Dransfield Shared O hiOwnership

Mantra Opportunity May 2011

2Current State – Strata MarketCurrent State Strata Market

• Unresolved conflict between lifestyle andUnresolved conflict between lifestyle and investment

• Investment pitches have failed– Inadequate income– No capital growth

Lack of appropriate usage rights– Lack of appropriate usage rights

• Current oversupply in the strata title market• Shared Regulatory hurdles now overcomeShared Regulatory hurdles now overcome• Operators unable to produce required returns

on higher quality stockg y

3Shared OwnershipIntroduction

• DSO Scheme is now live and market ready• Significant stakeholder benefits• Significant stakeholder benefits

– Hotel operator– Developer– Individual Strata Owner– Financier

• DSO scheme is– Portable– Flexible

• High barriers to entry/point of differentiation– Licence

– Time > 12 months

– Cost > $1m

– Skills and resources significantg

4Who is Dransfield?Who is Dransfield?

• Established 1993

• Principals, partners and advisors to a full range of hotel and

resort assets

• Advise Owners, Developers, Operators and Financiers

• Multi disciplined – Development, Operations, Project Marketing,

Fi iFinancing

• Over 300 hotels, over 30,000 rooms

• Australia's leading strata title project advisor• Australia s leading strata title project advisor

• Holder of an Australian Financial Services Licence

• Licensed Real Estate AgentLicensed Real Estate Agent

5What is Shared Ownership?p

• Typically 6-12 owners buy a share in the home entitling them to 4-Typically 6 12 owners buy a share in the home entitling them to 4

8 weeks occupancy per year

• Owners are on title as tenants in commonOwners are on title as tenants in common

• Reduced entry price and reducing ongoing maintenance costs by

more than 80%more than 80%

• Fully maintained and managed property

• Independent owners’ representation by Dransfield• Independent owners representation by Dransfield

6About Shared OwnershipAbout Shared Ownership

• Internationally well established• Internationally well established

– US over 10 years

– Europe 5 years

• Australian commencement delayed by licensing

• Australian Market is receptive to and substantial

• RCI market study identified potential of overRCI market study identified potential of over

– 470,000 households

Market size in excess of $9B– Market size in excess of $9B

7Shared Ownership vs.

TimeshareTimeshare• 140,000 timeshare owners in Australia and growing

• Shared Ownership and timeshare present different opportunities for different people in Australia

• Timeshare is designed to accommodate the pre-purchase of a holiday in a range of resorts or serviced apartments. Most families purchase about a week of time for about $20k

• Key Differences– Timeshare owners usually do not have any direct interest on title

– There is limited possibility of capital appreciation in timeshare

– There is typically a lower quality of accommodation in a Time share scheme

Timeshare has less transparency in costs and the value proposition– Timeshare has less transparency in costs and the value proposition

– Capacity to on-sell more difficult

– Premium applied to underlying property value in excess of 75% for time share

8All Stakeholders Benefitf

Dev

/Fin

Op SA Owveloper

nancier

erator

Sales Agent

wner

Enhance access and growth into MLR market X XIncreased Management Revenue from MLRs (significant profit per key from servicing shared Xowners)Reduced average cost structure by sharing overheads X X XImproved individual strata owner satisfaction

Sell down part of their apartment/homeIncreased lifestyle focus

XX

XX

XX

XXy

Improved Developer pitchesAdditional Distribution platform to offer developersa new must have

XX

XX

Differentiation to other developers XInternal exchange for Strata Owners increases perceived value X XInternal exchange for Strata Owners increases perceived value X XHelp in gaining additional management contracts XPath to access additional listings XLess competition on this type of product X X XMethod to move high priced stock to larger market (increase potential buyers) X X

New Distribution channels X X X X

9Marketing – DSO Positioningg g

• Key Messages to DSO BuyersKey Messages to DSO Buyers

– “Hassel Free” use – independently maintained

f– Quality of built product and operator

– Usage rights are Clear and Transparent, set at purchase

– Real estate investment on title

– Independent Scheme Management by DSO

– Return of Capital and potential growth

• Will replace some Serviced Strata Schemes and co-exist with manyco e st t a y

10Marketing – Sample Collateralg p

1111

Site Branded Websites

12Website Capabilityp y

• DSO utilises a Flexible website system with the SO ut ses a e b e ebs te syste t t efollowing features

– Internal content management

– Google analytics

– Search Engine Marketing

EDM ith n l tic– EDMs with analytics

– Database Management (project centric)

– Cloud storageCloud storage

– Individual owner pages

• Additional portals/projects added at low cost and p p jmanaged centrally

13DSO Roles

• One stop shop orOne stop shop, or

• Scheme establishment

• Management Agreements• Management Agreements

• Owner management and Servicing

• Project marketing• Project marketing

• Staff training

Online sol tions• Online solutions

• Branding and collateral development

G l H t l C lt• General Hotel Consultancy

14Magenta Shoresg

• 1/6th golf home $249k Beach home• 1/6 golf home $249k, Beach home $495k

High levels of initial response• High levels of initial response

• Improved response over whole hiownership

• On hold pending Sale by Mirvac, could be reactivated for spring 2011

• DHR engaged by Mirvac in marketing g g y gwhole site

15Magenta Response to dateg p

• Soft Launched November 2010

• Web hits 4 times that of similar whole ownership project

• Web hits 100% up in January 2011 on December 2010

• 100 expressions of interest in test period (target 30)• 100 expressions of interest in test period (target 30)

• 40 remained active as at 25 January 2011 (Mirvac sale announced)

• 3 contracts issued (target one exchange for test period)

l l d d d hd l• Extremely limited spend and campaigning prior to withdrawal

• PDS and offering withdrawn following Mirvac’s sale announcement

• Significant live experience gained in Australian market

16Shared OwnershipO t R StOperator Revenue Streams

Monthly Maintenance 1 200On site maintenance by hotel staff (includes Management Lot income from SO apartment (Draft)

Monthly Maintenance 1,200

External Contractor Scheduled Maintenance 1,500

S h d l d E it Cl 8 190

Allowance for pmnt to 3rd party maintenance contractors (includes margin)

based on $70 per clean (80% occupancy and 1/4 

margin)

Scheduled Exit Cleans 8,190

Annual Spring Clean 250

Resort management Fee 3,000

$ p ( p y /requesting additional "interim" cleans)

Allowance for annual deep clean of apartment

Fee for providing usual hotel services to unit owners (Check‐in, concierge etc.)

• Based on a 130sqm apartment

Income to Management Lot (excl. GST) 14,140GST 1,414Income to Management Lot (incl.GST) 15,554

• Based on a 130sqm apartment• Revenue received from annual dues payable by owners• Higher occupancy/longer stay than typical strata

t tapartment

17Site Establishment Ti i & F diTiming & Funding

Detail Time Cost

Stage 1 Scoping Study 3-6 Weeks $50k

Stage 2 Scheme Implementation

• Develop scheme detail

• Prepare for market

2-3 Months $150-$250k

• Prepare for market

Stage 3 Initial Test Marketing 2-3 Months $100-$300k

Assumes

• Furnished display apartment

18Benefits of Being SO Friendlyf f g y

f d ff h• Point of differentiation to other operators

• Assist in gaining new management contracts (especially in mixed

d d l )used developments)

• Significant profit per key

• Cost sharing opportunities

• Improved letting pool retention

• Reduced focus on producing investment grade returns

19SO Friendly vs. E it P ti i ti i SOEquity Participation in SO

• Real commitment = Real outcomes• Real commitment = Real outcomes.

• Genuine exchange program and owners club

• Individually plus group branded portals

• Significant ROI and long term income streamSignificant ROI and long term income stream

• Protected IP

• Reduced operator competition

• Increased site origination