The Radisson Blu Boutique hotel for investment in Costa Rica will consist of approximately 100 units. 80 of these would be oversized regular hotel rooms, with an additional 10 junior suites and 10 full suites. In addition to the rooms and suites on the hotel property. The property would also offer for rental up to 12, 1700 square foot, 3BR 3Bath investor-owned “Residences that would be operated as part of the hotel’s rental program on behalf of the investors. The Jaguar Village Residence units would not be owned by the hotel but would be rented on a revenue-sharing agreement. The investment in the Costa Rica hotel complex will offer the full complement of amenities and services expected in upscale resort hotels. It includes an onsite indoor/outdoor restaurant serving a continental fusion menu, 4,500 square feet of divisible meeting space, and 4,000 feet of a full-service spa, with recreational facilities including a fitness center, outdoor tennis court and pools, and an outdoor fitness course. Through its location within the Hacienda del Mar planned community. The hotel will have access to the Hacienda’s beach club, which facility will have additional meeting rooms, a full-service restaurant (the award-winning “Hacienda BLU”), a pool/hot tub with changing facilities, and a variety of water-based activities such as jet skiing, paddle boarding, and water aerobics. Also, all are located on the beach on concession property controlled by Hacienda. The hotel will have a private shuttle service to take guests from the hotel to the beach club in comfort.
The investment in the Costa Rica hotel project will be located within 300 meters of the Pacific Ocean and the Bay of Papagayo, within the Papagayo region, the main tourist area of the country, with tremendous ocean views from almost all rooms. It is 15-20 minutes by car from the Liberia International Airport. An airport that has non-stop and one-stop flights from approximately 40 cities around the globe, including Los Angeles, Phoenix, Houston, Atlanta, Charlotte, Chicago, New York, and Minneapolis, to name a few. The Liberia airport is a 3.5 to 4.5-hour flight from most US cities. In 2019, approximately 750,000 persons entered Costa Rica through this airport. That number is expected to reach over One Million in 2021. The airport terminal was expanded in 2018 to increase the number of gates. Also, its passenger handling capacity addresses the large increases in tourist travel expected over the foreseeable future.
Anticipated in April of 2021 is the commencement of construction of an extremely large, mixed-use development with a value in excess of one billion dollars to be located adjacent to the Liberia International Airport, and within 15 kilometers of the Radisson BLU site. This development is expected to bring large numbers of additional tourists and employment to the Guanacaste area. Moreover, it should act as a significant occupancy driver for the hotel.
Major thrusts of the Hotel’s marketing plan, among others, will be medical tourism, incentive group travel, and Radisson Rewards for individual travelers. The Hotel’s Spa and Wellness Center will work to provide alternative health care options to guests with a variety of procedures. Today’s health-conscious consumers are looking for non-traditional resources to enhance their well-being and medical recovery time in a supportive environment. The Radisson BLU Papagayo will provide local medical professionals with a package plan enabling them to market a supportive and private experience. That their patients are able to reside at the Resort during their recovery period. Along with traditional spa services, massage, and skincare, the Spa and Wellness Center will employ a staff nurse, offer Botox and injectable treatments, mindfulness and yoga classes, and hydrotherapy pools. The hotel shuttle will transport guests to local medical clinics for procedures or physical therapy done there.
Pre-Construction of the investment in the Costa Rica hotel portion of the project should start in early 2021, with the appropriate permit process. The construction of the Residences and the recreational facilities will be completed in early 2021. Work for which the Company already has the needed permits. With an anticipated 12-15-month construction schedule for the hotel. The anticipated opening date of that structure will be mid to late 2022, depending on the exact timing of construction start. The Residences will be available for rental in early 2021. Also, should capture a reasonably large occupancy during its first season, to give its owners some additional revenue prior to the opening of the entire project.
Because of the project’s location within the Hacienda del Mar planned development. The Company will get the benefit of the over $12 million in infrastructure the developers of Hacienda have already spent, including underground utility connections to the site, two complete sewage treatment plants, paved roads throughout the development, and a completed Clubhouse which will house one of the three restaurants available on site (the Trip Advisor award-winning “Abbocato”. See “www.abbocatocr.com”), as well as the Fitness Center and a Kids Club, in addition to another pool and hot tub.
The Company has projected revenues to begin for the hotel itself late in 2022. It is with first full year revenues substantially less than the second and following years. Stabilized revenues should begin to be seen in year 3 of full-scale operations. Based on gradually increasing current market occupancies, and average rates substantially below the existing rates at the neighboring 5-star resorts, and similar to those offered currently by the adjacent franchised “El Mangrove” Hotel, a Marriott Autograph property, the following returns are anticipated for the first 3 years of operations:
If the Company funds its operations with $20.5 million in equity only:
Year 1 Net Income: $2,406,848; 11.74% return on $20.5 million equity.
Year 2 Net Income: $3,196,440; 15.59% return on $20.5 million equity.
Year 3 Net Income: $3,635,647; 17.73% return on $20.5 million equity.
If the Company funds its operations with $11 million in equity and $11 million in 6.5% debt:
(The additional $1.5 million is for debt fees and interest reserves)
Year 1 Net Income: $1,549,944; 14.09% return on $11 million equity.
Year 2 Net Income: $2,224,142; 20.22% return on $11 million equity,
Year 3 Net Income: $2,663,169; 24.21% return on $11 million equity.
These returns are substantially higher than most hotel projections. This is partially explained by the fact that the Company and its hotel are getting the benefit of the above-mentioned over $12 million in completed infrastructure and the hotel’s portion of the revenue from the over $7.5 million in Residence value. This allows the Company’s $20.5 million (or $22 million if the debt is used) in funding to be used exclusively for the construction of the hotel and affiliated structures. This situation not occurring for the other hotels in the market. The Company’s projections on occupancy mirror the current levels experienced by the competitive hotels, with projected rates well below those of the neighboring existing 5-star properties, as described above and shown in the assumptions to the attached projections.
The Company is negotiating either a fully equity-funded transaction, with $20.5 million in equity, or in the alternative, $11 million in equity funding and construction/takeout debt in the amount of $11.0 million at a market interest rate floating to LIBOR, which can be automatically converted to a 3-year mini-perm mortgage at the end of the construction period, and long-term financing following the mini-perm. Repayment terms being negotiated are interest only during the construction period and the first 6 months of the mini-perm, after which the loan would convert to a 25-year amortization rate on the principal balance. An interest reserve will be set up at the inception of the construction loan that will cover all anticipated interest payments during construction and the first 6 months of the mini-perm.
The Company has two classes of Members, A and B. The A members are those investors putting in the $11 million of equity in the equity + debt scenario, or those investors putting in the full $20.5 million in the all-equity scenario. The B members are the founders, sponsors, and developers. The Company currently has $6.5 million in funds either already invested or firmly committed for “A” Membership Units, leaving approximately $14 million available in the “all equity” scenario. The B members have to date contributed approximately $1.0 million in cash and property, as well as substantial services over the last three years, to the Company. The A members will receive 100% of distributions until they have received back their original invested capital. Thereafter, the A members will receive 60% of all subsequent distributions, and the B members will receive the remaining 40%.
The Company expects an approximate 5-year hold on the investment in Costa Rica after the hotel opening and expects the sale of the property to be the Company’s exit strategy. The decision as to when to sell the property, and the price to be asked for it, will be made by all the Members as a group.
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Phone US: +1 425-435-8068 | Phone CR: +506 8803 7202
Address: Jaguar village, Costa Rica
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