Frequently Asked Questions FINANCIAL / RISK REVIEW How do you calculate the revenue for the clients per year and create an 8% guarantee? The below chart demonstrates that the income generated from the average lodge (costing £245,000) at Sun Valley more than covers the assured 8% income guarantee option. The calculation is the annual revenue from guests staying in the room - at £39,596 per year, less the booking fees and all park operating costs (staff, property management). Each lodge’s audited P&L will be provided to the owner at the end of the calendar year. 8% is paid by the leisure park operator to the owner quarterly. Financial formula Sun Valley - Actual Figures 2021 Average achieved income (2 bed) £39,596 Achieved annual occupancy rate 74% Average room rate per week £1,029 Booking fees (15%) £5,939 Operating Costs £1,980 EBITDA (net income) £31,677 Average net income 12.12% Please provide materials to show the parent company has sufficient capital for the project. This information will be provided upon signing an NDA. If the completion is deferred, when will the Leisure Park Operator start to distribute the 8% return? The property is a modular build, built by a subsidiary of the parent company, with a lead time of between 8-10 weeks. This cannot, therefore, be considered as an off-plan property per se which would bring all of the associated risks to completion that a regular off-plan property developer carries. As soon as the 30% deposit is received, 8% interest is applied. Once the property is in place at the assigned leisure park plot, the guaranteed income will commence. Is the assured income at 8% net? Yes, for all lodge’s purchased and which have signed the guarantee in the Management Agreement, 8% is the net return. What comfort do I have that my returns will be paid? Comfort is provided through a contractual obligation whereby the Leisure Park Operator commits to pay returns as detailed within the Management Contract. Additional security is also provided by a guarantee with Royale Parks Limited (the Parent Company) and the Leisure Park Operator, which includes approximately 28 sites as part of the Royale Group family. Is there a chance that the investors will be getting a return higher than 8%? Or 8% is fixed regardless of the overall actual profit received? The actual income generated will vary depending on the lodge type and the park's location; however the historic average across all leisure parks, actual net income is between 10-14%. The Lodge owner has a choice not to commit to the Management Agreement (guarantee) and assign an independent company to market the property on their behalf. What if I want to study carefully the various rental rates and forecast occupancy levels for the Gold, Platinum and Titanium units? We would be happy to provide those reports upon request. What are the costs/outgoings of running a lodge? Approximate costs are a 15% booking fee to the principal booking partner plus approximately 5% running costs, attributed to the income for each lodge. This covers any on-site staff, maintenance, and upkeep. Page 1 of 7 | February 2022 | For more information contact ak@royaleresortsasia.com Frequently Asked Questions Will the client signing the Management Agreement be liable to pay any additional costs on an ongoing basis? No. There are no additional costs to pay associated with the lodge from the Leisure Park Operator. This is contractually written into the Management Agreement. Will the park operator be responsible for the maintenance costs of the lodge? Day to day work and general maintenance will be handled by the Leisure Park operator, at no cost to the lodge owner. Are there details on how the resort is being funded? The freehold, planning and all associated groundworks, before the lodge is placed on the plot, is paid for by the parent company and the Leisure Park owner/operator. How are the lodges valued? The location, quality of the lodge, park operator, management, as well as the current (supply/demand) market conditions all have a determining effect on the value of a lodge. RevPAR (Revenue per Available Room) is another commonly used calculation used in the hotel industry and sets the value at 6 to 8 times the annual gross income. By how much do lodges increase in value over time? Historically, lodges are inflation-proof. The owner can sell their unit at any time on the open market. The RevPar and supply/demand market conditions would determine the value. A 100% buyback of the original purchase price is offered to buyers, which is underwritten by a guarantee with Royale Parks Limited. A lodge owner agreeing to the Management Agreement may exercise the buy-back clause at any time from the fifth year onwards (by giving six months notice), or they may continue to receive an annual 8% net ROI after the five years. Is there any estimated valuation on the unit(s) from an independent source? There are several companies that trade lodges and they would advise you of their professional opinion of the saleable value of the lodge. Local estate agencies would also be able to provide their opinion on the current market value. Is there any protection for the investor if Royale Parks fails to deliver an 8% net return paid quarterly, and the 5-year buy-back guarantee promise? The guarantee is the fallback position. In the first instance, returns and buy-backs are provided by the Leisure Park Operator. Should they fail to deliver on this the Guarantor (parent company) will step in, as per the contract documentation. What is the investment risk? If the client agrees to the Management Contract there is no risk to the investor as the income is ultimately guaranteed by the Royale Group parent company. A risk to the parent company might be that people simply don’t stay at the Leisure Park/Royale Resorts (reasons may be related to terrorism, economic or acts of God) or due to competition from the surrounding, cheaper accommodation options neither of which is likely nor realistic given historical-comparative evidence from market conditions on previous leisure parks of Royale Group, and of similar quality parks (inclusive of Covid-19 period) across the UK. What are the penalties if Royale cannot deliver the units to the site on time? As part of the sales and purchase contract, there is a long-stop date of 12 weeks from the date of exchange, and additional interest (above the standard contractual 8%) is paid thereafter on the initial deposit (30%), calculated on a daily pro-rata basis. Please see the sales and purchase contract for the exact figure. What happens if the Leisure Park Operator goes bust or cannot pay my returns or buyback? If for any reason the Leisure Park Operator goes bust, all the responsibilities of the Leisure Park Operator would be the responsibility of the guarantors and the investor would still own the lodge. The investor would continue to own the lodge in perpetuity until all monies due were repaid. This is covered as part of the purchase contract pack. The Lodge can remain in situ, or if the investor preferred it could be moved to another location. Page 2 of 7 | February 2022 | For more information contact ak@royaleresortsasia.com Frequently Asked Questions GENERAL What is the predicted state of the UK staycation industry for 2022? A strong staycation market will remain a fixture, whilst unpredictable overseas travel, ongoing restrictions and local lockdowns will further fuel demand for domestic leisure tourism. Domestic demand for the year ahead is extremely strong. We are experiencing a surge in bookings during 2022 and there could well be a shortage in accommodation to meet the future demand. The forecast for occupancy rates in 2022 is 78% across all Royale Leisure Parks. What is your medium-term outlook for unit occupancy in 2022? Occupancy levels are forecast at 78% at an average rate of £43,508 per annum. There will be a yearly adjusted occupancy rate increase per annum thereafter. Please request a feasibility study for your particular lodge. Are there any other outstanding projects planned for release this year? Yes, Royale will be releasing several leisure parks, located mostly in Surrey, Devon and Cornwall. What is the total number of units that Royale Group has sold during their 75-year history? The company has sold over 9,300 units to date. What are the blackout dates which the investors cannot self-use their lodge? All investors have access to a total of two free weeks of self-use each year. The lodge can be booked at any time except during UK school holiday periods. Approximately 13 weeks in the year. Who or what is the competition for this product? Royale Group is the largest provider of single-storey accommodation in the United Kingdom. They are a market leader in the UK Leisure Park industry and are highly regarded in the market. There are several leisure park operators in the areas where Royale Resorts are located and across the UK they are offering various levels of quality lodges. Hotels, Airbnb, Bed & Breakfast and residential let holiday homes would all be considered as competition. What amenities does a Leisure Park have and how will these be used to attract clients to stay for longer periods? Every Royale Lodge has a hot tub, parking space and is close to local tourist attractions. Each Royale Leisure Park location offers a variety of amenities which can include the following onsite facilities: indoor swimming pool, gym, tennis courts, children's play areas, spa, restaurants and cafés. Many are located a short drive from historic and well-located cities and towns as well as other tourist attractions. What is the role of Hoseasons? Hoseasons is one of the UK's largest and most reputable holiday home booking sites for UK & European holidays. They drive all bookings for the Royale Leisure Parks. Which party is responsible for the property insurance? Does it cover third party liabilities? Lodges are fully insured in the name of Royale Quarters. Third-party insurance liabilities are not covered. Does the Royale Leisure Park Operator have access or discounts to any other amenities outside the park? Yes. These vary from site to site but the resort operator at each reception at any resort will assist guests with bookings at local attractions. Track record of previous projects. At the time of printing (January 2022), over 110 developments in the U.K. across the Group have been completed. 8-holiday resorts are currently operational under Royale Resorts management. Will this site have insurance in place to protect against unforeseen acts of God? Yes. Insurance is mandatory for holiday parks. Who is responsible for managing the resort? Royale Resorts is the Resort Operator. They are responsible for the day-to-day management of the resort. Can the lodge be sold anytime? Yes, the lodge can be sold at any time. Page 3 of 7 | February 2022 | For more information contact ak@royaleresortsasia.com Frequently Asked Questions If choosing the 5 years buyback provision, what is the appropriate amount of expense involved in such a transaction? No charge to the buyers. If the lodge is sold in the market instead of the buyback provision, does the new buyer require to sign other agreements with Royale Parks, the operator, or the property manager? If the lodge is purchased with the accompanying agreements in place, it would also be reassigned upon sale. Has there been any history of default, delinquency in payment or failure of buyback in the past? The buy-back and assured income is a relatively new structure for Royale Group, incorporated in 2020. There is no debt or non-payment to owners on quarterly income payments. No buy-backs have been executed. All sales to date have been to UK investors or end-users. Buyback engagements will be established with time, but the company accounts for the 2021-22 annual report will be impressive and should more than satisfy the ability of Royale Group to honour the buy-back agreement. CONSTRUCTION Which company is the developer of the lodges at Royale Resorts? Royale Resorts lodges are built by several manufacturers such as Tingdene, Omar Park, Stately-Albion and Prestige Homeseeker. These are a few of the high-end producers in the lodge market employed by Royale. Who is the builder for the Parks/Resort? Royale Resorts are the developer. The groundworks are conducted on an exclusive basis by Callington’s Construction Limited, a private contractor. of which Royale is a shareholder. I would like to understand more about the building structure of the lodges. The structures are built to BS3632 UK standards, which is the highest standard available. Apart from quality, additional features include increased wall thickness for superior insulation and a 10-year GoldShield structural warranty. Each lodge has pitched tiled roofs with a 40-year waterproof guarantee and PVCu double glazing (10-year frame warranty + 5-year glazing warranty.) In case the property experiences a structural deficiency or collapse due to a natural disaster, who is responsible for the loss? Insurance company, Royale Parks or the owner? An insurance policy by the Royale Parks Operator would be responsible. A 10-year build warranty also exists on all new lodges covering structural issues. FINANCING Is there a financing option available? Royale Group can offer a level of developer financing, but this is on a case-by-case basis. The repayment interest rate will of course affect the 8% ROI. There are several external companies that also provide finance loans for lodges. What other funding options are available? Royale Group does offer a part-exchange program where buyers can receive a guaranteed amount for their UK property which can be used to purchase a lodge and any remaining funds are paid to the buyer. LEGAL / SECURITY What’s the address of the head office and business registration number? Royale House, 1550 Parkway, Whiteley, Fareham, Hampshire, England, PO15 7AG Business Registration No.: 09330072 How many lodges have been built/placed by the Royale Group to date? The Royale Group has sold over 9,300 units to date. In 2022 the Royale Group will add 700 lodges, with an additional 2,500 lodges to be built by 2025. Page 4 of 7 | February 2022 | For more information contact ak@royaleresortsasia.com Frequently Asked Questions Can we show complete transparency with the company ownership, subsidiaries etc Yes, all information on the Royale Group and subsidiary companies are accessible via a signed NDA after which access to the Royale Group Data Room will be provided. When will the buyer be required to sign the Management (rental guarantee) Contract? At the point where a sales and purchase agreement is signed, at the same time, the Lodge Agreement and Management Agreement is signed as well. Can the contract between Hoseasons and Royale Parks be provided? Yes. Our Due Diligence letter provided by our UK Solicitor states that the agreements exist and are in place. Your legal representative will confirm the same. Where will the buyer’s funds be held before completing? Royale Resorts will use the first 30% deposit funds to begin the construction of your lodge and complete all permits and work required before completion. Does this qualify as a secondary property in the U.K.? No. Tax on other properties is not affected by the purchase of a lodge. Are there any restrictions or terms to resell? There are no restrictions other than the Royale Leisure Park Operator needs to be informed before any sale takes place. Is a solicitor needed for the purchasing process? Whilst it’s not a necessity for purchasing a lodge in the UK, we recommend you appoint a legal representative to act on your behalf. Are there any reference or credit checks available for the developer? Yes, in the form of a Solicitors reference letter and 3-year audit accounts for Royale Parks Limited (the guarantor) and this information may be accessed after an NDA has been signed. Regarding the land ownership, is it a freehold or sub-lease? The land is owned by the company as a freehold. What is my investment security? A contractual guarantee is provided by the Leisure Park Operator and the Parent Company. In the event of an income shortfall, the Parent Company is contractually bound to cover such costs. The same applies to the buy-back at year five. The investment security is the ownership of the lodge and a 90 year licence of the land plot. Can I terminate my rental contract with Hoseasons at any time? If the buyer is enacting the guarantee, then Hoseasons has an agreement with Royale Resorts as a booking agency, relating to the management. There is no contract with the buyer. The buyer may sell the lodge at any time at which point all agreements would be nullified. In the UK, do they sell these units as a real estate product or as a financial instrument? The lodge itself is legally considered as personal estate whilst the land is real estate. They are sold in the UK as second homes for residential or leisure use. It is likely that in the future the lodges will be sold as both residential and financial investments. Who is paying my returns? Which company receives the return and which company pays the returns to me? The Royale Resorts Leisure Park Operator is responsible for all financial receivables and outward payments. What is the name of the insurance company covering the lodge? Burns & Wilcox is located in the UK. Is my unit insured and carry a warranty? How is this paid/covered? All Royale Group luxury lodges are built to comply with BS 3632, the highest residential standard for lodges. All lodges built to these standards are designed to last, are energy efficient, and will come with a 10-year structural warranty. What comfort do I have that my buyback will be executed? In the same way, returns are protected, the Leisure Park Operator commits to execute buybacks as part of the Management Contract. Additional security is Page 5 of 7 | February 2022 | For more information contact ak@royaleresortsasia.com Frequently Asked Questions also provided by a guarantee with Royale Parks Limited and the Site Park Owner. Royale Parks Limited is the Group Owner of over a third of the portfolio of the Royale Group. If the landowner is Royale Parks and the investor is the lodge owner, does it mean the investor only owns the lodge but not the land? Yes, the buyer owns the lodge and has a licence to the site at the designated land plot. PURCHASE PROCESS Please provide a timetable (end-to-end process) from complete reservation forms to completion of the transaction. ● The process should take no more than 28 days. ● Reservation form submitted & refundable fee paid to Royale Group ● Contract documentation issued to buyer’s solicitor within 24 hrs ● Documents issued to a buyer within 2-3 Days ● Buyer’s solicitor issues request for AML documents ● Buyer’s solicitor conducts AML check ● Contract pack and report issued to buyer ● Buyer signs documents and sends funds ● Exchange and completion can take place ● Returns generated immediately and paid quarterly in arrears from completion date TAX Is there VAT applied to my purchase? There is no VAT applied to the purchase. What are my Stamp Duty responsibilities? Holiday Lodges are exempt from Stamp Duty Land Tax (SDLT) and therefore no Stamp Duty is payable. Who pays the property taxes? The buyer will pay any taxes due. This will be based on their tax position. There is no Council Tax payable. Income tax is the only other tax and this can be nil-rated against the cost of the lodge. So, there are approximately 10 years of no income tax to pay. Is there any withholding of the 8% net return from overseas investors? Overseas investors should complete a non-resident landlord NRL1 form with HM Revenue & Customs, which will enable all returns to be paid in full. Without the NRL form, payments may be subject to a 20% withholding for tax purposes. Is there any tax implication for overseas investors in terms of income and capital gain? This will be based on the purchaser's tax position. In essence, income tax is offset against the cost of the lodge and CGT is reduced to 10%. Please seek advice from a UK tax advisor for confirmation. What Sales Reservation forms and AML/KYC reviews are required? A standard Reservation Form is required along with the usual supporting documentation. A copy of the buyer’s passport, proof of address and source of funds (for example, employment, bank deposit details). Can an inspection be arranged before closing for the buyer? Yes, this can be arranged upon request. Page 6 of 7 | February 2022 | For more information contact ak@royaleresortsasia.com Frequently Asked Questions OWNERSHIP / STRUCTURE What is the investor’s legal ownership status? Investors are granted full ownership of a lodge and an agreement for the same to be placed at the stipulated resort, both are granted to the buyer until either party has exited the agreement and there are no monies owed. Can the lodge be passed to future generations? Yes, lodges (or shared ownership) can be passed on or sold with written consent from the Royale Group. Can a lodge be purchased as part of a pension? Yes, depending on your provider, lodges can be purchased by either a SIPP or SSAS. Can a lodge be purchased by a UK limited company? Yes, many of our clients choose this option should it suit their portfolio requirements. Can an overseas investor purchase a lodge? Yes, many of our investors are from outside of the UK and are looking for a secure income-generating asset in the UK. Non-UK residents are required to complete a simple Non-Resident Landlord form (NRL1) to register their ownership and income with HMRC. Our after-sales team is on hand to assist with this process. Can a buyer purchase more than one lodge and is shared ownership an option? Yes, our model allows buyers to purchase any number of lodges or shared ownerships. What are my exit options? At any point after 5 years, owners can give 6 months written notice to terminate the agreement upon which the Leisure Park Operator will buy the lodge back at 100% of the original purchase price. Can the owner stay in the property for self-use without restrictions instead of renting it out? In most cases, the answer is yes. However, each resort will have varying restrictions and you should check ahead of committing to the purchase. Page 7 of 7 | February 2022 | For more information contact ak@royaleresortsasia.com www.royaleresorts.co.uk Hong Kong Suite 803, Won Hing Bldg, 74-78 Stanley St., Central Adam Hannam +852 6143 7801 ah@royaleresortsasia.com Glenn Pickard +852 9440 9388 gp@royaleresortsasia.com Singapore 11 Beach Road, Singapore, 189675 Alexander Knight +65 9270 7596 ak@royaleresortsasia.com The material contained within this document has been prepared for information purposes only by Royale Life Quarters Limited. Information contained herein is not to be relied upon as a basis of any contract or commitment. The information is not to be construed as an offer, invitation or solicitation to invest and opinions expressed are subject to change without prior notice. Information contained herein is believed to be correct, but cannot be guaranteed and should not be relied upon as statements of fact or representations . In case of queries or doubt you should consult an independent adviser. No personal recommendation is being made to you. All images used are for illustrative purposes only.
