Frequently Asked Question

FAQ’S – Frequently Asked Questions

What will I receive on settlement?

You will receive:

• Ownership of the Apartment purchased and the Furniture Fit out in it;
• Shares in (the “body corporate”)
• Rights to receive rental income from the Body Corporate flowing from the Operating Agreement with the hotel operator operation under the “Apart-hotel Scheme” (this is called the “Apartment Rights”); and
• You will receive membership of the common facilities:

Do I have to include my Apartments in the arrangements with the Hotel Operator?

No. Only the trance of the apart-hotel being The Bungalows have to join the arrangement (known as the “Apart-hotel Scheme”), under which the Hotel Operator will manage and operate the Bungalows as guest apartments. The decision to join the “Hotel-Apart Scheme” is a choice for the individual circumstances of the purchasers. An Apartment owner not in the Apart-hotel Scheme has to pay his or her share of the Body Corporate Costs the maintenance fee which is estimated to be $ 300.00 monthly per apartment.

When will I be able to use my apartment?

If you join the Apart-hotel Scheme your apartment is available throughout the year except where the apartments have been previously booked, for example, for a major conference or event involving a substantial number of the apartments. All apartment Owners and their immediate families are provided 4 weeks free use of the apartment per calendar year without affecting their return. This is called the Owner’s Period. No more than 2 weeks of this use may be in the high season. The Body Corporate and the Hotel Operator will agree the high season each year. The high season dates for the first year of operation will be available on request. You will be able to permit your friends to stay during your Owner’s Period on the same basis as if you were staying. Details on booking

What happens if I use my Apartment more than 4 weeks a year?

In the Apart-hotel Scheme owners are welcome to stay in their apartments beyond 4 weeks. During this usage, to ensure a fair system for all owners, a charge based on a discounted rate is applied for the usage. This is because owners usage reduces income otherwise available to all the apartment owners. These charges are based on special discounts that are personal to the apartment owner and immediate family and are not transferable. Arrangements have been made for these charges to be deducted from the rental payable to you under the Apart-hotel Scheme. Details of the persons considered to be immediate family are set out on pages (xx). These rates mean that you will be charged a per room rate which will be approximately 15% to 25% less than the achieved average room rate for the same type of apartment during that trading year. Servicing charges will not apply. The 25% off-peak period rate has special conditions attached. It will only be available during low usage periods that the Hotel Operator will designate as off-peak periods and may not be booked for longer than two weeks at a time. In addition, bookings cannot be made more than one-month in advance.

Do I need to book my apartment in advance?

In the Apart-hotel Scheme, yes. If you book at least three months in advance you will be able to stay in your apartment during your Owner’s Period unless it is already booked for a major conference or other special event. If you book later than three months in advance and your apartment is unavailable, the Hotel Operator will endeavour to find you a comparable apartment to book for your stay. If this occurs, charges will be calculated as if you were staying in your own apartment.

What are the options for servicing my apartment when I am staying?

You have two servicing options during your Owner’s Period:

1. Minimum service option – the Hotel Operator will prepare your apartment for your use, however there will be no daily servicing during your stay. The Hotel Operator will also service the apartment on your departure.
2. Daily servicing option – the Hotel Operator will prepare the apartment for your use and service it daily during your stay.

Each of these options will include use of the facilities at the Hotel such as the pool, pool towels, marine activities and telephone message facilities.

What will I pay to have my apartment serviced when I use it?

There will be a servicing charge payable to the Hotel Operator for cleaning and servicing of the apartment. The minimum servicing option is projected to cost ($10) per day for towels and lined. The daily servicing option is projected to cost between ($10) and ($15) per day, depending on the size of the apartment. Servicing charges are payable to the Hotel Operator in the same manner as other guest charges incurred during your stay such as mini-bar, room service, food and beverage and dry cleaning charges) and payment arrangements will be identified by the Hotel Operator on check-in. Arrangements will have been made with the Body Corporate for these charges to be deducted from the rental you earn so that you do not have to pay these charges at the end of your stay unless you want to.

What income will be earned under the management and marketing by the Hotel Operator?

The projected income is based on likely occupancy rates for the differently located apartments and the types of occupancy being long term, medium term and daily. It is estimated that initial returns will be as projected in the feasibility study

What fees are to be paid to the Hotel Operator?

As a guide a fee for its role in marketing and management of the Apart-hotel, the Hotel Operator will receive (30%) of the gross revenue and (20%) on a sliding scale from (100 %) to (60 %) as explained in the feasibility study.

What other costs are there?

The Body Corporate will deduct from the amounts paid to it by the Hotel Operator the expenses incurred by the Body Corporate. These expenses will include payable, premiums for replacement insurance and loss of profits insurance for the Apart-hotel, payments to Panama Town Council, services and fees payable to the Body Corporate Representative on a time and attendance basis for administration of the Body Corporate and representing the Body Corporate in relation to the Hotel – Apart-hotel Operating Agreement.

How is the Rental calculated?

The rental is calculated by reference to the net income of the Body Corporate from the apartment operation as determined by the Body Corporate after interest and depreciation, amortisation, repairs and maintenance and any no-deductible expenses (if any) of the Body Corporate. You will be entitled to a portion of the Rental based on the ratio that the Apartment Share Entitlement of your apartment bears to the Apartment Share Entitlements of all apartments. This have been calculated on the basis of rental income of each apartment relative to the assessed value of all the apartments. Therefore apartment owners will receive a payment equivalent to their apartment entitlement. These are set out on Appendix 2. The Apartment Entitlement of an apartment will not change if the sale price of that apartment subsequently varies.

How much of the rental I earn will be paid to me?

This rental payment will be calculated by the Body Corporate and will be based on the cash sum received from the Hotel Operator in that quarter and paid into the Operating Account (after the amount required to be deducted by the Hotel Operator and paid in the F.F & E Account has been paid) less:

Moneys required by the Body Corporate to meet Expenditure Provisions and Reserves as below;

Less any moneys owed by you under the Transaction Documents; and Any money which the Body Corporate has a right to set off under the Transactions Documents; Any loan & interest commitments relating to your apartment

Expenditure, Provisions and Reserve are generally:

The moneys required by the Body Corporate to meet anticipated costs to maintain the Furniture, Fittings and Equipment Reserve Account, and to reinstate the apartments (if they have suffered damage):

Contingency sums and working capital which the Body Corporate determines it needs; Costs and expenses incurred in operating the apartments under the operating agreement; Costs and expenses incurred by the Body Corporate in administrating the Body Corporate and the Schemes;

Repayment of any amount borrowed or moneys paid on behalf of the Body Corporate.

If the Rental paid exceeds the Rental due to an apartment owner the rental paid in the next year will be reduced or the Body Corporate can choose to pay that excess on account of Rental payable in the next Trading Year.

How will Rental be paid to me?

Rental will be paid by the Body Corporate. You can choose whether Rental will be paid by cheque or direct credit to your nominated back account from where you can withdraw it as you require.

What happens if the income earned by the Body Corporate does not cover costs?

In the unlikely event that the revenue earned from letting the apartment to guests is less than operating costs, this will mean that the previous Rental Payments, if any, you received from the Body Corporate will have been overpaid and will need to be recalculated (as the total Rental paid to all apartment owners is required to equal the net income from the operation of the apartments as guest accommodation). You will be required to pay a proportionate share of the previous Rental overpayments, based on your Apartments Entitlement, by way of levy within 14 days of being requested to do so. If previous Rental overpayments are insufficient, you will be levied an additional amount. It is anticipated that the level of occupancy would have to drop significantly from the level projected to below approximately (35%) before you would be required to contribute any shortfall.

If an apartment owner does not pay as required, the Body Corporate can take action to recover the amount due, and as a last resort may take the steps to sell the relevant apartment and apply the proceeds to pay the debt. In the unlikely event that the proceeds were insufficient to meet such a liability, then the shortfall would be a cost to the Body Corporate. As this cost would indirectly affect other apartment owners, in this limited respect, there is an element of partnership to the arrangements between all the apartment owners.

How will the Apartments be fitted out?

The Apartments will have a fit out that has been approved by the Hotel Operator. Full details of the Furniture fit out are set out on page (xx). It is a condition of the Operating Agreement with the Hotel Operator that you may not change the Furniture Fit out in your apartment.

What about “wear and tear” of my Apartment?

Under the Operating Agreement, the Hotel Operator has agreed to maintain your apartment and its Furniture Fit out in good order. The Hotel Operator will attend to ordinary day to day repairs and maintenance of the apartments and deduct the cost incurred from the revenue earned from all the apartments. In addition the Hotel Operator will deduct from revenue earned from the apartments a levy for capital expenditure for replacement, redecoration and major repairs, starting at 1% revenue in the first year of operation and rising to 5% in year 6 and subsequent years. This levy will be deposited in separate reserve account, in the name of the Body Corporate and held on behalf of apartment owners.

What happens if a natural disaster damages the Apart-hotel?

The body corporate will insure the Apart-hotel at replacement value against damage caused by natural disaster and other types of risks that are commonly insured against by operations of this type. Loss of profits insurance will also be held. The insurance will be arranged either directly or through the Body Corporate. Premiums for the insurance will be paid by the Body Corporate from the payments received from the Hotel Operator under the Operating Agreement.

Costs, which are not covered by insurance such as insurance deductibles or excesses and the cost of items that cannot be insured will have to be met by apartment owners proportionately.

Am I free to sell my Apartment?

Yes. Apartments, the shares in Body Corporate, under the hotel operating agreement must be sold together as a package if you have joined the Hotel-Apart Scheme then you are obliged to stay in the Hotel –Apart Scheme for a minimum of three year there after the agreement can be cancelled with a notice of 18 months

The consent of the Body Corporate is also required. Purchasers will be required to sign documents that commit them to the same arrangements as the original apartment owners

Can I mortgage my apartment?

Yes. A financier can register a mortgage over the Title of your apartment and take an assignment of all your Apartment Rights. Any mortgage may be required to enter into a deed that requires the mortgagee to agree to be bound by the Schemes.

What is the role of the Body Corporate?

The Body Corporate provides a forum for all apartment owners to control matters of common interest. It has the power to ensure that the Apartment Owners comply with their various obligations and, if an apartment owner does not, the Body Corporate can remedy the default in the interim and recover the cost of doing so from the apartment owner. Its powers include the power to take steps to sell the apartment, shares, furniture fit out, apartment Rights and Common Facilities Rights relating to that apartment, of a defaulting owner, repay itself from the proceeds of sale and pay the balance to the apartment owner.

Who controls the Body Corporate?

One year after the sale of the last apartment all the apartment owners will each receive a share in the Body Corporate equal to their Entitlement and will own the Body Corporate.

The Body Corporate initial directors will be appointed by (TROPICAL). Apartment Owners will vote their own appointees 24 months after the last apartment sale settlement.

To provide for day to day administration of its responsibilities, the Body Corporate must appoint a Body Corporate representative to fulfil that role. This Representative will be the interface between the Hotel Operator and the Body Corporate/Apartment Owners. For the first 24 months after completion this Representative will be appointed by (TROPICAL). Thereafter, if apartment owners vote accordingly the (TROPICAL) representative can be replaced as Body Corporate Representative.

In appointing a replacement Body Corporate Representative, Apartment Owners must choose a company or professional partnership, which is suitable.

(TROPICAL) will retain Shares in the Body Corporate equal to the number of apartments in the Bungalows and unsold apartments. Once all apartments are sold, (TROPICAL) will continue to hold shares of the apartments in the Bungalows and receive its proportion of Rental under the Apartment Scheme (and will be undertaking its functions as Body Corporate Representative for the stated initial period).

What experience does the Hotel Operator have?

The Hotel Operator will be an international operator of experience that we have been working with previously.

How will the Hotel Operator market our properties to maximise our returns?

The responsibility of marketing is that of the Hotel Operator. For general information traditional methods, as have been successful in the past are tabled below. New marketing is via the Internet and the private database of the Hotel Operator.

Channels of distribution Commission % Sales

Direct sales 0% 40%
Travel agents 10% 5%
Wholesalers 10% 20%
Inbound Operators 10% 35%

Can I market my and other apartments personally?

Yes, and we encourage you to do so. It will give us another 64 selling agents. The Hotel Operator may give you a negotiated commission. We aim for 100% occupancy.

What other schemes are available in addition to the 100% Management Contract?

You can opt for no Management Contract on your apartment with sole use for your own purposes. There will be a charge from the Hotel Operator for common services such as security, insurance, maintenance, gardening etc. the management fee is budgeted to be $300.00 per month. Partial management contracts to suit the needs of the purchasers may also be arranged.

How will potential investor purchaser be kept informed?

After completion the Apartment owners are regularly informed on a quarterly basis as in the Hotel Operating Contract. Prior to the start and during construction the Apartment purchasers will be kept informed on a monthly basis.