Investing in Hotels in China:

What You Need to Know

The China Hotel Investment Summit 2005April 2005

IMAGEHERE

IMAGEHERE

IMAGEHERE

IMAGEHERE

OUR PRESENTERS

Our Presenters

Bruce Parmley – Washington, DC

Steve Robinson – Shanghai

Jun Wei - Beijing

FIRM HIGHLIGHTS

Firm Highlights Over 1,000 lawyers practicing in 21 offices worldwide Our worldwide services structure and common firm culture

foster innovation, knowledge sharing and quality service Full-service “Top 30” global law firm (Legal Business, 2004) #1 real estate practice in Washington, DC, with client

appreciation for “the team’s responsiveness and positive firm culture” (Chambers USA, 2004)

Consistently ranked in Top 10 of lobbying powerhouses Represent over half of Fortune 500 companies and more

than 65% of Fortune 250 Ranked in 40 categories in European Legal 500 in 2003 Provide “one-stop-shop” seamless service wherever our

clients do business

HOSPITALITYpractice overview

Hospitality Practice Overview Structuring ownership entities and offshore vehicles, and negotiating

acquisition and equity investments in major hotel and resort projects

Structuring and negotiating all types of financing arrangements (public and

private debt, portfolio credit facilities, mezzanine financing and property level

financing)

Working with key authorities on approvals and registrations

Acquisition and development of hotel and resort projects, including

development and construction agreements, resort integration agreements,

amenity agreements (spa, golf course) and similar understandings

Structuring and negotiating management and operational agreements with

major hospitality brands, including Marriott and Ritz-Carlton, Four Seasons,

Hyatt, Starwood, Mandarin, Hilton, Wyndham and others

Private equity formation on behalf of sponsors and investors in major hotel and

resort projects

Tax, governance, operational, interdisciplinary and general business

representation with respect to all facets of the hospitality and lodging industry

OVERVIEW

Overview

Key Regulatory Authorities

Trends in Hotel Investment

Hotel Management Companies

Land System in China

KEY REGULATORYauthorities

Key Regulatory Authorities

National Tourism Administration (“NTA”)

National Development and Reform Commission

(“NDRC”)

Ministry of Commerce (“MOFCOM”)

State Council

TRENDS INhotel investment

Trends in Hotel Investment

WTO Commitments

Restrictions

Choice of Entities and Offshore Vehicles for Hotel

Investment

– WFOE (and governing laws)

– EJV (and governing laws)

– CJV (and government laws)

– Offshore Vehicles

Trends in Hotel Investment (contd.)

Approval Procedures

– Documents Needed

– Timeframes

– Post-approval Registrations

Operation Duration of Hotels

Trends in Hotel Investment (contd.)

Taxation

– Income Tax

– VAT

– Business Tax

Governance and Operational Issues

– Board

– Management

– Employment

– Labor Costs

Trends in Hotel Investment (contd.)

Exit Strategies– Listing

• Domestic Stock Exchanges

• Domestic Listing Requirements

• Approval Procedures for Domestic Listing

• Offshore Listing

– Sale to Strategic Investors

• Capital Gain Tax

• Land VAT

• Approval Requirement

• Mandatory Consent by JV Partners

• Mandatory Right of First Refusal

• Benefit of Having an Offshore Holdco

HOTELmanagement companies

Hotel Management Companies

Qualifications of Hotel Management Companies

Business Scope of Hotel Management Companies

Measures of Operations

Franchising

Intellectual Property

LAND SYSTEMin China

Land System in China

Two Types of Land

– State-Owned Land

– Collective-Owned Land

Land Use Rights v. Fee Simple

Obtaining Land Use Rights

Zoning and Land Uses

Land System in China (contd.)

Land Use and Real Estate Related Taxes

Easement

Land Grant and Construction-Related Authorities

Transfer of Land Use Rights

Washington, DC

New York

Baltimore

Northern Virginia

Miami

Los Angeles

Denver

Boulder

Colorado Springs

Berlin

Munich

Brussels

London

Paris

Budapest

Prague

Warsaw

Moscow

Beijing

Shanghai

Tokyo

www.hhlaw.com

Thank You

Hogan & Hartson Shanghai Office

Raffles City, Suite 3006 268 Xi Zang Zhong Road Shanghai, China 200001

Phone: +86.21.6340.4666 Fax: 86.21.6340.4999

Hogan & Hartson Beijing Office

China Merchants Tower, Floor 29, Suite C 118 Jianguo Lu Beijing, China 100022

Phone: +8610.6566.9088 Fax: +8610.6566.9096

Hogan & Hartson Washington, D.C. Office

Columbia Square555 Thirteenth Street, N.W.Washington, DC 20004-1109

Phone: +1.202.637.5600 Fax: +1.202.637.5910