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BUDGET | CAPITALIZATION AND MANAGEMENT | FACILITIES | PERCENTAGE OF OWNERSHIP MOUNT KONOCTI GONDOLA SKYRIDE BUSINESS PLAN
The price of the gondola installation ($6,000,000) is based upon an estimate prepared by a major manufacturer. A unique “window of opportunity” exists in 2006 to purchase not only Buckingham Peak from the Fowler Family, but also Wright Peak. Base Facilities includes construction of a road in from Soda Bay Road, and a Parking Lot. Summit Facilities include a Restaurant and Gift Shop.2. CAPITALIZATION AND MANAGEMENT Tom Bardeen conceived of and developed this Business Plan after visits to Banff, Alberta, where he discovered that the Sulphur Mountain Gondola was the catalyst to Banff's now world-famous tourism industry (www.BanffGondola.com), and to Queenstown, New Zealand, where he discovered that the Skyline Gondola was the catalyst to Queenstown's now world-famous tourism industry (http://NZ.com/Queenstown/SkylineGondola/Conferences/). Both the Sulphur Mountain Gondola and the Skyline Gondola have been in operation for over 30 years, and each hosts over 600,000 passengers per year. (Please see the color photos presented elsewhere in this presentation.) MKGS hopes to develop a partnership with Skyline Enterprises, Queenstown, New Zealand, including a program to train managers. To fund the complete construction of the Mount Konocti Gondola Skyride, the company is proposing to sell 60% of the ownership to Skyline Enterprises for an investment of $7,500,000. Another $7,500,000 of funding would be generated by the issuance of debt. Other than salaries, including increases to be based on increases in the number of visitors to the site, the promoters would receive no additional remuneration until Skyline Enterprises recovers its initial investment fully. The promoters welcome comment and alternative proposals. Tom Bardeen, as Financial Manager, and Brad Dennett, as Operations Manager, will be responsible for carrying the project all the way through the Permit Process. A monthly progress report will be made to the investor(s). Tom and Brad will be expected to continue to meet with and to address all interested community groups, in order to maximize community support for the project.Facilities at the Base will include parking, gondola storage, and structures for ticket windows, information, souvenirs, and restrooms. These will be modeled after the base facilities at Napa Valley's Sterling Vineyards Gondola, a nearly identical lift, which was visited by over 600,000 tourists last year! Walkways to several viewing areas will be constructed at the Summit. Buckingham Peak is located at 3,967 feet above sea level. This elevation compares to the level of Clear Lake, which is 1,327 feet above sea level. Thus, the Summit is ½ mile above the lake! The views are quite spectacular, indeed breathtaking, and comparable to views in the world-famous Grand Canyon! A well-designed wood and steel circular building will be constructed at the Summit of Buckingham Peak. This building will contain a restaurant, tourist shops, and Native American Museum. The viewing areas will have printed guides, telescopes and camera mounts. All of Lake County Television Club's towers, and other communications towers, will be relocated to the "center" of the circular building, similar to Banff and elsewhere.Of particular interest to the company is the notion of setting up a "live cam" and establishing a "broadcasting" facility, utilizing the television equipment already on location, to communicate with every hotel and motel room in Lake County, and perhaps to every home in the county. Such a facility would likely have the capability of broadcasting live to San Francisco Bay Area television stations, further assisting the company in its marketing program. A small 300-500 person amphitheater for group meetings, for church groups, for weddings, and for Native American celebrations is planned. A museum, housing historical and anthropological information about Native Americans, will be constructed, as well. We are hopeful that "guided" tours, perhaps by horseback, will be available to Wright Peak, south of Buckingham Peak. The tourist shop will feature local wines, local artists, and local writers.The analysis projects the following distribution of shares:
The attached analysis looks at an operation that would be maintained during the 8-month tourist season currently running in Lake County. With the opening of major gaming resort/casinos in coming years, tourism will become year-round, and the gondola will extend its days of operation. The weather is very mild in the winter, with snow appearing on the mountain for no more than 2 months, during January and February, if at all. The 245 days of the tourist season are nearly cloudless and rainless, with sunshine appearing on all 245 days!The attached analysis projects that 245,000 visitors will ride the gondola during the first year. Clear Lake State Park, located "up the street" from the Base of the Mount Konocti Gondola Skyride, served an average 126,000 visitors over the past 8 years. The Konocti Harbor Inn serves over 250,000 visitors each year. The new $25,000,000 Konocti Vista Hotel and Casino, just 4 miles north, is being visited by 3,000 to 5,000 visitors each day! The total number of tourists visiting Clear Lake at present is approximately 500,000 which is just 10% of the number of tourists (5,000,000) who currently visit the Napa Valley, located just 45 minutes to the south. However, in recent years, we have seen a surge of new tourism in Lake County, associated with the highly rated rock concerts at the Konocti Harbor Inn, and with Indian Gaming. Each of Lake County's 4 tribes is "compacted" (approved) for expanded casinos, now permitted after the recent passage of Proposition 1A. Konocti Vista has announced an investment of over $25,000,000. Other tribes are talking about hotel/casino projects of equal or greater investment. The future market potential for gaming in Lake County is enormous! Lake County is shown on most "Maps of the Wine Country" as an integral part of America's #1 "region" for tourism, the Napa Valley. Indeed, Lake County was part of Napa County for over 50 years, before being "separated" into "north" and "south" portions. Highway 29 "links" the 2 counties, beginning in the city of Napa and extending northward to the city of Lakeport. Several Napa Valley wineries have acquired land around Clear Lake, and it is certain that the wine-tasting tourists will follow. For example, Jim Fetzer The initial price for a ticket will be $15. This compares with $18 per ticket at the Palm Springs Aerial Tramway in Southern California (Palm Springs' #1 tourist attraction), and $18 per ticket at the Sulphur Mountain Gondola in Banff (Alberta's #1 tourist attraction). The analysis assumes that the company will earn, net of expenses, at least $2.50 per visitor on food and beverages. Souvenir facilities will contribute net income equal to $3 per visitor. The analysis assumes that the company will either operate the restaurant itself, or contract with a major restaurateur.6. FUTURE ALLIANCES WITH STATE PARK As a Strategic Objective, the company will encourage Clear Lake State Park to extend its boundaries to abut the Mount Konocti Gondola Skyride. Such an arrangement will be ideal, as it will give Clear Lake State Park visitors an extra attraction, while increasing patronage of the gondola. Many partnerships such as this exist throughout North America and Canada. To encourage high performance, managers' salaries will increase proportionately to the increase in the number of passengers. The analysis assumes significant growth in the number of visitors during the first 3 years, then a leveling off. The attached analysis projects that initial attendance of 245,000 will increase by 20% per year from years 1 to 3, and by 10% thereafter. This project is at the northern perimeter of the San Francisco - Sacramento Metroplex area, which is home to more than 10 million residents! 20 employees will be hired and trained, in addition to Tom Bardeen and Brad Dennett. The average non-management salary will be $25,000 per year, including a one-month vacation break during the Off-Season. Salaries are projected to increase at the rate of inflation, 5% per year. The number of employees will increase in proportion to the increase in the number of visitors, to 100 employees in 10 years. Property taxes are set by law at 1.25% of Total Assets. They remain fixed until the assets are sold. All other expenses are variable and increase directly with the increase in the number of passengers. The analysis projects $.50 per passenger budgeted for maintenance, $.50 per passenger for utilities, $.50 per passenger for insurance, $.50 per passenger for general and administrative expenses, and $1.00 per passenger for advertising. Legal and CPA services are projected at $2,000 per month.8. LOAN AMOUNT & BREAKEVEN POINT The company plans to leverage $7,500,000 in Equity with $7,500,000 in debt. This 1 to 1 Debt to Equity ratio is well below the standard 2 to 1 Debt to Equity ratio. This nearly guarantees the success of the project, as interest expense is nil. The Breakeven Point is only 142,000 passengers! Because stock analysts always "price" stocks based on "next year's" projected earnings per share, this analysis does so, as well. Earnings Per Share is stated on a "fully diluted" basis. That is, for each year in the analysis, next year's Total Annual Cash Flow is divided by 15,000,000 shares. The analysis shows the Projected Earnings Per Share would be 17 cents during the first year. This increases to $1.04 per share in the tenth year. The related Price To Earnings Ratio (P/E) is shown relative to an initial stock price of $1. The initial Price To Earnings (P/E) is 6 times. This decreases to just 1 times earnings in the tenth year. The last financial ratio shown in the attached analysis is the projected Stock Price, if the stock were traded publicly, assuming a Price To Earnings (P/E) multiple of 20 times projected earnings, consistent with the current Over The Counter market. At 20 times projected earnings, the Stock Price would be $3.37 per share after just one year, rising to $20.85 per share after ten years. NASDAQ requires an initial price offering of at least $5.00; thus, this analysis suggests that the Mount Konocti Gondola Skyride might be in a position to "go public" after just 3 years! After 10 years, at $20.85 per share, with 15,000,000 shares outstanding, the "market" valuation of the Mount Konocti Gondola Skyride would be $312,750,000. However, below, under "Selling Price in 10 Years", this Business Plan projects a selling price of just $148,551,964 based on a more conservative multiple of 10 times the projected 11th year Net Operating Income, less 5% Selling Costs.In the top left hand corner of the analysis, one sees the Investor(s) Rate of Return (ROR) of 42.68% per year. This is the "internal" Rate of Return of the Investor(s) Cash Flows appearing at the bottom of the analysis, under Investor(s) Cash Flows. The Investor(s) will own 60.00% of the project. When all ownership is included, it is possible to calculate the Project's Cash Flows, and the related Project's Rate of Return, which is 55.86%. For each calculation, the initial equity investment of $7,500,000 is shown as a negative number (money going "out"), and the annual cash flows appear afterward (money coming "in"). Under "Value of Business (Year-End)", a figure appears which estimates the value in the marketplace if the business were sold that year. Just above, "Capitalized Value Estimate" appears. For any given year, the Capitalized Value Estimate is the next year's Net Operating Income (NOI) capitalized at 10%. The Value of Business (Year-End) is simply the Capitalized Value Estimate less the selling costs, 5%. At the end of the 10th year, the Mount Konocti Gondola Skyride has a projected selling price of $148,551,964 according to the analysis. This number impacts heavily on the Rate of Return, discussed above. The selling price in 10 years might look ambitious at the outset of the project, but it is realistic, if indeed the Mount Konocti Gondola Skyride hosts over 600,000 passengers annually after 10 years. Also in the top left hand corner of the analysis, one sees a Current Fair Market Value (FMV) of $37,168,305. A discount rate of 15% was used in this calculation. This is the price which an "at-arms-length" market investor, seeking a 15% return, would logically pay to get in on this business today, if he could be 100% certain that the cash flows shown in the analysis would be realized. The FMV assumes that the business will be sold at the end of the 10th year for a price equal to the 11th year's projected Net Operating Income (NOI), capitalized at 10% (the reversionary capitalization rate). All of the cash flows up to the point of sale, and the net proceeds of the sale itself, are then discounted back at the FMV rate, 15%. Selling costs are estimated at 5% of the Selling Price in 10 Years. 13. FINANCIAL ANALYSIS CONCLUSIONS
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