GOODWILL OF HOTEL

Grey River Argus, 19 August 1944, Page 8

GOODWILL OF HOTEL

CASE BEFORE LAND SALES COMMITTEE

Ml- Mark Wallace presided over a sitting of the Westland Land Sales Committee at Greymouth yesterday. With him were Messrs J. Mulcare and yW. G?eenslade. Mr. Basil King Commissioner of Crown Lands, iethe Crown, P The committee had before it an application by A. Kyle (Mr J W Hannan) for permission to sell to W. B. Hudson Sec. 10, Pt. Sec. 11, and Secs 12 and 13 town of Greymouth,, Richmond Hotel. The price asked w.as £l(\500-—£4,500 for the hotel and £6,000 for the license. Mr. King said that the Crown valued the land at £4,208, ana for all practical purposes the Crown could accept the vendor’s valuation. The chairman said that the section would not be worth more than £lOO as an unimproved property, but it was worth considerably more commercially. Mr. Hannan contended that comparison provided the surest basis of value, quoting another case in support of this view. He gave evidence of a sale of a hotel for £14,000 where the takings were about £l2O, similar to those of the present hotel. Andrew Kyle, proprietor of Richmond Hotel, gave evidence of his takings. The hotel was very handily situated for the trade of the wharf. Wages at present paid out a week amounted to £4 19s. 3d. He was selling on medical advice regarding his wife’s health. He had been offered £lO,OOO for the premises in 1938, arid last year a rental of £lB a week had been offered. He was satisfied that at the price at which it was being sold there was a good living for the purchaser. To Mr. King: He put through about 216 gallons of beer a week, paying £9 15s. for a 36 gallon barrel. He had not gone into the question of the profit on one of these barrels. Gross weekly takings were just over £l2O. To the chairman: The fact that he had no need to provide for the travelling public enhanced the value of his license.

To Mr. Greenslade: The business would be worth £5OO a year in wages for himself and his wife. Clive Lawrence Kettle, commission agent, said he had done most of the valuation of hotel properties in Greymouth in the last 25 years. He thought the price asked was .on the low side. Gooawill was profits on the business. He thought 7i per cent, was a fair capitalisation, which would make the price about £15,000. The Hotel Richmond did not only have a good wharf traffic but a good commercial traffic It was a well kept hotel —he would compare it among the best four hotels in Greymouth. Illustrating the way in which values had risen he said that the Dunollie Hotel had sold oyer 20 years ago for £6,000 and within the last 12 months had been) sold for £lO,000. He also instanced the Dominion Hotel, which as a no license house had been a losing proposition, but a few vears after acquiring a license had been sold for £9,000. This was 14 or 15 vears ago. The hotel had since been sold for £10,500. He would not think there would be much difference between the trade of the Dominion and the Richmond. To Mr. King: He thought his allowance of 7i per cent, capitalisation on the Richmond Hotel was a liberal on». He agreed that some men might be content with, sayi, a five per cent, return without allowing for wages over and above that. Mr. King said that the only sense he could make out of the proposition was that hotels were a class apart carrying a special goodwill. On an ordinary commercial basis the goodwill of the hotel would be about £3,200. It looked as though the ordinary commercial basis would have to be dropped and the only reliable evidence taken that of other sales of hotels, the values of which had been maintained over a period of years. sip jo juamajijoJ jjoqs n JOJJV committee, the chairman announced that consent would be granted at £10,500. The valuation of the land and buildings as such had not been disputed, and the Crown had not been able to bring forward any evidence to challenge the figures in connection with the weekly takings. On the basis .of the figures supplied it appeared that the average weekly takings were about £llB over a period of three years. The committee had allowed £5OO a year as the value of the licensee's services in the management of the hotel, and capitalising the net balance at 5 per cent, a figure somewhat in excess of the consideration was arrived at. The sale of the Or iental Hotel in Dunedin provided a parallel with the present case.