Division 4.1(b) Reports on the valuation of the plot destined for a hotel complex (NNH plot)

The 2000 and 2002 reports on the second plot (‘NNH’) suffer from the same limitations (e.g. use of an inadequate deflator, lack of justification for not applying valuation methods established in Spanish law, etc.). As mentioned above, none of these reports are signed or stamped.

Some additional comments are nevertheless in order. The 2000 and 2002 reports establish benchmark prices for hotel rooms with the help of average prices. However, the source is not provided, nor is it clear whether it refers to Alicante province (2002 report), or the Comunidad Valenciana (2000 report).

The resulting average prices are EUR 44,95/night in the 2000 report, and EUR 47,65/night in the 2002 report. Although the source underpinning these values has not been provided, they are not out of line with previous figures.

By contrast, the 2009 report provides a list of 6 well located hotels, all of which are 4- or 5-star, to establish a benchmark price. The latter is established EUR 104/night. There is no explanation as to why the methodology to establish benchmark prices is different from the one used in the 2000 and 2002 reports.

More importantly, it is hard to understand why the focus is on 4-5-star hotels. Is there any indication that demand would exist for 4-5-star hotels outside Alicante, located next to a highway and a ‘poligono industrial’?

In the same line, it is quite telling that the only hotel close to the CDL complex has been omitted. The latter is an IBIS, whose prices range from EUR 49 per night for the summer of 2010 (http://www.ibishotel.com/gb/reservation/multirates.jshtml consulted on 24 February 2010). As further evidence, luxury apartments next to a golf course (and relatively close to CDL) charge EUR 80 per night in August 2010 (peak season, see http://www.hotelesoasis.com/WebOasis/EN/ficha_hotel/plantio_golf/descripcion.jsp, consulted on 24 February 2010).

The 2009 report for the NNH plot also contain some surprising statements. One is initially pleasantly surprised to find out that the method to undertake the valuation is in conformity with the law (p. 13 reads ‘The methodological references are the criteria laid down in Ministerial Order ECO 805/2003 on real estate valuation and Law 6/1998 of 13 April 1998 on land valuation, the aim of the valuation being to establish the value at the present date.’ However, on p. 25, one discovers that, after all, the valuation report has not complied with the requirements set out in the Ministerial Order: ‘In accordance with Article 61(1)(b) of Order ECO 805/2003 of March 2003 on rules for real estate valuation, we would point out that this Valuation Report does not formally comply with that Order since its purpose is other than the scope of application of the Order’ (‘por ser su finalidad distinta al objeto de aplicación de la misma’).

It is also interesting to note that there is a huge difference between the estimates per square meter for the two plots (NNH and NNT). While not denying that the projected uses (offices vs. hotels) may explain part of the difference, the gap is still striking. For hotels, the values range from EUR 144,12/m² (2000) to EUR 188,35/m² in 2009. For office space, the respective magnitudes range from EUR 491,64/m² (2000) to EUR 800/m² in 2009. What can explain the significant difference in the price evolution (inflation) of these two plots situated next to each other? How is it possible to account for this difference of over 300 %?

Should we conclude that this is due to the fact that the methodology used to value the plot destined for hotels is closer to the standards established by the law? Or should it be put down to the greater transparency of the price of a hotel night?

It is also claimed that variable costs represent 50 % of revenues (e.g. on pp 18-19 of the 2009 report). Where does the estimate of such large margins come from?

Building costs are estimated on the basis of a benchmark price module. For the 2000 and 2002 reports, the correct figures are chosen. However, for the 2009 report, the 2006 figure is used. Why is this?