Overseas assets: Sale of PIA hotels likely to rake in $700 million

[Hyde]

keh tou raha hon lease ker do, mulk ka nuksan zaror kerna hai asset bech ker?

Leader sahab hum World Bank nahi jiske pas itne paise hain ke Lease kar ke bhool jayen. Lease main jitna profit aana hai us se acha hai ke business ko run karne dain aur kuch karain hi nahi. Lease is a sort of ownership/permission which you are giving to your client in compensation of small initial deposit and a fixed yearly rent and in our case, The client is going to pay you off from the same existing hotel business to recover his investment.

Imagine right now without doing anything, you rent out 10 rooms for 100 dollars per night. Your profit is 1000 USD.
You lease a property, somebody else takes that 1000 USD, pay you probably 200 dollars as a rent and take everything else at home.

The idea is to either retain the full ownership to extract the full benefits or sell it and get one big cheque. Leasing and getting few cents every now and than won't help. On top of that, the conditions for leasing a property in USA are very complex. You won't be able to sell the property afterwards if you have given a say 25-100 years of extendable lease to the owner and non extendable lease are hard to sell and enrich very little income. You can sell but for very little earnings as whomsoever the owner shall be may not be able to get into the property as the property has already been leased out. In most cases you expect to have a lease of 50 - 999 years or else the value of your lease will be highly underrated, you don't have so many years to wait as our needs may be different in 2050 and we are talking about 2014.

 

[Hyde]

Let me give you an example of my uncle to explain how bad the lease can be at certain times, he purchased 4 warehouses somewhere in London on lease. He was given the extendable lease of 80 or so years. He paid only few thousand pounds to rent this property. The original value of those warehouses was estimated to be around £800,000 pounds at that time. He used those warehouses for multiple purposes and really liked the place. So he decided to buy it and went to see the owner. He just used a straight forward language that since he has the legal documentation for lease and he original owner cannot use the property for any purpose why not sell this property to him and get the money in his life rather than waiting for his generations to come and takeover. The owner liked the idea so he agreed to sell the property for about £200,000 only. Imagine the total value of the property and the value he agreed to sell the property for.

Lease is a great idea if you have like 500 properties to rent out

PIA purchased this property for less than half of it's current value. They may have already earned more money than initial investment as a profit. It's technically a free money for us. It was purchased for business purposes. If we just carry on dealing with the business, i believe in the next 8 years we will take equal amount in profits once again as is the total value of this hotel since in developed nations you expect to recover your commercial investment between 8-10 years. By leasing out, you will recover the same money in 15-25 years depending upon the contract.

 

[My-Analogous]

Why not sale Pakistan one time and take all money and lived happily anywhere in Europe or US

 

[maxpayne]

Privatizing has good long term benefits. The institute which suck billions of money suddenly become profitable for government. Like KESC. It was losing around 10B each year which government was paying. Gov privatized it for 18B which was revenue for short term and also saved around 10B each year which is a long term benefit. Also, government has 26.5% shares in it. KESC earned 7B profit last year and 26.5% of the profit went to government other than the tax it collect when consumer pays the bill.
One more thing: There are some governments which open mass hiring to get vote banks/labour union support/hire people for money etc. This mass and illegal hiring suck all the revenue of company and they cannot be laid even if there are stupidest of the people and are even not qualified for the posts. Private 'seth' ask people to work, if not, go back to home!!

Why not sale Pakistan one time and take all money and lived happily anywhere in Europe or US

Good idea but who will buy? It had many long term liabilities on it. I dont think there will be any costumer. All we have to do is to clean it within itself to make it profitable because we OWN it. Her profit is our profit and her loss is our loss!!

 

[Leader]

Leader sahab hum World Bank nahi jiske pas itne paise hain ke Lease kar ke bhool jayen. Lease main jitna profit aana hai us se acha hai ke business ko run karne dain aur kuch karain hi nahi. Lease is a sort of ownership/permission which you are giving to your client in compensation of small initial deposit and a fixed yearly rent and in our case, The client is going to pay you off from the same existing hotel business to recover his investment.

Imagine right now without doing anything, you rent out 10 rooms for 100 dollars per night. Your profit is 1000 USD.
You lease a property, somebody else takes that 1000 USD, pay you probably 200 dollars as a rent and take everything else at home.

The idea is to either retain the full ownership to extract the full benefits or sell it and get one big cheque. Leasing and getting few cents every now and than won't help. On top of that, the conditions for leasing a property in USA are very complex. You won't be able to sell the property afterwards if you have given a i say 25-100 years of extendable lease to the owner and non extendable lease are hard to sell and enrich very little income. You can sell but for very little earnings as whomsoever the owner shall be may not be able to get into the property as the property has already been leased out. In most cases you expect to have a lease of 50 - 999 years or else the value of your lease will be highly underrated, you don't have so many years to wait as our needs may be different in 2050 and we are talking about 2014.

lease kabhi ki bhi hai? pehlay ja per parho...

 

[Hyde]

lease kabhi ki bhi hai? pehlay ja per parho...

haan yaar lease ki thee aik baar 5 saal pehle. Aik Indian bande se leasehold commercial property buy ki thee jiska owner Jew tha.. Jew se kuch technical reasons ki waja se bani nahi is liye dobara baich di thee... I was talking out of my experience

 

[Leader]

haan yaar lease ki thee aik baar 5 saal pehle. Aik Indian bande se leasehold commercial property buy ki thee jiska owner Jew tha.. Jew se kuch technical reasons ki waja se bani nahi is liye dobara baich di thee... I was talking out of my experience

bhai tou phir kyon nahi pata apko kay long term lease per dena is almost same as selling...yet ownership remains with the leaser !

 

[Hyde]

bhai tou phir kyon nahi pata apko kay long term lease per dena is almost same as selling...yet ownership remains with the leaser !

It indeed is, that is why I said initial deposit + fixed rent. If they sell it, they may get 800 million dollars.. If they offer lease, they may be getting 100 million dollars + fixed rent each year. The equivalent money of 800 million dollars may be recovered in 15-20 years and you still own the right to sell the property. The leaseholder owns the right to sell the lease only...

The only issue in this case is, do you intend to own the hotel forever? If No then for how many years. We already owned the hotel for 20 years, giving it on a lease is like binding yourself for another decades to come and your investment is stuck. You will get handsome income from time to time but that's not what PIA aimed for when they were buying this property. Better is to retain full ownership and double your money in 8 or so years and also Roosevelt Hotel helps the government save it's expenditures too. Leasing out will eliminate all the perks it comes with.

If Yes, then do we have enough resources to run the affairs of the priority business of Airlines? If yes then it needs not be sold. Leasing out is a great option when your business is expanded massively that is hard for you to control or your sole business is to lease out businesses to create more businesses.

The Government anywhere in the world either retains ownership or privatise it. I don't remember them leasing out like that.. Take care bro, we can spare this discussion for some other time

 

[Leader]

It indeed is, that is why I said initial deposit + fixed rent. If they sell it, they may get 800 million dollars.. If they offer lease, they may be getting 100 million dollars + fixed rent each year. The equivalent money of 800 million dollars may be recovered in 15-20 years and you still own the right to sell the property. The leaseholder owns the right to sell the lease only...

The only issue in this case is, do you intend to own the hotel forever? If No then for how many years. We already owned the hotel for 20 years, giving it on a lease is like binding yourself for another decades to come and your investment is stuck. You will get handsome income from time to time but that's not what PIA aimed for when they were buying this property. Better is to retain full ownership and double your money in 8 or so years and also Roosevelt Hotel helps the government save it's expenditures too. Leasing out will eliminate all the perks it comes with.

If Yes, then do we have enough resources to run the affairs of the priority business of Airlines? If yes then it needs not be sold. Leasing out is a great option when your business is expanded massively that is hard for you to control or your sole business is to lease out businesses to create more businesses.

The Government anywhere in the world either retains ownership or privatise it. I don't remember them leasing out like that.. Take care bro, we can spare this discussion for some other time

Not necessarily, you can contract for higher down payment as high as 40%, the important thing is you still get to keep the asset. given the chor nawaz and co are, asset sold at 500 or 800 either way its going to be lost with no benefit to PIA or the State.

the stronger the state, the stronger the nation... stronger the capitalists, the weaker the State. as long as State owns assets, its people's property, but sold it goes to capitalists...

so the things to do is to depoliticize the institution/s and let it act like a business entity, everything will start to improve..

selling assets or privatization is suicide..

 

[xyxmt]

these stupid idiots will sell everything pakistan owns to their business partners...

p.s.

makes no sense of selling assets, they can freaking give it on long term lease... lakin nahi bc mulk ka nuksan ho kiya parwa !

thats what you said about 3G 4G licenses

 

[Leader]

things have started to improve, we dont need to sell or privatize national assets to become more slave to 2% elite and international powers.

 

[Hyde]

Not necessarily, you can contract for higher down payment as high as 40%, the important thing is you still get to keep the asset. given the chor nawaz and co are, asset sold at 500 or 800 either way its going to be lost with no benefit to PIA or the State.

It is possible indeed. But for that you have to compromise with lease conditions. Have a lease of 99+ years of extendable lease would get them 80% of the original value. The only benefit in that case is.. We can still use the name PIA Owned Hotel but compromising it's true ownership for a long time. I think leasing out the property is a long term planning but PIA is particularly interested in short term solutions to cop with existing menace of financial deficits. Hypothetically speaking, If the condition of PIA improves we can buy a chain of Hotels to add to existing tiny network of hotels owned by PIA/The government and its range of Destinations can expand from New York to all over the world.

In Europe we have (technically small but very large in terms of total revenue and passenger traffic) airlines known as RyanAir and Easyjet. They are always having offers for tourists with cheap packages combined with hotels, flights and even transportation sometimes. If PIA can build a chain of Hotels in future, they can follow up the successful formula of such airlines. Money can do any business in the world.

 

[AZADPAKISTAN2009]

Well , its tough choice but its been bleeding money since 10 years , every year losses and excuses and more hiring

What bothers me however is , we will buy planes and fix the organization up ? Spend money and remove debt from sale
so How does that work? If we are spending money to get planes then we should not sell the organization just restructure it

The number one reason for losses is lack of fuel saving planes

However , if the organization can be offloaded 5-10 Billion etc why not

Ideally government either has to
a) Give PIA planes and let it make money or
b) Sell of 30% shares in company etc or sell off the whole organization

 

[imiakhtar]

10 rooms for 100 dollars per night. Your profit is 1000 USD.

If only making money was so easy.

What about staffing costs?

What about taxes?

What about marketing?

It does look like the government is stripping the PIA of its profitable and worthwhile assets first, so that investors (who included such assets in their calculations) will be left with only the garbage and liabilities

NO, they're carrying out the publicly stated plan of splitting PIA into a core business, bifurcation is a word you could use.

Fifth, they placed orders for 20 new aircraft on lease

Actually the recent lease tender for 10 aircraft was cancelled and a new one reissued.

What I don't understand is why is Government interested to buy the planes for the forigne investors

Apart from the 5 Boeing 77Ws which were ordered before this govt, they're not buying any aircraft but leasing. Leases can always be cancelled early for a small penalty.

selling assets like hotels or any other earning hands is not wise

When you're technically bankrupt, it is. PIA's liabilities exceed her assets ie, All PIA's aircraft, engines, spares, office eq, IT eq, ground support eq, properties and facilities (hotels and engineering) etc amount to less than PIA's debt.

makes no sense of selling assets

If you need to raise money (PIA is desperate to do so), it makes perfect sense.

The alternative is to write the airline off altogether and keep the hotels running.

 

[Hyde]

If only making money was so easy.

What about staffing costs?

What about taxes?

What about marketing?.

Haha you took my example so seriously I guess. When you are looking so deep why did you not bother to highlight why only 10 customers would stay in a five star hotel per night? They would obviously be in hundreds or more.. the example was illustrating the fact that either you take ownership and be responsible for its share of net profit or loss or fix your net profit by tying up with the contract of lease. Dont worry