Kingpin of Australia’s adult toy industry Malcolm Day has begun raising money for the listing of what he claims will be the world’s biggest brothel, a three-storey 42-room mega-sex-plex opposite Sydney University on the city’s Parramatta Road.
“The new complex will create the largest short-stay bordello globally. On completion, earnings are projected to double to $40 million of revenue and $12 million of EBITDA,” according to a stockbroker presentation obtained by BusinessDay.
Westpac is the senior financier on the deal, chipping in $12.1 million to redevelop 84 and 86 Parramatta Road, and slap it together with the existing brothel at number 82 – replete with a large underground car park.
Day is out marketing a $5 million convertible note via his listed company Delecta Ltd, which used to be called Adultshop. The porn king’s plan is to run a one-for-eight share consolidation, acquire the brothel company Stiletto – which now operates profitably out of 82 Parramatta Road – from Sydney racing identity Eddie Hayson, and conduct a share buy-back.
Providing a glimpse of the profitability of the sex industry, Hayson’s existing brothel made $7 million in revenue last year and earnings before interest, tax, depreciation and amortisation (EBITDA) of $3.6 million. That’s more than a 50 per cent profit margin.
Under the quite hairy-chested estimates in the broking presentation, however, margins get even fatter.
Revenues are tipped to more than double to $17.8 million in 2013 when the project is complete, while EBITDA is forecast to increase to $11 million.
The valuations, too, are a bit of a stretch with real-estate group Colliers estimating the value of the average room at $800,000. True, that does include spa baths and mood lighting. Moreover, the average valuation will have been lifted by the apparent shift to a “multi-bed” layout.
According to reports, the top floor of the new wing will include seven suites with pool tables “and two sets of beds for parties and group bookings”.
The presentation also includes this line, citing the investment highlights: “Fully incensed and legal premises, with all regulatory approvals obtained – 10 year operating history.”
That may be a typo, but then again …