pepper club the hottest address in cape town. apartment hotel investment consists of: an apartment...

Pepper ClubThe Hottest Address in Cape Town

Apartment Hotel InvestmentConsists of:• An apartment and a Parking Bay• An interior designed furniture pack • A rental pool operated by experienced hotel

operators• Asset Managed by experienced professional

board of Directors (Hospitality industry, Corporate Governance)

1

Payment terms

• Apartment & Parking Bay– 5% deposit : 7 days from signature– 5% deposit: 1 January 2009– Balance of Purchase price on Transfer

• Furniture Pack– 50% : 1 July 2009– 50%: 1 September 2009

2

Mortgage Finance

Investors are offered:• Guaranteed interest rate of PRIME MINUS 5%• Currently equates to 10.5% pa • For 24 months• On a 90% Mortgage Bond

Mortgage could be fully repaid within 8 years out of rental income

3

Projected Revenue

• 12% for the first year of operation (Dec 2009 to Dec 2010) – increasing by 10% pa

Or

• guaranteed 8% pa - for 2 years4

Taxation -Urban Development Zone (UDZ) Allowance

• The Revenue Laws Amendment Bill 2008 provides for the extension of this allowance from 31 March 2009 to 2014.

• Expected to be legislated early October 2008

5

Taxation - Allowances • Urban Development Zone (UDZ) Allowance– 11% of unit cost in the first year, and– 4.4% pa for the following 10 years.

• Depreciation Allowance– 20% pa on the cost of the Furniture pack.

• Tax Deductable Interest– Interest payable on all funds borrowed to finance the

investment is tax deductable

• Assessed Tax Losses– Tax Losses may be set off against any other taxable income

or may be carried forward to following tax periods

6

Investment Assumptions

• Apartment / Bay R1,000,000 • Furniture Pack R 150,000 • Total Investment R 1,150,000• Financed by – Investor R 250,000 R100,000 Deposit R150,000 Furniture– Mortgage at 10.5% R 900,000

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Tax Allowances

Mortgage UDZ Deprec Interest Total

• Year 1 110,000 30,000 94,500 234,500• Year 2 44,000 30,000 94,500 168,500• Year 3 44,000 30,000 94,500 168,500• Year 4 44,000 30,000 94,500 168,500• Year 5 44,000 30,000 94,500 168,500

• Total 286,000 150,000 472,500 908,500

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Taxation Net Rental Tax Taxable Accumulated

Allowances Income /(Loss) Tax Loss for year at year

end• Year 1 138,000 (234,500) ( 96,500) (96,500)• Year 2 151,800 (168,500) ( 16,700) (113,200)• Year 3 166,980 (168,500) ( 1,520) (114,720)• Year 4 183,678 (168,500) 15,178 (99,542)• Year 5 202,046 (168,500) 33,546 (65,996)

• Total 842,504 (908,500) (65,996)

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Projected Values - End of Year Investment Capital Investment

Value Appreciation Value - end - beginning of year of year

R R R

• Year 1 1,150,000 115,000 1,265,000• Year 2 1,265,000 126,500 1,391,500• Year 3 1,391,500 139,150 1,530,650• Year 4 1,530,650 153,065 1,683,715• Year 5 1,683,715 168,372 1,852,087

• Total 702,087

Projected capital appreciation - 10% pa

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Total Return – 90% Mortgage Net Capital Total Return on (Tax Loss)/ Income Appreciation Return Investment Taxable After IncomeMortgage Interest R R R

• Year 1 43,500 115,000 158,500 63.400% (96,500)• Year 2 57,300 126,500 183,800 73.520% (113,200)• Year 3 72,480 139,150 211,630 84.652% (114,720)• Year 4 89,178 153,065 242,243 96.897% ( 99,542)• Year 5 107,546 168,372 275,917 110.367% ( 65,996)

Average 85.767% Total 370,004 702,087 1,072,090

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INVESTOR – 90% LOAN

• Projected Income Tax Free to Year 6

• Projected period to repay loan only out of projected income In year 8

12

30 Days Free Usage

• An Investor may occupy his apartment for 30 days each year, free of rental. VAT is payable.

• During an investor’s occupation, the apartment will not participate in the rental pool.

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Pepper Club

The Hottest Address in Cape Town

Only the contents of Agreements signed by the parties may be relied upon. All other representations, written or verbal, are not warranted