FAQ
What is the average hotel occupancy in Cuzco?
The City of Cuzco enjoys one of the highest hotel occupancy rates of any city in the world. It ranks up in the top 10 along with cities like New York, Tokyo, and London.
The Cuzco tourism board claims that average occupancy for a 4-5 Star hotel hovers around 78% average. However there are no upscale “Branded” Hotels, and the expectation and feedback is that a brand new Branded hotel could enjoy occupancy rates in the 80% to 90% range, however this is yet untested.
Is there a high and low season?
Yes, mostly high. The lower hotel occupancy months are during the rainy season which is mostly November through March. The investors’ spreadsheet, which can be accessed in the investors’ member area, shows the different seasons and the expected occupancy rates for those months. Email us for a free password so you can access more detailed information.
Are there any other sources of income besides hotel room rentals?
There will be a restaurant and retail space in the lobby which could generate income, however, this potential income is not being used to calculate income.
Will we have a restaurant?
Yes, a first class restaurant is included in the plans and will be professionally run and operated. A lighter breakfast buffet will be served in the mornings as well as a complete dinner menu in the evenings.
Will the restaurant make money?
The restaurant has been set up to be a profit center for the Corporation; however, no restaurant income has been used to project profits in the proforma. The hotels room rental rates are the only income calculated for income.
Is there any rental income from the retail space?
There is a retail space located in the lobby, as well as a gift and sundry shop. The retail space has the potential to generate handsome rental income and could be used as headquarters for many types of businesses from a Jewelry Shop, or a Travel Agency.
However, like the restaurant, no income was allocated from rental income in the proforma. The room rentals alone are used for income proforma calculations.
What is the political climate in Peru?
Peru’s current government has stabilized their economy and political environment. They have recently signed a Free Trade agreement with the US, which requires certain qualifying protocols, and has lent them more credibility with the world market as well as given them global clout and investor confidence.
Does Cuzco have earthquakes?
No Cuzco is not affected. Cuzco did not notice the recent quake of 2007 in Lima. There was no damage in Cuzco. All the damage is in the south of Lima, very far from Cuzco. Even the 1974 earthquake did not affect Cuzco as it was in Huaraz, north of Lima.
What is the currency and will it affect our investment?
The official currency in Peru is the "Nuevo sol" The US dollar is by far the easiest foreign currency to exchange and is commonly accepted. Despite of being well accepted the entrance of foreign currency to Peru is limited. The dollar exchange rate may vary every day, but it usually changes between S/.2.8 and 3.2 nuevos soles against each American dollar.
Any variation in currency will not directly affect the profitability of the hotel operation since we will operate in dollars, collect income in dollars, and hold dollars in the operating bank account.
Can I use my IRA Funds?
Yes, several investors have used Self Directed IRA funds to invest in foreign stock corporations, while deferring income taxes. More information can be found at www.theentrustgroup.com. Or consult with your CPA or tax accountant.
Who will manage the hotel?
The hotel will be professionally managed by an experienced trained staff. Checks and balances, along with a strict corporate command structure insure that the property will be run with the highest level of professionalism and efficiency.
How many other investors will there be ?
There is a total share count of XXXX shares issued. The total number if shareholders at final issuance is unknown, but is expected to be in the xx to xx range.
How do I get paid?
You will be paid your proportionate share based on your stock ownership. You may also choose quarterly distributions if you like. Some investors choose to open a Peruvian Bank account, with online banking so you can track activity and manage your account. Others may arrange for wire transfers to their self directed IRA, or
Is there income tax in Peru ?
Peru has a simple tax structure. Corporate income tax rates run around 30%.
Our accountants will with hold and pay estimated taxes on our corporate income, and will distribute monthly dividends in after tax dollars.
How is the accounting handled?
We have designed a three tiered, double checks and balance system. All of the income will be collected electronically via Credit Card. The only cash accepted will be from the gift store and is insignificant. All income will be placed into a general account which will have only General Partner’s authorization. First, an “in house” full time accountant will handle daily bookkeeping activities. Second, a full time night auditor will log the day’s receipts and pass the data up to the accountant. Thirdly, a private, independent CPA firm has been retained as a final auditor for all hotel activity and will report directly to the General Partners.
What kind of reporting will I receive? Monthly statements will be emailed to all shareholders showing a breakdown of income, expenses, and net profit. Payments will be sent to the account that you may from time to time designate.
Will you ever issue more shares ?
No, the total offering will not be diluted by the sale of additional shares.
Can I sell my shares ?
Yes, of course. However, the likeliest buyer for your shares will be another investor in the project. We will have annual shareholders meetings where you will have the opportunity to sell shares if you desire to do so. Keep in mind however, that your shares are not terribly liquid, and you should consider this investment long term. Contemplate 5 years or more.
What will my shares be worth after the property is up and running?
The share value will of course be determined by the dividends paid to each share and will be worth whatever another investor is willing to pay at the time of liquidation. However, consider that the Corporations stock value will be considerably higher than the initial offering of $3M.
Consider that the Corporations value at a 10 Cap rate with $3M net operating income, could mean a valuation of $30M, on the open market. This is ten times the
Capitalization cost. So your investment could be worth 10 times the face value, once the property is operational.
What are my US income tax liabilities?
This is a very individual question. Depending on your individual tax situation, a person could hold the stock shares in an LLC, Partnership, or other entity, or, simply in your personal name. If done correctly, a little planning could minimize the impact of US taxes on your investment. Some investors will keep the money overseas, and others will bring it into the US. We can make a referral to you to a tax expert who can help answer your individual questions and advise you how to best structure your ownership of the shares.
What is type of security is given for my investment?
You will be issued private foreign stock ownership in the form of shares given and recorded in your entity name, and recorded in the public record of Lima, Peru.
