HE:SBI
Brian Lantier: How do you view the company? Do you think people look at the company as purely a hotel play that you measure by the traditional hotel metrics, or are they valuing it with some of the long-term prospects that you discussed?
Hans Niemi: It's a good question because you usually have to a main class of business, and either you're in the property side of things or a hospitality operating company. This has a lot of different facets to it. And so, I think the short answer is that it's all of those things. We're an operator; we have the cash flow of that. We have all of the assets on our balance sheet. And so, there's that real estate aspect to it, but there's also the operating aspect. So, it's a mix and match. It's going to be hard for you guys to assess it.
Brian Lantier: When you go into a city, what are the biggest objections you hear from regulatory or zoning or?
Hans Niemi: They never come across. That's typically the case. Wherever we usually go, we're the first one to propose this. And since we have the expertise in doing this for decades in different countries and cities, we've also created our own classification inside of DNV for our asset, because there wasn't a classification in the maritime sector that sort of fit what we're doing. We created that as well. So those things give us a boost when we're talking to governments, like in Vancouver, the planning department, and so forth. So, it's a collaboration, always.
But the question kind of for them is that is it a fish or is it a bird? And it's the same thing that a lot of the Nordic investors in the credit market, when we went into the listed bonds market, a lot of our Nordic investors were sort of trying to understand what it is. Because normally you would place this either in the property, credit portfolio, or then the hospitality. So, we sort of went through that and created the credibility that, hey, these are kind of like the accommodation use that they do for the oil rig in oil and gas. So, this is kind of in that segment.
Brian Lantier: Okay. I think I saw on one of the slides that they come with a removable propulsion system.
Hans Niemi: Yeah, so we built three pilot cases. One of them was sold to Burma, to Myanmar. It's operating there. And so out of the three different models, we're currently operating in London and Gibraltar. And one was sold there. So, different types of technical solutions.
We've learned a lot. We've made mistakes. We've learned from those mistakes. And that's kind of where the evolution series comes in. That's the fourth generation. All the teething problems and things have been sort of fixed by now. We've learned what not to do because it becomes very expensive very quickly if you don't manage the sort of certifications, permitting, and the classification in the right way. And so, this is the most efficient build that we've ever come across. We're using the best hull model that we've designed so far, and we know that we can do that efficiently and cheaply.
And then we've learned a lot from our client base in terms of what they want. What are the aspects from our clientele that they respect and value in our product? And so, we're trying to optimize the operating side and then the build cost, and the way we do this.
Brian Lantier: Do you ever envision a day where you sort of piggyback the Norse model, where you migrate based on seasonality? There's high demand in one part of the country or one part of the world in the summer, and then you move to the summer down south.
Hans Niemi: We had a concept like that, and it was actually for Barcelona and Ibiza, because Ibiza is very seasonal. Barcelona has its sort of peaks and troughs, but it's a more robust market, so the idea was that, hey, let's take the double ADR in Ibiza and then move the vessel. But once you do the numbers, and we're driving at high occupancies of sort of 80%, it actually doesn't pan out. It's not worth it. It's a lot of cost for doing that, so what we realized is that it should be stationary. And so instead of building propulsion systems inside of these vessels, which was kind of your question, we've designed a single propulsion unit system that can be used in all of our fleet; when we need to move them, when we need to maneuver them. So, one investment, but multiple use cases across the fleet.
Brian Lantier: It's interesting. Do you envision that there will be margin opportunities with the new evolution series? You know, as you go beyond just being a hotel space, will there be, you know, do you think that the restaurant business will boost your overall margin?
Hans Niemi: Yes, in terms of our performance for Vancouver, it's already become a substantial part of the business plan in terms of the spa, the floating spa. We have an underwater spa in Vancouver that's going to be pretty cool. So those things will add to the destination. And I would also point out that these are not leisure hotels. These are mixed-use, so we have a lot of corporate clients. And then we have a lot of leisure clients. London is a good example because typically, the East London area is not where the tourists want to go, and so most of those city hotels are relatively empty, running at lower occupancies during the weekend. We're 100% full. So, we've become a destination in our own right in the outskirts of the sort of East London area where the exhibition center is. So, we're still full when most of the other hotels are not. And so that gives us a certain strength and stability for our business.
Brian Lantier: Big picture, have you ever sat around a table and thought, maybe we could address the global housing crisis with a product like this?
Hans Niemi: We are working on those concepts. The world is sinking. I think by 2050, we will have billions of people displaced from the coastal zones. Manhattan will be underwater in time. And so, we need to solve these issues. And we have products and technology now with the concrete cap designs, with the sort of metal designs on the ships, to really create robust products that make a lot more sense than building on land or stilts, and have the dynamic element of it and have the financing element behind it, how to finance things.
Brian Lantier: Super interesting. Any questions from the audience?
Audience Member: So, when you go to this hotel, how much does it move?
Hans Niemi: It doesn't move at all is the answer. We've designed and haven't patented it, because we didn't really see the reason for it, but a damper system. So, these are not moored by conventional rope systems or sort of Seaflex systems, but these are actually moored with steel arms that usually take around 240 tons of push and pull, each one of them. That means that even in hurricane winds, big swells, sea conditions, these are completely stationary.
Audience Member: So, no Dramamine.
Hans Niemi: No, you won't get seasick.
Audience Member: Okay, and then how much does it cost to redeploy from one place to the other? I mean, you said they're meant to be stationary, but I mean, if we were to figure, you know, the moving costs, how much are we talking?
Hans Niemi: If we're doing short distances, it's a couple hundred thousand dollars. Not more than that. It's towing. If we're moving long distances, we usually use submersible vessels. And so, one of the attributes of fast delivery of this, that we can build in between 15 months and 22, 24 months, and then we can deliver them in 45 days anywhere in the world.
That 45-day delivery promise comes with a submersible ship, and then it can cost $3 to $4 million to do that. But that gives the option of actually taking this very expensive asset in a very safe environment, fully insured, on board another transport vessel. And then once you get it there, then you might just tow it or use our own propulsion system. But if I'm taking it long distances, I'm not going to put our own propulsion system on it. It's too unsafe. It takes too long.
And so, the cost is, to answer your question, from a couple hundred thousand dollars in towing to up to like $5 million for long voyages taking it to Australia on a ship.
Audience Member: Once you get it to the place, how long does it take so that it can open?
Hans Niemi: I'd say around a couple of weeks, 10 days to a couple of weeks. We've done this before, and we switched ships and changed them over. So, the couplings and the systems are all designed with that in mind. So that's a relatively quick one. If you have an existing hotel and you're switching it to a new one, you already have the staff and the infrastructure and everything in place. So, you don't need anything. If it's a new site, then it's like any normal hotel opening, soft opening, couple of months, drive and test everything, and then you're up and running.
Audience Member: [inaudible]
Hans Niemi: Well, we've been working with different cruise companies and exploring opportunities and collaborations. They don't really get it because it's like talking to Norse Atlantic and saying, Why don't we do a plane hotel? They're like, you're stupid. We're not going to do that. So, the cruise lines are very focused on passenger movements from A to B. They're making their money out of a captive audience. They want to take out to the sea. They don't want to go to port if they can avoid it.
So, what we saw from the earlier discussions is that Ritz Carlton, Four Seasons, Aman Hotels, are all launching their super high-quality, but cruise line businesses. So, they're already in this business, but their business model is still that they go on tours, they have SOLAS, and I am more regulated ships with lots of staff and fuel costs and whatnot. So, we're not interested in that. I don't think they're interested in what we do. And so, I don't think there's a big risk in the cruise line company stepping on our shoulders and seeing the opportunity here. They have their own kind of business model, and we have ours.
Audience Member: You were just mentioning about doing one in Manhattan.
Hans Niemi: Maybe that was a Freudian slip. But there may be a project in Manhattan, correct. We have been engaged with New York for some time, and during the pandemic, we were as far as getting EDC and DEEC approval, and then with the pandemic, we actually iced that project, but the project site is in Manhattan, not too far away from Wall Street.
So, we're hoping to do that over the next year. We're now picking our low-hanging fruit. The low-hanging fruit is London, Vancouver, ⁓ Seville, where we're already in advanced stages in permitting. And then there are a couple of others that probably aren't going to come first. New York is notoriously hard to get the permitting through, the lobbying, and the time and the money it takes. So, we're going to drive that, but that's not going to be our priority. The first priority is doing things as fast as we can. And that's going to be these projects that we discussed. Yes, sir.
Audience Member: Since they are moving very seldom, why are they designed as ships?
Hans Niemi: That's a good question. So, I talked about the client perception of the product. So, our clients love the idea of a super yacht. Not many people have 150-meter super yachts that you can go on board. And so, we're creating access to something that's otherwise very exclusive. You're combining the attribute of being in the marina in city centers. And what we've seen over the last years is that all the industrial ports have moved away from the city centers. You don't actually have the industrial activity and the cargo ships coming into New York's Manhattan port; they've moved away. So, you have a lot of free empty space in the prime real estate sites, even in Sydney, Hong Kong, New York, Toronto, Vancouver, you name it.
And why is it a ship? It's a ship because if I go to the cities and say I'm going to build a building that happens to be on a concrete platform, it's going to be 10 stories high, it's going to be blocking everybody's views. Well, they're going to say it's a building, no matter whether it's floating or not. If I bring in a super yacht that has the Finnish flag, IMO certified, DNV classified, and it's clearly a ship, and it's temporary, and it's environmentally friendly, it's energy efficient, it's very cool, it's very hip, they love that idea.
Exactly that. And you know, typically the objections for building event centers in city centers or hotels, your neighbors say, you're blocking my views, you're blocking my air rights, you're creating a nuisance, and blah dee dah dee dah. Well, the argument is that somebody says that I don't like your ship in the port, that doesn't really fly in the permitting process. So, we have the right to be there, and that's why we usually deal with the port authority, where we can get the long-term leases.
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