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A House for All Seasons
Friday, July 31, 2009
Money-Observer by Faith Glasgow
Fancy holidaying in a desirable location, with the potential for capital gains? Faith Glasgow visits a creation idyll to see how a fractional scheme works
Istria is a great place for insect life. A crowd of butterflies, bees and mysterious black and red bugs duck and weave around the lavender patch on the far side of the pool of the Villa San Giovanni and large grasshoppers bounce sociably around the broad limestone terrace. But there’s room for everyone around the pool and luckily they don’t seem to be inclined to venture inside.
The expansive house, featuring five spacious en suite bedrooms and an enormous living space – all height and light – was built as a school in the 1930s, on a spur of land that catches the cooling breeze in both directions, with expansive views across the valleys and down to the Adriatic. Just a year ago it was lying derelict and unloved , but Desmond Patrick-Smith, founding director of a small UK firm called Rocksure Property, stumbled across it and snapped it up as the latest acquisition of the Rocksure Bravo Property Fund.
Rocksure’s property funds – Bravo is the second launched, following the success of the Alpha in 2006 – grew out of the criticism of Patrick-Smith and his co-director David Rogers of so called destination clubs. These lifestyle leisure clubs, popular in the US, charge wealthy individuals a one-off club membership of up to $500,000 (£303,204), plus annual dues of up to $30,000, for several weeks’ access each year to a range of luxurious, fully serviced holiday properties in desirable locations. When investors leave the club, in most cases they get 80 to 100 per cent of their initial subscription back. But destination clubs are all about exclusivity, lifestyle, enjoyment; in most clubs, members have no stake in the value of the bricks and the mortar in which they stay. It’s the club itself that benefits from the rising property prices. ‘We decided to turn the destination club idea on its head’ explains Rogers. ‘There will be 40 shareholders in the Bravo fund, who will hold shares in a Cayman Island fund that exists solely to own the six house we buy’. Thus, if in due course the properties gain value, the shareholders will be the key benefactors. Rogers is at pains to emphasis that there are no promises of specific returns – and that the 20-plus shareholders who have so far signed up are not concerning themselves on that front.
Fun before funds
‘They want to have fun above all. They also want their money back and they’d like some profit, but they are not asking about how much capital gain they can expect’, he says.
So far, Bravo shareholders have use of their million-pound houses in the Algarve, Breckenridge in Colorado, and Croatia’s Istrian peninsula. Still to come, as the fund grows (no borrowing involved), are properties in Phuket in Thailand, Brazil and Morocco.
Why these destinations? ‘We were looking for long seasons, ideally 10 months. That’s difficult in Europe, but we have the Algarve, where the microclimate means that you can play golf in your shirtsleeves from March to December,’ says Rogers. Breckenridge in the Rockies offers great skiing and high-altitude summer, while Brazil, Thailand and Morocco all have almost year-round sunshine and a good dollop of the exotic.
As far as investment prospects are concerned, the aim has been to strike a balance between desirability, capital preservation and capital uplift potential. ‘Of course we want capital appreciation, but there’s no point buying in downtown San Paolo just because the best returns are to be made there’ Rogers explains. ‘But by buying into six homes around the world, rather than a single holiday villa, investors spread risk and increase their chance of gains.’
From a holiday perspective, there’s no need to worry about maintenance and when you visit the properties there’s no dash to the supermarket or the kitchen: on arrival it’s all done for you, as the local housekeeper/cook and manager are part of the package. They’ll shop and cook, keep the place tidy and do away with the elements of holiday drudgery that generally hang over at least one member of any self-catering villa party.
The nitty-gritty
So far, so good. What about the nitty-gritty: costs, exit options, risks? One share in the Bravo fund costs £189,000, for which you’re entitled to an average four weeks a year, a half-share costs £94,500 and is worth an average of two weeks. (If you opt for quieter periods you could spend longer than four weeks in the properties)
On top of your investment, there is an annual service charge of £1,800 per full share, which goes towards the properties’ maintenance and running costs. To help cover those costs while keeping investors’ annual charges down, Rocksure rents out the properties for a few weeks a year on a commercial basis.
However, renting involves potential clash with shareholders’ interests, agrees Rogers. ‘Shareholders get the first chance to book up their weeks, but if we get a rental booking for a free week in the high season, we’ll take it. These places rent at an average £3,000 a week, so it can make a. big difference to covering running costs.’
He points out that the Hideaways Club, the only other UK-based venture of this sort, does not rent out its properties but charges members between £7,000 arid £14,000 a year on top of the initial outlay (which ranges from around £120,000 to no more than £220,000).
For exit strategies, the Rocksure model has a fixed life of seven years from the final closing, when all the shares have been sold and all the properties purchased (although earlier joiners can use what’s available before that time). When the fund life expires, the properties will be sold and any profits distributed among shareholders, although. Rocksure takes a 17.5 per cent cut of any growth above the first 20 per cent increase.
That’s a benefit in that there is a defined point after which investors will be able to access their money. But it could mean that returns are limited by the state of the market. The directors have two years’ leeway if they deem it prudent to wait before putting the properties on the market. But in conditions like those that have been troubling markets across much of Europe over the past two years, that could be little consolation.
Nor are there any guarantees on capital. The geographical spread of the properties makes it pretty unlikely that all six local markets will be equally depressed at the same time but, again, you could, conceivably, lose money over seven years.
Ultimately, Rocksure is selling pre-packaged luxury. It will be a less personalised, less flexible experience than going to your own holiday home, while, financially, Rocksure’ fees will eat away at any final capital gains that may be realized.
But you’ll get a high standard of holiday accommodation and service without the hassle involved in second home ownership or the gut-churning high season prices of luxury villas. If the Istrian experience is anything to go by, it seems a good compromise.
The Capital Fund
If you’d rather do boulevards and boutiques than black runs or beaches, the Rocksure Capital fund might be an interesting alternative. The fund will run for 10 years from final closing, and will invest in a portfolio of 1,500 sq ft, two-bedroom, two-bathroom apartments with daily maid service, each averaging 1-2million Euros in smart enclaves (think Knightsbridge) across 10 European capital cities including London, Prague, Barcelona and Venice.
A full share, costing €115,000 (£97,500), entitles you to an average 14 nights a year, which can be taken as full weeks, three-night weekends or four-night midweek stays. But by using your allowance at quieter time of the year and not always going to the most popular cities, you could extend that to 28 nights.
There’s an annual maintenance charge of €2,100 per full unit, and on top of that an irritating visit fee of €200 per visit. Nonetheless, this fund could be a good option if you’re a keen short breaker. Moreover, the Capital fund’s value is likely to prove relatively resilient to price downturns and easier to monitor accurately than a collection of one-off villas.
A House for All Seasons
Wednesday, January 07, 2009
Arabian Business by Kim Latham
Owning a second home in an exotic location is appealing. However, complicated legislation often scares off buyers. David Rogers of British company Rocksure is enticing investors to purchase abroad by spreading the risk and increasing rewards.
Think timeshare. Investors spend well-earned money on leasing holiday properties in various locations for so many weeks a year. But when the time runs out what do investors have to show for it? British company, Rocksure may well have come up with a more modern equivalent for today's real estate investor.
"Timeshare at its worst was an absolute rip-off because they took large amounts of money off people and delivered nothing in return really, a week here, a week there. This has a flavour of timeshare in that you have shared-use at times. But the cornerstone is that you own the buildings," says David Rogers, Founder and Director of Rocksure.
David Rogers has worked in the travel industry for most of his life. But one memorable trip to the United States has dictated the direction of his so-far successful, England-based company.
‘Destination Clubs' in the US see many-an-American writing US$300,000 cheques to become members of an organization that give investors access to a number of beautiful properties around the country. The upside is customers have the opportunity to holiday in glamorous surroundings, the downside, as Rogers quickly discovered, is that properties are owned by directors of the club - and not those handing over the cheques.
"I thought the idea of sharing the assets was nice but when I realized people writing the cheques didn't own the houses and they were owned by the entrepreneur, I thought it was crazy and it would never work in England. The Brits have a love affair with bricks and mortar so I turned the idea around so that people writing the cheques actually own the houses," Rogers says.
The Rocksure Property Alpha Fund is a villa fund launched in the UK in 2006. On closing in July 2007, the fund boasted subscriptions of some US$9m from around 36 investors. At the beginning of this year, Rocksure launched its second fund - the Bravo Fund - which has received subscriptions of some US$6m to date.
Individual investors pay a cash lump sum of around US$300,000 to Rocksure - an amount that even in today's fragile climate wouldn't give buyers very much house for their money if choosing to purchase a second home alone. What's more, this money is used to buy US$1.5m properties in prime holiday destinations all over the world.
"Instead of putting US$1m into one place, you put US$300,000 into six places. The destinations were chosen very carefully so there is a spread of climate zones and we believe the medium-term opportunities for capital gain are good. We've chosen places that have world markets," stresses Rogers.
Thailand, Portugal, Colorado, Brazil, Morocco and Croatia are all on the luxury shopping list of the Bravo Fund. Two properties have been bought so far - Colorado and Croatia - and the others will be purchased if and when more buyers jump on board the investment bandwagon. A total of 40 investors are being targeted with this fund and with a total of 40 units available the fund is expected to eventually hold around US$11.3m.
The fund expires after a planned exit of around seven to eight years. During the run-up investors are entitled to use the properties as holiday homes - rent free.
A full unit entitles an investor to use properties four weeks a year on average. The minimum investment is a half unit which costs US$141,430 and gives the user two rent-free weeks a year. A concierge service is on hand at every destination along with a housekeeper, cook and pool attendant. Rogers is quick to point out, however, that this scheme, perhaps surprisingly, is not for the mega-rich.
"Our shareholders are not flash people. They are sensible, high-earning people who want a good time. We've never presented ourselves as a platinum operation. We have no chandeliers or butlers. We might call ourselves a gold organization and we'll leave platinum to the footballer's wives," he jokes.
In essence, what the fund offers is the opportunity to buy into grand holiday homes. As the investment is conducted on a cash-only basis there are no mortgage ties and the risk is spread out over numerous properties (as opposed to having all your life earnings tied up into one or two homes.)
A clear benefit to this is that buyers don't have the hassle and headache of having to deal with foreign legislation and complications over a country's land laws which they perhaps would encounter if they did this alone, - this is the job and responsibility of Rocksure who is regulated by the UK Financial Services Authority.
Perhaps another incentive is that investors can rent out their holiday time to other people if they prefer to gain a yearly dividend instead.
Spare cash
It appears that the type of investor most likely to benefit from this kind of fund is those with spare cash to spend and those that don't need the money back in a hurry, if at all.
The good news with regard to investor security is that Rocksure doesn't even begin to purchase properties until it has at least 20 investors. Then, the company increases the number of houses after receiving six or seven new investors at a time.
"Investors put up the cash in the beginning and we pay cash for the houses. This makes it a safer investment, it may reduce returns but the people investing want to get their capital back, have a good hope that they will make a capital gain. If there was a lot of gearing, the returns might be higher but they like the cash and the security," emphasizes Rogers.
Once the seven to eight years is up - investors can then choose to take their money and run or recycle their capital into another fund.
"We can be described as a safe haven. This is what people want to do, they want to keep their lifestyles going but want to reduce the cost of it all," says Rogers.
And that's not all. In more recent times Rocksure launched the Capital Fund in Dubai with the aim of targeting wealthy Emirati investors looking to partake in the culinary and cultural delights of Europe.
Apartments in London, Paris, Rome, Prague, Venice, Cannes, Marbella, Florence, Barcelona and Vienna have been chosen in an attempt to entice more cash investors to a fund that boasts properties in cities that claim a rich tapestry of history, art, architecture, music and literature.
Capital cities, capital gain
"Dubai is a good place for our first international market. This is the sharing of 10 apartments or townhouses in Europe. It's a way of being able to explore Europe and to have short breaks without a huge hotel bill at the end," confirms Rogers.
This fund boasts luxurious properties of around 150 sq m across 10 cities. Owners of a full unit are entitled to around two weeks of rent-free stay during the 10-year life of the fund. This fund, claims Rogers, is ‘ideal for companies wishing to extend hospitality to retain existing clients or win new ones.'
While Rogers says this fund is also targeting the expatriate community in Dubai, the decision to target Emiratis with the Capital Fund is because of their love of huge properties and privacy.
"My understanding is that when Emiratis travel on holiday with their families they like huge properties and the privacy that comes with it. They like to have the freedom of their own place. We can offer that. Our house in Phuket for example, is 5,500 sq ft and can sleep 15 people. I also think Emiratis love to travel to Europe so our Capital Fund is ideally suited to them."
The company plans to launch the Capital Fund in the UK early in 2009. As Rogers admits, UK investors are just not writing cheques at the present time although he says he doesn't want the funds to be purely UK-based anyway and his ambition is to see the company become a ‘well-known brand with a world-wide appeal.' The Rocksure director also plans to launch in the US once ‘Obama has had time to sort out the problems.'
Another interesting factor is that investors can opt to combine shares in both the Capital Fund and the Bravo Fund. This would entail spreading the risk over 16 properties in 12 different countries. Subscribers could then spend four weeks a year in a villa in Phuket or the Algarve for example and then opt to spend time in apartments in say Venice and Cannes.
"A smart combination would be to subscribe for half a unit in the Bravo Fund (two rent-free weeks) and a full unit in the Capital Fund (two rent-free weeks) so investors have the choice of delicious places," says Rogers.
So while there appears to be numerous benefits for spare cash investors, it is hard to envisage just exactly how Rocksure makes its money.
Rewards
"We are rewarded by fees for what we do. For assembling investors, for buying the houses and managing them. We get a share in the gain at the end."
This method perhaps ensures that investors are well aware of the company's need to buy well at the beginning and to sell well at the end thus making sure the company puts their customers interests first. Rocksure also has a hurdle rate which sees the first 20% of gain go directly to its investors.
For those who are already financially secure and who have spare cash to play with, Rocksure appears an interesting option.
A house for all seasons
Friday, October 14, 2011
Vogue - Claire Pilton
If you hanker after a holiday home in the sunshine, but have reservations about returning to the same place every year; if you baulk at the burden of funding a second property which you may only use a few weeks each year then Rocksure Property’s Crystal Fund (01993 823809; www rocksure.com) could be the solution.
As the third ‘villa fund’ in Rocksure’s five-fund portfolio (which has attracted a total £16 million of investment to date, the Crystal Fund affords the opportunity for like-minded, high-net-worth individuals to own their share of six villas: each with four/five bedrooms and bathrooms, a home office, garden and swimming pool. Collectively they will offer year-round sunshine, with locations in St Lucia, Provence, Morocco, the Algarve, Corfu and Andalucía.
A minimum investment of £119,000 for a ‘half unit’ share entitles owners to an average of two weeks annual use per annum, with three-quarter and whole units offering three and four weeks for £178,500 and £238,000 respectively Shareholders, who can invest in extra quarter units or ‘stretch’ their entitlement by taking mid-season visits, are also able - via Rocksure lnterfund Programme - to use all the properties owned by its five funds, in destinations including Brazil, Thailand, Colorado, Croatia, Marrakech (pictured), Paris and New York. Annual services which are set at £2,400 per half unit for the first year, cover all utilities, maid service, a full-time housekeeper/cook, gardener and use of Rocksure’s comprehensive concierge service. At the end of the Crystal Fund’s seven-year life, the villas will be sold and all proceeds distributed to its shareholders.
A house for all seasons
Friday, October 14, 2011
House and Garden - Claire Pilton
If you hanker after a holiday home in the sunshine, but have reservations about returning to the same place every year; if you baulk at the burden of funding a second property which you may only use a few weeks each year then Rocksure Property’s Crystal Fund (01993 823809; www rocksure.com) could be the solution.
As the third ‘villa fund’ in Rocksure’s five-fund portfolio (which has attracted a total £16 million of investment to date, the Crystal Fund affords the opportunity for like-minded, high-net-worth individuals to own their share of six villas: each with four/five bedrooms and bathrooms, a home office, garden and swimming pool. Collectively they will offer year-round sunshine, with locations in St Lucia, Provence, Morocco, the Algarve, Corfu and Andalucía.
A minimum investment of £119,000 for a ‘half unit’ share entitles owners to an average of two weeks annual use per annum, with three-quarter and whole units offering three and four weeks for £178,500 and £238,000 respectively Shareholders, who can invest in extra quarter units or ‘stretch’ their entitlement by taking mid-season visits, are also able - via Rocksure lnterfund Programme - to use all the properties owned by its five funds, in destinations including Brazil, Thailand, Colorado, Croatia, Marrakech (pictured), Paris and New York. Annual services which are set at £2,400 per half unit for the first year, cover all utilities, maid service, a full-time housekeeper/cook, gardener and use of Rocksure’s comprehensive concierge service. At the end of the Crystal Fund’s seven-year life, the villas will be sold and all proceeds distributed to its shareholders.
A house for all Seasons
Friday, October 14, 2011
Tatler - Claire Pilton
If you hanker after a holiday home in the sunshine, but have reservations about returning to the same place every year; if you baulk at the burden of funding a second property which you may only use a few weeks each year then Rocksure Property’s Crystal Fund (01993 823809; www rocksure.com) could be the solution.
As the third ‘villa fund’ in Rocksure’s five-fund portfolio (which has attracted a total £16 million of investment to date, the Crystal Fund affords the opportunity for like-minded, high-net-worth individuals to own their share of six villas: each with four/five bedrooms and bathrooms, a home office, garden and swimming pool. Collectively they will offer year-round sunshine, with locations in St Lucia, Provence, Morocco, the Algarve, Corfu and Andalucía.
A minimum investment of £119,000 for a ‘half unit’ share entitles owners to an average of two weeks annual use per annum, with three-quarter and whole units offering three and four weeks for £178,500 and £238,000 respectively Shareholders, who can invest in extra quarter units or ‘stretch’ their entitlement by taking mid-season visits, are also able - via Rocksure lnterfund Programme - to use all the properties owned by its five funds, in destinations including Brazil, Thailand, Colorado, Croatia, Marrakech (pictured), Paris and New York. Annual services which are set at £2,400 per half unit for the first year, cover all utilities, maid service, a full-time housekeeper/cook, gardener and use of Rocksure’s comprehensive concierge service. At the end of the Crystal Fund’s seven-year life, the villas will be sold and all proceeds distributed to its shareholders.
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