CONCERN FELT

Evening Star, Issue 25770, 17 April 1946, Page 6

CONCERN FELT

GOODWILL OF HOTELS APPLICATIONS FOR TRANSFERS Concern was expressed by the Otago Land Sales Committee—Messrs W. M. Taylor (deputy chairman), D. J. Iloss, and E. Sincock—at its sitting yesterday afternoon at the substantial increases in the amounts apportioned for goodwill in the cases of three hotels which had been previously dealt with by the committee. In all, five cases concerning the transfer of hotels were dealt with at the sitting. Approval of the transfer of the Ocean View Hotel to James McLean Wilson and Elizabeth Wilson at a consideration of £28,000, of which £22,000 represented the goodwill, was- sought by Thomas Clark Muir and Mary Francis Mtiir. The vendors were represented by Mr G. W. Ferens and the purchasers by Mr 1. B. Stevenson. Mr J. R. Hampton appeared for the Crown. Tho hotel had changed hands on June 19 last, said Mr Ferens, for £25,300, goodwill amounting to £17,300. The sum of £22,000 was now being asked for the goodwill, an increase of £4,700. The Deputy Chairman said that the increase in goodwill was causing the committee concern. The only satisfactory method of assessing hotel goodwill was not on the takings, but on the net taxable income, claimed" Mr Ferens. - "PRICE FULLY JUSTIFIED." Giving evidence concerning a valuation made by him on Juno 16, 1945, in connection with the previous sale of tho property, Robert James Knowles, a taxation consultant, said that because of _ the absence of reliable accounts witness explained that he had not been able to draw conclusions from the accountancy records, and he had made his calculations on the basis of an assumed rental value of the undertaking as a going and well-established concern. He had stated as his opinion that an experienced hotelkeeper of average business acumen would have no difficulty in earning a substantial income in the hotel after paying £35 a week rental, and the figures for the 40| weeks ended March 31 last, furnished by the owner-licensee, revealed that his contention was justified. "In my view," witness continued, " the price for the hotel buildings, the adjoining property, and the goodwill of the hotel business is fully justified at £28,000 on the basis of the income figures furnished." Edmund Robert Grace, public accountant, said he had calculated the annual net profits on the basis off tho nine months' trading disclosed in the profit and loss account to be £3,583 13s 4d, exclusive of any allowance for taxation. DECISION RESERVED.

On the figures submitted the Crown could not contest the amount asked for goodwill, said Mr Hampton, but the question was whether the increase in takings for nine months was sufficient to justify such a big increase. The committee'would also have to consider whether the vendors were not doing something that they had no right to do under the Servicemen's Settlement and Land Sales Act, and that was speculating in hotel property. The Chairman said that a point which the -committee wanted to clear up was whether Muir was not something more thau an average efficient hotelkeeper. If that was the position then it could be contended that he had received his reward in increased profits resulting from the improved trading position which his own ability had brought about. In such a case it was his own personality that was the factor and not the hotel. Mr Stevenson said that the proposed purchaser and his wife had had a good deal of experience in the control of hotels, and had been highly successful in another Duncdin hotel. Mr Wilson, from his experience, was prepared to believe that the takings would amount to £290 a week.

Mr. Ferens, in further submissions, said that the price was quite reasonable in view of the other sales approved by the committee. Counsel denied that Mr Muir was engaged in hotel speculation, and said this was shown by the fact that he had only four hotels in four years. There was nothing to prevent a man selling an hotel property three months after he acquired it. The committee reserved its decision. "SOMEBODY GOING TO BE HIT." The application of Douglas Colville Gait and Roma Kathleen Gait for the ■transfer of the Royal Oak Hotel, Arrowtown, to Lee Charles Stapp at a consideration of £6,500, of which figure £3,500 was for goodwill, was granted. Mr Ferens appeared for the vendors and Mr Edmund J. Smith for the purchaser. It was explained by Mr Ferens that the vendors had purchased the freehold of the hotel in August, 1944, for £3,600, the goodwill amounting to £6OO. A considerable increase had been made in the takings. Improvements amounting to £240 had also been carried out. The property included a butcher's shop, a bakehouse, and a garage. Mr Gait was selling owing to his wife's health. Mr Smith said the purchaser was a returned soldier who was anxious to acquire the property. Mr Hampton said the Crown could not object to the price on the figures submitted, but he wished to emphasise that if the committee was going to increase the amount allowed for goodwill on increased -takings, " then somebody is going to be badly hit when hotel takings drop." ROXBURGH HOTEL. In the case in which (Robert Sheriff applied to transfer the Goldfields Hotel, Roxburgh, to George Spowart Proctor and Winifred Marguerite Proctor for £14,000, the committee reserved its decision. The goodwill amounted to £10,125. The vendor was represented by Mr J. C. Robertson, and Mr H. S. Ross appeared for the purchasers. The vendor, in a written statement, said he had taken over the hotel in April, 1943. He had increased tho business considerably. " Central Otago," he added, " is becoming increasingly popular with tourists, and the future is particularly bright because of the Government's proposed irrigation works." His reason for selling was that he was getting married, and his future wife did not wish to live in an hotel. "WILL HAVE TO MAKE A STAND." The Crown did not contest an application for the sale of the Criterion Club Hotel, Alexandra, by George Mountney to Avis Lancaster Young for £17,000 (land and buildings £6,100, goodwill £10,900). Mr Hampton explained that the property had been sold two years' ago for £II,OOO, but the figures showed a staggering return on the capital outlay. The Deputy Chairman commented that the committee would sooner or later have to makr> a stand, especially with the number of hotels which were being sold for a second time. In tho

present application the goodwill had been increased by £5,600. The application was adjourned for a hearing of the parties, the committee expressing the opinion that it was not satisfied that the increase in goodwill was justified. UNDUE AGGREGATION ALLEGED. The application of David Porter Wilson for the transfer of the Crown Hotel to New Zealand Breweries Ltd. was adjourned for hearing, on tho of alleged undue aggregation tm the part of the purchasers.