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Frequently Asked Questions about Denarau Beach Resort...
Q. What is Denarau Beach Resort?
Q. Where is Denarau Beach Resort?
Q. What does Denarau Island offer?
Q. Who is the developer?
Buying the Apartment
Q. What will be included in each apartment?
Q. What will be included in the furniture package?
Q. When is Denarau Beach Resort expected to be started and completed?
Q. What am I buying?
Q. How do I pay for the apartment?
Q. Who will hold the native headlease?
Management Arrangement
Q. What are the implications of the management arrangement?
Q. How will income be allocated?
Q. When will I receive income?
Q. Can I exit the management arrangement?
Q. How long can I stay in my apartment?
Q. Can I let others use my apartment?
Q. How much are the management fees?
Q. Who is the manager?
Q. When will the identity of the hotel operator be disclosed?
Ownership
Q. Are there any ongoing charges?
Q. What sort of entity will the body corporate be?
Q. How will the body corporate function?
Q. What about wear and tear on my apartment and the resort?
Q. What happens if a cyclone damages the Denarau Beach Resort?
Q. Can I purchase in the name of my family trust or my company?
Q. Can I sell my apartment?
Q. Can I mortgage my apartment?
Q. What is Denarau Beach Resort?
A. Denarau Beach Resort will comprise 135 two bedroom apartments set in approximately ten acres of landscaped gardens and water features. In addition to the largest pool area in the South Pacific (with family, children and adult only areas, private beaches and an international spa and health facility located on a private island within the pool), the resort will include a magnificent sunset restaurant, pool bar, lobby lounge & bar, conference facilities and a typical array of ancillary activities found in a premium resort.
Q. Where is Denarau Beach Resort?
A. Denarau Beach Resort will be located on Denarau Island, Fiji and will be developed on a site next to the existing Sheraton Fiji Resort on Denarau Island. Denarau Island is approximately 20 minutes by car from Fiji's main international airport at Nadi. Fiji is situated in the South Pacific and is approximately three hours flying time from Auckland and four hours from Sydney.
Q. What does Denarau Island offer?
A. Denarau Island is an internationally recognised integrated resort featuring some of the best hotels in the South Pacific, superb residences (many with private moorings), an 18 hole championship golf course, grass and astroturf tennis courts, port, marina and various retail outlets.
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Q. Who is the developer?
A. Denarau Beach Resort apartments are offered for sale by Tainui Limited, a wholly owned subsidiary of Tabua Investments Limited. Tabua Investments is wholly owned by BIL International Limited (listed on the London, Singapore and New Zealand stock exchanges) and has already developed (or is currently developing in the case of the Golf Terraces Apartments) a number of successful developments on Denarau Island, including the Denarau Sheraton Villas, Golf Terraces Apartments and various exclusive residential subdivisions.
Buying the Apartment
Q. What will be included in each apartment?
A. All apartments will feature the same two bedroom and two bathroom design and triple key system which provides the versatility to let the apartment as a separate hotel suite and one bedroom apartment or as a two bedroom apartment. Each apartment will also have a separate kitchen, dining area, lounge area, full laundry facilities, an owner lockup cupboard and two separate balconies each with water views (all bedrooms will have a similar view). The apartments will be air-conditioned and have ceiling fans.
Q. What will be included in the furniture package?
A. A furniture package will be provided with every apartment. The furniture package will include a king bed for one bedroom, two queen beds for the other bedroom, three televisions, a stereo system and a full range of kitchen utensils and table settings. Further details of the furniture package are included in the furniture list attached as a schedule to the Apartment Sale, Purchase & Construction Agreement.
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Q. When is Denarau Beach Resort expected to be started and completed?
A. Construction of Denarau Beach Resort is expected to commence late 2004 or early 2005 and hotel opening is targeted for the second half of 2006. There are "sunset dates" in the agreement which mean you can terminate the agreement if there is significant slippage in the protected development timetable (i.e. if construction hasn’t commenced by 31 December 2005 or if opening is not achieved by 31 December 2007). This is a point of difference between Denarau Beach Resort and some other developments.
Q. What am I buying?
A. Your land interest will be a sublease of part of a Fijian native leasehold title, with a term until 2097. The native lease is the predominant form of land tenure in Fiji (most hotels are on native leasehold titles) and your sublease will be registered (nb. Fiji has a similar Torrens registration system as New Zealand and Australia). The leasehold tenure is for the land only, so you will be the freehold owner of the apartment improvements and furniture package.
Q. How do I pay for the apartment?
A. You will pay a deposit of 10% of the total price, which will be held by KPMG as stakeholder until the vendor is in a position to settle. That deposit and interest earned on the deposit will be credited against the purchase price on settlement. In addition to the initial deposit, FJ$720
will be payable on signing to cover stamp duty for the purchase agreement. The balance of the purchase price will be payable on settlement. The vendor must be able to provide a registerable sublease title and the hotel operator must have accepted the resort as being practically complete and ready for operation, as pre-conditions to settlement.
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Q. Who will hold the native headlease?
A. The native headlease title will be held by a body corporate entity, the members of which will be all of the apartment owners and owners of business areas within the development. By holding the headlease, the body corporate will effectively own all of the common areas and improvements within the resort.
Management Arrangement
Q. What are the implications of the management arrangement
A. At least 100 of the 135 apartments will be sold subject to a management arrangement. If you purchase subject to the management arrangement, the apartment must be available for letting to short term guests by an international hotel operator at all times you are not utilising your owner usage rights (described below). The manager will account to you for the income from letting your apartment to hotel guests together with income earned from those guests from minibar, telephone and inhouse movie charges (after deducting your share of hotel operating costs, ownership costs and management fees).
Q. How will income be allocated?
A. You will earn the accommodation income and in room charges from the paying hotel guests who stay in your apartment. Income is not pooled, however the hotel operator will adopt systems (including the "Hyrum" booking system) and set room tariffs which will facilitate a fair and equitable spread of guests over all of the apartments in the management arrangement.
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Q. When will I receive income?
A. The hotel operator will account to you for your net income (providing a statement detailing all deductions for costs and VAT) on a quarterly basis and pay that income in the manner specified by you.
Q. Can I exit the management arrangement?
A. Yes, you can exit the management arrangement by giving six months notice, subject to not less than 100 apartments remaining available to the manager under the management arrangement. You can also terminate the management arrangement if the manager materially breaches the terms of the management agreement.
Q. How long can I stay in my apartment?
A. You can stay in your apartment for up to 84 nights (equivalent to 12 weeks) each year of which 14 nights (two weeks) can occur during "peak periods". "Peak periods" essentially correspond to New Zealand and Australia school holidays, an aggregate of just over 70 days. Owner occupancy will be subject to availability at the time of booking.
Q. Can I let others use my apartment?
A. Yes. Immediate family members, business associates and friends can be nominated by you to enjoy all or part of your usage entitlements. However this must be on a non-commercial basis.
Q. Who is the manager?
A. The manager under each individual management agreement will be a Fijian company, established and wholly owned by the body corporate (body corporate manager). The body corporate manager will employ an international hotel operator to perform all of the management functions under the management agreement. This structure means that a single entity (representative of all owners) can deal with the hotel operator and protects owners from liabilities and risk associated with the hotel operation. The body corporate essentially acts as a "pass through" entity.
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Q. When will the identity of the hotel operator be disclosed?
A. Tabua Investments has signed a letter of intent with one of the world's leading hotel operators. However, the identity of that operator cannot be disclosed until the formal management documents are finalised.
Q. How much are the management fees?
A. The management fees will reflect hotel industry norms and will be no higher than would typically apply between a single hotel owner and an individual hotel operator. The fees will comprise a base component of 2% of gross accommodation revenue and an incentive fee of 8% of gross operating profit (being the gross accommodation revenue less applicable operating costs). All these fees will be passed on from the body corporate manager to the hotel operator and the body corporate manager will not deduct any additional fees for itself. This is another point of difference between Denarau Beach Resort and some competing developments.
Ownership
Q. Are there any ongoing charges?
A. Yes. As with any property investment, ownership costs apply. These include a share of the Denarau Beach Resort common area costs, Denarau Island common costs (as levied by Denarau Corporation), insurance costs and ground rent. If you enter into the management arrangement you will also pay your share of hotel operating costs and it is expected that all of your costs will be met by the manager from your accommodation revenue. If your accommodation revenue is insufficient to cover all costs, you must pay any shortfall.
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Q. What sort of entity will the body corporate be?
A. The body corporate will be a New Zealand incorporated society. An incorporated society provides the same limited liability protection for its members as a company but, unlike a company, cannot have pecuniary gain as an objective. Most sporting clubs and other non-profit organisations in New Zealand are structured as incorporated societies.
Q. How will the body corporate function?
A. Every owner will have voting rights as a member of the body corporate. The owners at annual general meeting will appoint a management board to govern the body corporate. To minimise the administrative burden for that board and to ensure there is appropriate day to day representation of owner interests in Fiji, the body corporate will appoint a suitably qualified Fijian representative to supervise the body corporate's affairs and look after owners' interests in Fiji. That representative will report to the board and can be replaced at short notice by the board.
Q. What about wear and tear on my apartment and the resort?
A. Owner occupiers will be responsible for their own maintenance. For owners who are in the management arrangement, a percentage of accommodation revenue (4% from year three onwards) will be set aside into a "FF&E reserve" to cover the costs of refurbishing the apartment and furnishings when required. In addition, the body corporate levies include provision for a "sinking fund" to cover major repairs and refurbishment of common facilities such as the pool complex.
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Q. What happens if a cyclone damages the Denarau Beach Resort?
A. The body corporate will ensure that the resort, including the apartment, are insured against damage caused by cyclones and similar risks that are associated with the operation of a resort of this nature in Fiji. The costs of maintaining such insurance are payable as part of the ownership costs. Costs that are not covered by insurance, such as insurance deductibles and excesses and the cost of items that cannot be insured, will have to be met by the owners. Full details of insurance cover will be available to owners.
Q. Can I purchase in the name of my family trust or my company?
A. Yes. In the case of family trusts, the trustees themselves will have to sign the purchase agreement. While, for legal reasons, the name of the family trust itself cannot appear on the registered leasehold title you will acquire, the trustees are perfectly entitled to hold their ownership interest for trust purposes. In the case of a company, purchasers can choose either to establish a Fijian company to hold their investment, or to use an existing or new company established in some other country such as New Zealand or Australia. In either circumstance, certain Fiji statutory investment approvals must be obtained.
Q. Can I sell my apartment?
A. Yes. You are entitled to sell your apartment at any time you wish. If you are in the management arrangement then, unless you lawfully terminate that arrangement, you must procure the purchaser to sign a deed of covenant to be bound by the terms of the apartment management agreement.
Q. Can I mortgage my apartment?
A. Yes. If you are entering into the management arrangement, the mortgagee will need to provide an acknowledgement to the body corporate manager and hotel operator that it will be bound by the apartment management agreement in the event it exercises any enforcement rights under the mortgage.
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