SALE OF HOTEL

Otago Daily Times, Issue 26229, 13 August 1946, Page 6

SALE OF HOTEL

PRICE HELD REASONABLE APPEAL BEFORE COURT The Criterion Club Hotel, Alexandra, figured in a case which was heard by the Land Sales Court yesterday .afternoon, when an appeal was heard before Mr Justice Archer, and Messrs W. Stewart and E. Scott (associate members). The appeal, which was supported by Mr A. J. H. Jeavons and Mr H. S. Ross, was against the decision of the Otago Land Sales Committee in refusing to give consent to the sale of the hotel at the purchase price of of £17,000 on the grounds of speculation. The committee fixed a price of £12,500 on the property for the purpose of an appeal to the Court. The Crown was represented by Mr S. T. Barnett, of Wellington. The appeal was the first of five involving hotels set down for hearing at the present sitting of the Court, and Mr Jeavons intimated that when the cases were heard he would make general submission concerning the question of value and speculation. Mr Jeavons explained that the hotel had been sold in February last. The appellant was selling because of the state of his wife’s health. At the hearing before the committee, he said, all the evidence supported the contention that the hotel was well worth the consideration asked and the Crown had not disputed that evidence. Accountant’s Evidence

Evidence was given by J. J. Hall, public accountant, who stated that he had kept the books of the hotel and witness submitted profit and loss accounts for three years. Making due allowance for the fact that the residential part had to be closed for a time the figures of the takings showed an increase since the case came before the committee. Alexandra, witness added, was one of the most progressive towns in Otago and had become an extremely popular tourist resort, particularly during the past two or three years. Witness ’considered the business of the hotel should increase. The takings of the hotel were very much lower in 1943 when Mr Mountney acquired it than they were later. At that time the restrictions on tourist traffic would considerably retard business.

To Mr Barnett, witness said the hotel provided accommodation for 16 guests. Possibly the three hotels in the town would provide for 50 guests, but there were several boarding houses.

Mr Barnett: You ask me to believe that Alexandra has just been discovered as far as its tourist attractions are concerned? Witness: No.

Mr Barnett: And yet there is nothing there now that was not there in 1939?

Witness agreed that there was a “general air of prosperity In the hotel business throughout Otago.” “Worth More Than Price"

J. M. Samson, hotel broker and valuer, said that at the hearing of the application before the committee all parties had agreed to the value of the land and buildings at £6500. Witness considered this was a most reasonable valuation, and after hearing the evidence of the last witness, he considered the place was worth even more than the £17,000 asked for it. Witness said that in all the transactions in which he had been concerned he hardly remembered an instance in which the previous licensee’s figures relating to takings and expenditure had been available to the purchaser. “I can show Mr Barnett," witness continued, “an hotel in a small place with a population of ‘two men and a dog’ which takes £IOO a week. Population" he emphasised, “has nothing to do with hotel takings." He expressed the opinion that one of the reasons for increased hotel business was that more drinking was taking place amongst young people. Mr Barnett: I am surprised to hear that such a thing is happening in Otago. Witness: It is worse in Wellington. He added that he did not always place much reliance on figures dealing with takings. There were many other factors to be taken into consideration. “ It is what a hotel can do rather than what it has done that matters,” witness added. There was no absolute relationship between takings and goodwill. Analysis of Balance Sheets

' P. W. Stabb, a member of the firm of James Samson and Co., said it was fairly safe to assume that he had had business dealings with most hotels in the province. The Criterion Club Hotel bar compared most favourably with that of any city hotel and the accommodation and appointments were also of a high class. The vendor was an efficient publican. Witness considered the price paid for the hotel by Mrs Young was a most reasonable one. He had made an analysis of the balance sheet and profit and loss account for the past two years, and found a total profit of £6432. After making deductions for personal services, etc., the figures represented a profit of 13.2 per cent, on a capital of £ 19,000. “To show the absurdity of following this through,” witness continued, “I would like to point out that to capitalise that amount at 7 per cent, the hotel would be worth £36,000. From my own knowledge and experience I would cer tainly not suggest it is worth anything like that.” Speaking generally witness said he did not know of any hotel sold in Otago during the past 20 years which had receded in value. When the hotel was sold in 1943 and the case came before the committee he had expressed the opinion that the takings would improve, but witness said he was surprised at the” substantial increase that had taken place. The takings had increased from £l5O in 1943 to £233 in 1946.

H. C. Carter, hotel broker, said he did not expect any recession in the business in the Alexandra district. Witness also pointed out that there were few bad debts in the hotel business.

His Honor: If you were a lender would you consider the present basis fbr lending money on hotel properties as satisfactory? Witness: Yes. He thought there would be no difficulty in obtaining £12,000 or £13,000 on the property from a bank.

John MacDonald, of the firm of John Reid and Sons, real estate agents and valuers, said the hotel, in his opinion. ,was a cheap purchase at £17,000. There would be no difficulty in securing a tenant at £25 a week, plus rates and insurance. In his opinion people were not purchasing hotels for speculative purposes. Evidence was also given by A. W. McDonald, land agent and hotel broker, and by the appellant, C. G. Mountney. To Mr Barnett, Mr Mountney said he had not made up his mind whether he would purchase another hotel or not. His wife did rot wish him to do SO The court at this stage adjourned until 10 a.m. to-day.