I N F O R M A T I O N M E M O R A N D U M

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1 I N F O R M A T I O N M E M O R A N D U M Page 1 of 20

2 THE OPPORTUNITY Colliers International is retained as exclusive marketing agent for sale of the leasehold interest of the, a 3.5 Star island resort. The Resort is located on the second of a series of 3 beaches, along a pristine coastline with views of nearby islands. Groote Eylandt is an island situated in the Gulf of Carpentaria approximately 50km east of the Arnhem Land Coast and 650km south-east of Darwin. Investment Highlights: Unrivalled waterfront location 74 upscale cabins and motel rooms comprising luxury and affordable accommodation options Large, modern bar and restaurant with indoor and outdoor dining spaces Strong historical performer well supported by the corporate market Available with vacant possession Experienced management & staff Huge potential to improve Leisure guest market The only quality tourist accommodation property on the island Daily flights from Darwin and twice weekly barge service 25 hectares of maintained grounds with absolute beach frontage. The land is subject to a 35 year ground lease with a residual term of 25 years and 6 months The resort was constructed in 2007 and completed in 2008 and has been primarily catering to the staff, contractors and visitors associated with the GEMCO mine, however also appeals to the tourist market with indigenous cultural offerings and fishing tours. The resort is the only accommodation facility on the island that is open to the public with the only other accommodation in the form of workers camps. Page 1 of 18

3 EXECUTIVE SUMMARY The Property Luxury beachfront island resort to be sold with vacant possession: 74 high end resort style cabins and motel rooms 29.74Ha beach front site Extensive high quality resort facilities Pristine island location with water front position Large, modern bar and restaurant with indoor and outdoor dining spaces resort-style pool with waterfall surrounded by timber decking spa with full beauty and hair salon and three opulent treatment rooms dedicated meeting and convention rooms sunset dining area with unspoiled views of the ocean large, contemporary reception area 25 hectares of maintained grounds with absolute beach frontage Onsite management and staff accommodation Address 1 Bougainvillea Drive, Alyangula Northern Territory 0885 Interest Lease Current Rental Leasehold tenure Property to be sold with vacant possession $75, / annum GST Exclusive. The rental is fixed for the term of the lease with no rental review mechanism provided in the sub-lease document. Title N.T. Portion 1632 plan(s) CP Zoning NOZONE (NO NT Planning Scheme zone applies) The Lodge provides 74 cabins and motel rooms comprising luxury and affordable accommodation options. There is a large reception and restaurant area, cultural building, day spa, manager s residence and extensive staff accommodation. The buildings on the property are connected by a series of timber boardwalks suspended over natural landscaped terrain shaded by gum trees and tropical natives. The property for sale comprises the improvements which are positioned on Leasehold land of approximately hectares. The land is subject to a 35 year ground lease of which a residual of 25 years and 6 months remains. Schedule of Room Types: Component No. of Rooms Motel Rooms 34 Deluxe Bungalows 20 Executive Bungalows 6 Cottages 2 Fishing Camp Cabins 12 Total Room Count 74 Page 2 of 18

4 TITLE PARTICULARS Title Reference Parent Parcel The leasehold land is not a separate title and currently forms a small part of N.T. Portion 1632 which comprises the majority of Groote Eylandt. The parent parcel is legally described as follows. Title Details Search Date 15 February 2017 Local Government Area East Arnhem Shire NT Portion 1632 Legal Description Volume Folio Registered Proprietor Parcel Reference: N.T. Portion 1632 plan(s) CP Anindilyakwa Land Trust of PO Box 172, Alyangula NT 0885 Encumbrances, Easements and Interests Registered Date Notation Description 05 May Lease to Pty Ltd as trustee for Groote Eylandt Unit Trust - NT Portion 7555(A) - expiring 13/12/2042 The Search Certificate provides a Deed of Grant of Groote Eylandt and Aninidilyakwa Islands to the Anindilyakwa Trust under section 12AAB of the Aboriginal Land Rights (Northern Territory) Act Land Tenure & Occupancy The property is occupied under a sub-lease arrangement which involves a 35 year lease from Anindilyakwa Land Trust to Groote Eylandt Pty Ltd as trustee for Unit Trust, summarised below: Sub-lease Registered Document No: Lessee Sub-Lessee Anindilyakwa Land Trust Groote Eylandt Pty Ltd as trustee for Unit Trust Commencement 14 December 2007 Term 35 years. Expiry Date 13 December 2042 There are no rights of renewal. Permitted Use Annual Rental The Lessee will not without prior written consent of the Lessor use or permit the leased area to be used for any purpose other than for the building of a resort and fishing camp and related activities. $75,000 per annum (GST Exclusive) fixed for the term of the lease Page 3 of 18

5 THE LOCATION AND SURROUNDS Groote Eylandt has an area of approximately 2,260 square kilometres. is located on the North-Western Tip of Groote Eylandt, which is situated in the Gulf of Carpentaria approximately 50km east of the Arnhem Land Coast. Groote Eylandt is situated 650km south-east of Darwin approximately 200km south of Nhulunbuy. The island can be reached by both sea and air. Airnorth provides direct daily services from Darwin which take approximately 90 minutes. is located just 1.5 kilometres north of Alyangula. Alyangula is the major township on the island and houses the majority of GEMCO Employees. GEMCO is a South32 / Anglo American Plc joint venture which runs a substantial manganese mine on the island. The Resort is located on the second of a series of 3 beaches, pristine coastline and views of nearby islands. Immediately south of the Lodge is a 9 hole golf course. Facilities within nearby Alyangula include shopping, Primary School, Post Office and community facilities including the town swimming pool, tennis courts and sports oval. The town is serviced by a twice weekly barge service from Darwin. Page 4 of 18

6 LOCATION AND SITE PARTICULARS Page 5 of 18

7 ABOUT GROOTE EYLANDT Groote Eylandt is the largest island in the Gulf of Carpentaria and the fourth largest island in Australia. It is the homeland of, and is owned by, the Warnindhilyagwa People who speak the isolated Anindilyakwa language. Groote Eylandt lies about 50 km from the Northern Territory mainland and eastern coast of Arnhem Land, about 650 km from Darwin. The island measures about 50 km from east to west and 60 km from north to south. It is generally quite low-lying, with an average height above sea level of 15 metres although Central Hill reaches an elevation of 219 metres (719 ft) Together with Bickerton Island and a few smaller satellite islands, Groote Eylandt forms Anindilyakwa Ward of East Arnhem Region. It contains the communities of Angurugu, Alyangula, Umbakumba, Yadagba District, Uburamudja District and Sandy Hill (Groote Eylandt) and Milyakburra District. Outside the local government subdivision is the mining company GEMCO with headquarters in the town of Alyangula, which is an unincorporated territory within the Northern Region of Northern Territory. Groote Eylandt is part of the Arnhem Land Aboriginal Reserve. GEMCO, a South32 / Anglo American plc joint venture, operates a large manganese mine near the community of Angurugu. In operation since the early 1960s, the mine produces more than 3.8 million tonnes of manganese annually about a quarter of the world's total production. Groote Eylandt is becoming renowned for its fine Aboriginal rock art sites, arts, crafts and outstanding sport-fishing. The whole of Groote Eylandt and its surrounding waters lie within the Anindilyakwa Indigenous Protected Area. An unnamed islet off the north-eastern coast has been classified by BirdLife International as an important bird area because of its global importance as a roseate tern breeding site. Page 6 of 18

8 OVERVIEW OF IMPROVEMENTS Page 7 of 18

9 OVERVIEW OF IMPROVEMENTS Page 8 of 18

10 OVERVIEW OF IMPROVEMENTS Page 9 of 18

11 HOTEL MARKET OVERVIEW National Hotel Market In 2016 Colliers International recorded 50 sales with a total value of $2.7 billion, the second highest result on record. This came after a strong year in 2015 which was dominated by several 5 star hotel sales in Sydney and the Eureka hotel portfolio deal. New South Wales dominated sales volume in 2016 with around 40% of total hotel sales by value. Major hotel sales in Sydney included the Park Regis City Centre ($46.0 million) and the Vibe Hotel Sydney ($97.0 million). Major suburban sales in NSW included the Mercure Parramatta ($39.6 million) and the Adina Apartment Hotel in Norwest ($30.6 million). The largest transaction of the year was the $700 million Ribbon development site acquisition by Chinese Zhengtang Group in Darling Harbour. The mixed-use development is mooted to include a 400 room W branded hotel, 150 serviced apartments and retail/cinema component. When including the Ribbon development site purchase, Chinese mainland investors were the predominant buyer origin for 2016 with 37% of sales by value. This compares to just 6% of sales in Domestic buyers accounted for approximately 29% by value and Singapore buyers accounted for approximately 18% in There was significant activity in 2016 in the Queensland leisure destinations of Surfers Paradise and Cairns including the Surfers Paradise Marriott Resort & Spa ($70 million), Hotel Grand Chancellor Surfers Paradise ($80 million), Rydges Tradewinds Cairns ($34 million) and Rydges Esplanade Cairns ($40 million) all transacting in These sales coincided with strong growth in the trading fundamentals from Cairns and the Gold Coast, which were the two best performing markets in the country in 2016 in terms of year on year growth. Year to date 2017 has seen considerably lower transaction activity, with just 26 transactions with a total transaction value of $1.57 billion. In the same period of 2016 there were already 39 transactions of $1.8 billion. We have also seen considerably less activity from Chinese investors, purchasing just four assets this year to date. Australian investors, closely followed by Singaporean investors have been involved in the largest hotel transaction volumes in 2017 year to date. The largest sale for 2017 to date has been the Hilton Melbourne South Wharf which sold for $246 million. Another notable sale in 2017 has been the InterContinental Sydney Double Bay which sold for $140 million, reflecting a per room value of $1million. Page 10 of 18

12 A diagram outlining the origin of hotel and serviced apartment purchasers since 2005 is provided below. Page 11 of 18

13 The following diagram shows the changes in values per room over time. On a value per room basis the trend has been positive and over the ten year period to 2017 the average growth was 5.7%. Significant growth was recorded in 2015 in particular from the sale of several major five star hotels, however in 2016 there were less 5 star hotel sales and hence lower values per room has seen a number of four- and five star hotel and serviced apartment transactions, hence the increase in price per room values once more. Major Hotel Sales - Price Per Room 425, , , , , , , , , , , , , ,000 75,000 50,000 25,000 - Average Price Per Room Median Price Per Room Linear Trend (Median Price Per Room) Source: Colliers International Traditionally the projected initial yield (first years projected income over purchase price), has been higher than the passing yield reflecting the risk associated with forecast income growth and this is demonstrated in the below graph. Initial yields have shown less volatility than passing yields suggesting the market has being putting more emphasis on projected rather than historic income. The trend in 2016 and also in year to date 2017, was a continuing contraction in yields due to increased competitive pressure from buyers and the cost of finance falling. Over the past 4 years we have seen an overall trend in compression of yields; from over 9% in 2013 to approximately 6% in 2016 when taking into account all hotel transactions over $5 million. Page 12 of 18

14 The diagram below outlines the spread of passing yields in various markets across Australia in 2016 and YTD Passing Yield Ranges & 2017 Hotel Transactions 12% % % 0.08 Yield Range (%) 6.0% % % Sydney CBD Melbourne CBD Surfers Paradise Cairns Other Capital Cities Non CBD locations Source: Colliers International Generally the market appears to be positive over future trading conditions for Sydney and Melbourne due to current high occupancy rates, albeit Melbourne average room rates are increasingly becoming under pressure. Although clearly with the resource based markets declining from historic peaks (Perth and Brisbane) there is some concern as to how long it will take for the cycle to once more show a positive trend in these locations. Northern Territory Hotel & Serviced Apartment Market Australian Bureau of Statistics (ABS) Statistics The ABS no longer provides quarterly updates of the Takings from Accommodation data and therefore the statistics are now quite dated. The most recent available data due to the ABS now releasing the statistics on an annual basis rather than a quarterly basis is for the year ending June The next release of this data will be for June 2017 however will not be available until December Page 13 of 18

15 The statistics referred to below are from the ABS and refer to the Northern Territory. According to the ABS, the Takings from Accommodation data collected from 1 st July 2000 is on a GST inclusive basis. Colliers International s analysis excludes GST from the Takings from Accommodation data shown below. Please note: Data sourced from the ABS under Takings from Accommodation collected from 1 July 2000 is on a GST inclusive basis. Colliers International excludes GST from the Takings from Accommodation data shown below. Definitions: ARR Average Room Rate RevPAR Revenue Per Available Room RNA Room Nights Available RNS Room Nights Sold Northern Territory - HM&SA Year Establishments Room Nights Room Nights end Rooms Available Sold Occ ARR RevPAR Jun ,499 2,371,221 1,448, % Jun ,614 2,421,467 1,545, % Jun ,584 2,421,695 1,614, % Jun ,359 2,604,648 1,657, % Jun ,407 2,677,141 1,706, % Jun ,392 2,696,697 1,737, % Jun ,285 2,629,869 1,686, % Jun ,469 2,715,994 1,764, % Jun ,335 2,665,309 1,687, % Jun ,448 3,082,906 1,922, % Jun ,943 3,228,455 1,956, % According to the ABS, as at June 2016 (the latest available data from the ABS), there were 101 accommodation establishments in the whole of the Northern Territory (NT) providing a total of 8,943 rooms. Page 14 of 18

16 The below chart shows the Average Room Rate (ARR), Revenue Per Available Room (RevPAR) and Occupancy in the Northern Territory Hotel and Serviced Apartment market on a quarterly basis: 80% 70% 60% 50% 40% 30% 20% 10% Occupancy Source Australian Bureau of Statistics It can be seen the June and September Quarters are typically stronger than the December and March quarters, indicating that the NT market overall is impacted by the Darwin and northern hotel market, which is seasonal between the wet and dry season months. The below chart shows the underlying trends for the average room rate, RevPAR and occupancy in the Northern Territory hotel and serviced apartment market on an annual basis since June 2007 : Source Australian Bureau of Statistics Page 15 of 18

17 The Northern Territory Hotel market has experienced very stable occupancy rates over the previous 10 years in the range of 63% to 66% however has been in decline since June 2013, with the lowest achieved rate being in June 2016 at 60.6%. The recent decline is likely to be greatly impacted by the increase in room supply and the corresponding drop in demand in the Darwin hotel market which contributes approximately 59% of total room supply in the NT. ARR has shown consistent steady growth over the period commencing in June 2007 at $ and gradually increasing to $ by June 2015 and then declining only very slightly to $ to June Despite the most recent fall in Occupancy since 2014, RevPAR has also achieved steady growth over the nine years commencing at $77.79 in June 2007 and recording an increasing trend throughout the period to $95.64 in June 2015 then falling by 2.5% in June 2016 to $ The above chart shows hotel room supply and demand as represented by room nights available and room nights sold, in the Northern Territory on an annual basis. The Northern Territory hotel and serviced apartment market has seen consistent moderate room supply increases until June 2014 then a marked increased in the level of supply in June 2015, where supply increased by 15.2% over a 12 month period, followed by another increase of 5.9% to June 2016, which is almost directly associated with a sharp increase in room supply in the Darwin market. There has been very little addition to room supply to any of the other regional markets in the NT in recent years. Page 16 of 18

18 METHOD OF SALE SALE PROCESS The property is for sale by Expression of Interest Closing 4:00pm CST Wednesday 22 nd November To assist in the assessment of this opportunity, additional information including financial performance and pricing is available on request. Prospective purchasers are invited to submit offers to purchase in writing. Offers must clearly address, but not be limited to the following matters: Acquisition Price Purchasing Entity Deposit Amount Capacity to Complete Conditions and Approvals The amount of consideration in Australian dollars. The identity and nature of the legal entity which will acquire the property, including its place of incorporation and ownership structure. Confirmation of the prospective purchaser s proposed deposit. Prospective purchasers should provide details of their capacity to complete by the settlement date, including in particular the source of funds and evidence of the prospective purchaser s financial status. Prospective purchasers must set out in full the details of any conditions which will need to be satisfied prior to the prospective purchaser either signing or settling the contract for sale e.g. deposit amount, settlement terms, due diligence period etc. For further information, please contact: Craig Inkster Director of Sales craig.inkster@colliers.com Tony West Specialist Consultant tony.west@colliers.com Page 17 of 18

19 DISCLAIMER This report has been prepared by Colliers International (NT) Pty Ltd for the information of potential purchasers to assist them in deciding whether they are sufficiently interested in the property offered to proceed with further investigation in relation to the property. The information contained in this report does not constitute any offer or contract of sale; it is provided as a guide only; and has been prepared in good faith and with due care. Potential purchasers must take note that the figures and calculations contained in this report are based upon figures provided to us by outside sources and have not been verified by us in any way. We have no belief one-way or the other in relation to the accuracy of such information. Any projections contained in this report represent estimates only and may be based on assumptions that may be incomplete, incorrect or erroneous. Potential purchasers must satisfy themselves in relation to all aspects of the report including development potential and cost; market take up; rent levels; outgoings; and all other matters a prudent purchaser would consider relevant. The Vendor, Colliers International, or their employees, agents or representatives will not be liable for any loss or damage resulting from any statement, figure, calculation or any other information that a potential purchaser relies upon that is contained in this report or any other marketing material. The property will be traded or sold as is and with all faults, without any representation or warranty as to its condition; fitness for any particular purpose; or compliance with any relevant law. The Vendor reserves the right, at its sole discretion, to postpone or cancel the proposed trade or sale of the property and to modify or add any terms and conditions to any proposed contract, vendor s statement or other material associated with the proposed sale, which may be made available to a potential purchaser. Page 18 of 18

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