1. Create a detailed Pro Forma Cash Flow Statement

Willowbend Suites

The hotel will be called Willowbend Suites and will sit on a property with an area of 1,000-sqm located along A.S. Fortuna St. in Cebu City. The building will have 12 floors (inclusive of two basements) and will have a footprint of 10,256-sqm as measured on the building plans. The project cost is estimated at P630M inclusive of land, building machineries, equipment, and FFEs. The revised cost details are as follows:

Construction cost per square meter (excluding equipment/machineries) is around P39K but will go up to P61K when equipment/machineries are included. These values are still within industry standard according to Arcadis (formerly Langdon and Seah Phils. Inc.) with standard costing as follows:

Willowbend Suites is envisioned as a 5-star hotel that will cater to the middle and upper class tourists in Cebu City. It has about 57 hotel rooms of various sizes, a coffee bar/lounge, a restaurant, music lounge/dining, grand banquet hall, events garden hall, meeting rooms and other amenities. Over-all, it will be a high-class and intricately designed hotel that will mirror elegance and grandeur. Mr. Wu, the owner, commissioned the services of Makati Development Corp., a construction company based in Metro Manila. Big ticket projects of this contractor include Ayala Land projects in Makati Central Business District and Bonifacio Global City in Taguig City. The hotel project is being supervised by a local engineer and architect.

The two (2) basements can accommodate 20 cars and will house the hotels security room. The building plan includes the following:

Competition: The city of Cebu is a haven for tourism. It has seen with recent phenomenal increase in tourist influx following the opening of the Mactan-Cebu International Airport Terminal 2. This has resulted in the increase in hotel occupancy in the city. The conversion of other hotels into Korean English Schools in recent years has contributed to the demand. Moreover, renovations of local residences to transient houses and establishment of condotels in the area has also not really dampen the occupancy of some of the known hotels in Cebu. Serious competition may, however, be posed by the higher end hotels like Shangrilas Mactan Resort and Spa, the upcoming Sheraton Hotel and a host of other known hotels in the area.

Financial Projection Assumptions:

1. On initial year of operation, occupancy rates on lean and peak months range from 45% to 80%, for at an average of 65%. On the succeeding years, the average occupancy rate is assumed to increase by 5% to 70% and stayed flat over the term of the loan. Peak months are December to June.
2. Room rates will range from P5.5K to P12.5K. Events, banquets and other parties are held 4x during lean and 8x events during peak months. Restaurant, music lounge and bar at 80% of the check-in customers on lean and 200% on peak season. During peak season, it was assumed that walk-in customers will dine.
3. Direct cost and operating expenses are initially at 20% and 35%, respectively. The rates are increased by 5% in 2024 and 2032 to cover for rising costs and regular maintenance of facilities.
4. Income tax is computed at net income at 35%
5. Long-term debt and current portion are computed based on 8-year payment period at fixed interest rate of 5% p.a. Loan drawdown shall be based on staggered releases.
6. Advances from shareholders totaling P36.57M represents debt servicing while the hotel is not yet operational. This shall be fully paid once the hotel generates income. Interest expense is at year 1 of the loan (1-year grace period). Principal plus interest paid on year 2
7. Equity infusion assumed at P289.461M while initial capitalization at P6.913M.
8. Capex for building construction alone is at P563.036M. Depreciation for the building is based on cost of P332.478M is over 40 years economic life while for the M & E totaling P165.948M and Furniture and Fixtures of P50.0M are over shorter period of 10 years. Outright expense is assumed on the Other costs totaling P14.61M.

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\begin{tabular}{|l|c|c|c|} \hline \multicolumn{1}{|c|}{ Description } & Building(PhP/sqm) & M&ETotalServices & Total \\ \hline Hotels, Budget Hotels - 3 star, mid-market & 34,00046,700 & 12,45016,050 & 46,45062,750 \\ \hline Business Hotels - /5 star & 35,10046,800 & 13,60020,350 & 48,70067,150 \\ \hline Luxury Hotels - 5-star & 49,10054,200 & 14,30023,700 & 63,40077,800 \\ \hline \end{tabular} \begin{tabular}{l|l|} \hline 12-Storey Building & \\ \hline Basements (1) & 10 cars; security room \\ \hline Basements (2) & 10 cars \\ \hline 1st Floor & Reception; Coffee Bar \\ \hline 2nd Floor & Restaurant; Music Lounge \\ \hline 3rd Floor & 50%5.5k;50%12.5k \\ \hline 4th Floor & 50%5.5k;50%12.5k \\ \hline 5th Floor & 50%5.5k;50%12.5k \\ \hline 6th Floor & 50%5.5k;50%12.5k \\ \hline 7th Floor & 50%5.5k;50%12.5k \\ \hline 8th Floor & 50%5.5k;50%12.5k \\ \hline 9th Floor & Restaurant; Banquet Hall \\ 10th Floor & Events/Function Halls \\ \hline \end{tabular}