Beach resort development

[Ganesh S.]

Hi Folks

I am fairly comfortable with commercial NNN real estate (In US) , as well as land development (primarily in India). However I have come across a new opportunity in southern Indian state with a beach front land right next to a popular beach resort. The neighboring resort is doing extremely good business and most are foreign/expat tourists that stay there.

We (partners) bought this beach front land, with the idea that we would construct a beach resort. My partners have significant experience in building residential houses but not beach resort, so construction wise we may not have much of a problem. Environment and other approvals would also be mostly be possible, though may take some time.

The challenge we are facing now is a very open ended question of how to approach building a beach resort. We have a a little less than 5 Acres and we are not allowed to construct high raise buildings. I will list down some of the random thoughts that I have, please provide any comments/suggestions.

1. Since we don't have experience running beach resorts, one option is to build the resort and lease out the management as well as Restaurant to tenants and collect rent. We primarily need to reach out to existing resort operators and see if they are interested. I was thinking of reaching out to operators like RCI and proceed from there. Anyone has some suggestions for this?

2. Build the resort, operate the resort part of it, but lease out the restaurant space. But Food and beverages would be one of the primary profit centers, so not sure if this is a good idea, unless we get pretty good lease rates.

3. Build/operate the resort/restaurants with help from partners. This is a long shot, but one of them does have a background in restaurant business, so we would think about this as well.

4. If we decide to build & operate the resort ourselves, we may have space to build upto 30-40 rooms with ample space for swimming pool, restaurant, parking, event hall. But would you start out small with 10-20 rooms with rest of the facilities and then build another phase for additional rooms? or build all of it together?

5. How should we go about analyzing opex of such a property? Obviously it is in India and things would be different, but lots of times things are same as well - for e.g. Food & beverages is a big money maker is what I hear in both places.

6. Neighboring resort has > 70% occupancy all the time and we know their total revenues, but dont know the exact net income after all operational expenditures. Not sure if there is a general rule here. We may have to get friendly with some of their management staff ;-)

Any other ideas? Showstoppers to watch out for?