February 5, 2010

Hotel development and investment in South Africa – Casa Hotels Fund II

Casa Hotels 1, LLC, a US based hotel development and investment company focused in South Africa, completed the development of the 103 unit Hampshire Inn in Durban only few miles from the new Dube international airport opening in May 2010. In addition, Casa I fund acquired other hotel development sites including St. Elizabeth and two in Midrand. The Hampshire Inn hotel is opening doors next week and is expecting first year occupancy of 65%, ADR of $110, and RevPar of $71.50. The first year NOI is expected at 24.3%. There are no financings on either the newly constructed Hampshire Inn or the new sites nor on any future developments and site acquisitions. Casa Hotels II, LLC is the second round of fund of $12 million for the construction of new sites including St. Elizabeth. The minimum investment per individual is $125,000 with an immediate return of 8% interest and NOI share of 1% for a total of 9% during the first year, royalty shares and capital gains in the fifth year with full return on the initial investment in five years. Mr. Ajit Bhakta is one of the founders of Casa Hotels and one of the earliest clients of Scientific Capital. If interested please contact Ramin Mostaan for more information†.

S.2869 and H.R. 4602 Bills - New Announcement by President Obama

Today President Obama announced again new SBA programs to help with small business and commercial real estate. If all these announcements by President Obama were to be implemented and practiced, hoteliers would have not seen as much hardship as they are experiencing today. There seems to be a long way from announcements to actual loans for the hoteliers. The last announcement on SBA limit increase to 5 million was in October 2009 and the two bills are still stuck in the Congress. I have put direct connection to Open Congress site on our home page. I will update you the day any of these two bills are passed.

A significant number of my clients are having hotel loans of over 2MM, are not located in rural areas to qualify for USDA loans, and are having high interest rate loans that is hemorrhaging the cash flow specially during this winter months. A refinance is needed immediately to help getting through 2010 and the passing of this bill will make it possible.  See SBA Press Release on today's President's Announcement

PLEASE CONTACT YOUR REPRESENTATIVES URGING SUPPORT FOR S.2869 AND H.R.4602

Job Market

In January a quick check with few ex-colleagues in tech companies showed better corporate outlook, an end to the lay offs, and even few new positions to be filled during the first or 2^nd quarter of 2010. This isolated sampling led us to believe that national net job losses would hopefully end by mid to late Spring and corporate travel would finally see an uptick. The corporate earnings reports this week specially by Cisco (read Chambers: Cisco hiring in US) and the January unemployment numbers issued today are tentatively corroborating this expectation.

The following graph depicts the job loss trend for the past 12 months. Disregarding the upcoming Census temp labor hiring by the government, it appears that we should have a better Spring and Summer than 09 for the hoteliers albeit this Winter is remaining to be tough.

(Source of data: Dept of Labor)

(Graph: CNNMoney.com)

International Travel to US was up 1% in November 2009

The trend in the international visitation to US is probably the most promising news today. It was over-shadowed by the news from the credit crisis in Grease and the January unemployment news. The significance is not just in the visitation rate reaching +1.3% in November of 09 as we had a one off positive reading in April of 2009, but in the trend that shows a consistent improvement over the past 8 months. If the trend is sustained, we should be well in the positive numbers in the Spring and the Summer of 2010.

(Source: ITA- Press Release Feb 3, 2010)

Disclosure

†Scientific Capital is not associated with Casa Hotel LLC I or II and is simply acting as a referring agent.

Readers please note that the information provided in this email is for informational purpose only. Scientific Capital Group, Inc. is not responsible for accuracy and usefulness of the information and shall not be responsible or liable for any decisions by the readers based on this information.