(I) CONDO-HOTEL: Real estate ownership + hotel services!!!

19 September, 2011 No Comments

We are talking about a hotel in which every room belongs to a different owner, but the entire hotel establishment is managed jointly …. also referred to as the perfect second home.

Its operation is similar to the one of a normal hotel with the difference that the rooms are owned by an investor. The investor will be able to enjoy the room for a certain period of time, and the rest of the time it will be exploited by the hotel managing company, producing a nice return to the investor.
This kind of business surged in the 80′s in South Florida, which then spread to other states as New York, Los Angeles, Las Vegas, or golf resorts and mountain resorts such as Aspen in Colorado. After a while, it became a very common figure in other countries such as Panama, Canada, Philippines, and many more.

Many second home owners consider the possibility to rent their home for as long as they don’t use it to take some profits out of it. However, in many cases they are not successful because it is not always easy to find tenants.

In this particular case, the “condo-hotel” investor owns a piece of real estate within a large hotel resort ans is aware that will be able to enjoy it one month out of a year. The remaining 11 months he will not have to pay expenses that a second home usually carries, and will be getting a return for his investment from the management company.

It is obvious that the management company, in order to maximize profitability, will put a restrain on specific dates in which the owner will not be able to use the home, for example in some countries, the months of July and August which are the busiest of the year. This type of investment would be more convenient for people who have flexible schedules, and are able to pick their vacation days with no restrains.

“Condo-hotels” are usually located in the best destinations around the globe. C-h are high quality places where every little detail is taken into account, and its clientele is in the upper class. All this leads to a high turnover in room rentals. Thus, when investing in this specific product, it is recommended to do it on a hotel whose management company is prestigious and has good reputation.

It is a relatively new system in Spain, and it seems that in the urban aspect there is legal uncertainty. But in legal terms, the condo-hotel may be regulated within some of these figures: 1 – The hotel’s horizontal division, which would be the most common way to do it. In this case the owner would have the property and a registration notice proving them owners of a room. 2 – It might also be considered as a group of assets, which would mean to buy a % of the entire property without specifically dividing the parts (not the common way). 3 – A corporation, that is to acquire part of the hotel by the purchase of shares. In this corporation, the ownership of the hotel belongs to a company whose investors participate as shareholders.

Regarding the community services that the hotel offers (pools, spa, gym, golf, etc..), they will be available to the owner during his stay, with the possibility to pay them at a discount (depending on the agreement established with the management company).

The managing company is responsible for the rent, as well as for maintenance and repairs of both the property and the common areas. The portion of the income derived from the rental is allocated to finance, if any, repairs or possible damages in the property.

In a later post, I will present you with a list about the strengths and weaknesses of this type of investment, which differ from both timeshare or fractional properties.

NEW BVLGARI 6****** HOTEL IN LONDON!

16 September, 2011 No Comments

Brick recovery in London? ….. people look for the safest investment, and  the lvxury hotel segment came to mind.

This new bvilding that attempts to arrange a hotel plvs six lvxury apartments, is located in the neighborhood of Knightsbridge, a very exclvsive area in the city of London with amazing views to Hyde Park (nearby Harrods). A few meters away from the hotel, you can find the most expensive apartments from the city, the One Hyde Park complex. The project is lead by Inditex co-founder Rosalia Mera, svpported by other investors such as Prime Capital Investors with an estimated capital outlay close to 350 million €. (Expansión 30/01/11)

The hotel project under the name of the Italian jewelry firm BVLGARI, which currently has hotels in Milan and Bali, will be managed by the Ritz Carlton family, the company that currently manages the other hotels from the chain.

Rosalia Mera has previous experience in the hotel indvstry, with a stake in the Room Mate chain, as well as a number of hotels in the US. In this case, it is a rather conservative project, and a way to diversify her real estate investments. London is also considered to be a stable market, and the hotel would become the first 6****** hotel in the city, which I am sure they will not have too many empty rooms.

The project’s site is where the old Normandie Hotel was established. The investment group bought the site in 2008, but it was not until over half a year ago that the necessary permits and licenses were finally approved.

Its opening is planned to be at the same time as the 2012 London Olympic Games.



(I) DATAGA: MACRO PROJECT IN CHINA “EUROPE ROYALE”

16 September, 2011 No Comments

From the association between Spanish Dataga and Hainan China Railway Construction Investment surges the development of this project.

Spanish real estate developer Dataga will build, according to their data, the largest residential, tourist, and leisure project of the Asian continent. The idea is to build four large residential complexes in the areas of Beijing, Shanghai, Shenzhen and Hainan. The project, referred to as Europe Royale, seeks to recreate the architecture and landscapes of five European countries (Spain, Italy, France, England and Germany).

Believe it or not, this project is to actually build four new cities that will include all necessary services of a city; schools, hospitals, leisure space, tourism, cultural, and sports centers. In a future post I will write about the agreement (7.1.11) closed with RFEF (Spanish soccer federation) to manage the football section of the new City of sports of Europe Royale in Beijing. The first project currently underway is the one to be held in Hebeli, near Beijing.

The developer, in a joint venture with local partners, has agreed to develop the project with Chinese authorities, public and private organisms, and Asian funds and banks. Hainan China Railway Construction Investment, a partially state-owned enterprise, will collaborate in the development of the first project, and Dataga has created a network of Chinese and international offices and companies. For the Beijing project, the initial investment is estimated to be € 10,000 million, of which € 1,900 million will be allocated in the first phase. (Expansion 3.2.11).

The entire project is scheduled to be built in 10 years, working in periods of 24 months with the first property deliveries in 2012. The villas, ranging from 400 to 1,200 square meters, will have an approximate value of 6,000 € / m2, and are targeted to the high-end segment of the Chinese society, without forgetting other potential markets such as Hong Kong, Singapore, Korea and Japan. In addition to the residential area, there will be a financial district, with 25 office buildings, international universities and sport areas.

This major project is one of the pioneers with which the Spanish real estate sector has expanded in the Chinese market. This was possible due to the Chinese law of urbanization that qualified land as state ownership (concession), which did not appeal foreign investors to develop real estate projects in China.

For more information please check:

www.europeroyale.com

(II) Real Estate Investment in Punta del Este – URUGUAY

15 September, 2011 No Comments

Uruguay is a tourist destination where people who went once, usually like to repeat. This makes a positive effect on the return of any real estate investment, especially of vacation properties.

Uruguay finds itself in a full expansion that has allowed, after a period of growth, to achieve economic stability. It focuses on low public spending policies, competitive tax rates, in addition to an improved tax collection, and a relatively open trade regime.

Besides the economic stability and the country’s strong legal system, the Uruguayan government has an open attitude towards foreign direct investment (FDI), by eliminating unnecessary paperwork such as previous registrations and authorizations, as well as restrictions that discriminate against local or foreign investors. This allows foreign capital to have no restrains in case they desired to participate in local companies. The legal and mercantile procedures to establish a corporation in Uruguay are simple, and the initial capital invested can benefit from tax exemptions, or VAT.

Punta del Este is emerging as one of the best business opportunities in the country. It is the most attractive real estate investment due to its location, like a “VIP real estate destination”. Despite Montevideo, Punta del Este has registered the highest number of transactions of second hand/vacation homes, whose main buyers come from Brazil, Argentina, United States or Europe, with an increasing number of Uruguayans as  their society gains purchasing power.

This part of the country offers virgin landscapes, combines nature and a very well designed modern city, with  its commercial and residential neighborhoods while respecting the area’s coastline natural beauty, which enables you to enjoy countless “first line views to the beach”, adding value to the property. Usually, properties acquired in Punta del Este are occupied most of the time, fostered by a climate that has an average temperature of 30 º C in January, which compared to Barcelona or Madrid, is “a bit warmer”.

As a relevant fact, I would like to highlight some investment figures that attempt to develop different markets with less conventional structures. They base their functioning in ways that are more secure in contrast to the potential risks, promoting a more efficient development:

* Building Trust at cost, which would be associated to the market of residential housing.

* Condo Hotels, associated to the development of second homes in tourist areas and for selling purposes.

In a future post I will make a deep analysis of these figures that are increasingly becoming more powerful in this housing market.

(I) Real Estate Investment in Punta del Este – URUGUAY

15 September, 2011 No Comments

If you are interested in brand new real estate such as homes, flats or other new properties around the world, check out the international portal www.obranueva-newhomes.com. You will be able to contact directly developers and promoters who offer these properties in each particular country. It is a simple and easy way to get to know the international market.

In this case, it’s a narrow strip of land that divides the waters of “el Rio de la Plata” and the Atlantic Ocean. Thus, its extensive crystalline water coasts.

Uruguay is among the international tourist destinations that offer the possibility to take a summer vacation in January.

Let me mention the reasons for which one should consider investing in Real Estate in this area of the world:

1 – Political stability: Uruguay is considered the most peaceful country is South America, followed by Costa Rica.

2-New constructions are luxurious, with great designs, and integrated in the landscape. Punta del Este has made an effort to achieve a sustainable development, with growth that respects the environment.

3-Paradisiac beaches, lacunas, wildlife, and caves, are what surrounds the peninsula (so appreciated around the world).

4 – Here you can acquire a home and a higher standard of living at a considerably lower price than in Europe.

5 – Real estate is expected to increase significantly in value

6 – As a foreigner, when buying a property, you will be treated equally in terms of taxation.

Will the Spanish real estate sector become Spain’s growth engine again?

14 September, 2011 No Comments

If we compare the current market situation with the last real estate crisis to see whether the outcome is going to be similar to that of years ago, they only resemble in the drop on sales.

* The crisis that I mentioned in the paragraph above is the one that we experienced in 1990 prompted by a mere increase in home prices. The direct consequence of price increases and speculation was a housing bubble. The situation the market reflected was a big supply of finished homes that investors were buying only to speculate, hoping for prices to increase to then sell a few months later. Since the market could not keep up with this rhythm, the market shut down;  sales went down BUT, banks did not stop financing as it happened in the 2008 crisis.
** In the current situation, the market problem has its origins both in the financial sector as well as in the real estate sector, and we see that:

1- Promoters built in places where there was no demand prior to construction, and hoped that demand would rise only because there were properties for sale. It was never taken into account that a family home must be close to the workplace, with services, equipment, communications network …. which are crucial aspects in the decision process. The result was nothing else than ghost towns and overpriced land. Now, land is what weights more in the bank’s balance sheets rather than homes of defaulted customers.

2 – Reference has been made about the quantity of unsold homes within the banks’ portfolios. Perhaps this is not the primary concern because homes will eventually be sold since the need to buy homes still exists. This need is not reflected in the market (demand) because financial institutions are not lending money. Banks are granting mortgages only to clients that are interested in assets within the bank’s real estate portfolio, but other assets such as land remain stuck in their portfolios. The reason is that nobody is going to build any time soon until banks get rid of all their stock, then demand for construction will rise and thus the value of land.

Following the pressure from the Bank of Spain 6 months ago, “Cajas de ahorro” presented the data regarding their real estate properties, highlighting the amount of soil that they had to take, which part of it corresponded to undevelopable land.

3-In regards to particular investors interested in purchasing a home, I can tell you that many visits to properties take place, although in most cases do not go further. This is a consequence of the high percentage of customers that their bank has denied the mortgage.

This has transformed the rental market into a safe haven. In a country where in recent years the purchase of a home was THE common transaction (justified on the notion that it was better to make a payment to the bank, which in the long run created wealth, rather than paying a monthly rent to a landlord), we have found ourselves in a larger and more expensive rental market. It is important to mention that rental prices have somewhat stabilized. A monthly rent is similar to paying a mortgage payment, and those who bought a property with a mortgage found themselves that their only option was to rent. In the meantime, however, the possibility to rent a property with a purchase option has become quite popular and gives more incentive to people.

In the normal course of free market, the supply of a product suits to the demand, but the current situation has forced demand to fit supply, changing the concept of seller by landlord.

4 – We should not forget that being part of a global economy, could mean that a simple cold in America or Asia, may translate into a pneumonia in Europe.

Given this situation we can arrive to the conclusion that the Spanish economy will not reactivate until the real estate market reactivates ….. because this sector, with all its ups and downs, has been the growth engine in the last couple of decades (along with tourism and services). I believe the necessary measures need to focus on generating liquidity to the financial system to speed up the recovery process, although it is most likely that we will not go back to the figures of recent years …… at least not in the short term.

BLACK SEA GARDENS RESORT in BULGARIA, A FOSTER + PARTNERS PROJECT

13 September, 2011 No Comments

SUSTAINABLE ARCHITECTURE PROJECT
Norman Foster Black Sea Resort master plan

Among the impressive collection of projects that Norman Foster’s studio has designed, we find this master plan for the development of a tourist complex in the coast of Bulgaria’s Black Sea. This project tries to minimize the impact on the environment, and its possible gas emissions.

It will be located near the Bulgarian town of Byala divided in five neighborhoods that make up the complex that will be located on top of small hills covered with forest. The neighborhoods are: Sky Village, Wilderness Village, Meadow Village, Cape Village, and Sea Village, all of them by the sea. Its streets will be filled with trees and vegetation, but cars will not be allowed to circulate which is one of the ways to avoid gases. Residents will have to leave their car in underground garages located at the entrance of each of the neighborhoods, and in order to move around there will be electric shuttles or the possibility to have electric carts, and bicycles. The project was designed so that the entire community, 15,400 residents, could live the entire year and enjoy the area’s great climate.

This project is currently on standby as the developer Madara Bulgarian Property Fund ltd. (a company that was listed on the London Stock Exchange ) needs to find partners / investors to help them finance a portion of this development in order to finish it.

Some advice when purchasing in the foreign market so that YOU DON´T…

6 September, 2011 No Comments

1 – Overestimate the budget itself:
It is dangerous to rely solely on the income received from renting the property to cover  mortgage payments. One must always have reserve funds.

2 –Sign a contract without the appropriate legal counseling such as an attorney:
It is crucial to have a lawyer check any document that you need to sign. When you purchase a property off the architectural plans, or when you make a trip to the region to check out the promotions, there may be some pressure to sign documents, or make payments. Thus, you must count with an efficient lawyer that is available either by email or fax at any time.

3-Rely on something, unless otherwise specified in the contract:
In most cases the developer selling the property is the one that will be responsible to rent and manage it during the months the owner does not use it, which will be specified in advance. The concepts that should be clearly identified are: the months available for rent, total amount charged for rent, and how will be divided between the owner and the agency. The guarantees for rentals, in particular, are always based on verbal promises, but often are not specified in the contract clauses. Make sure that the contract has no cracks in this matter.

4-Ignore additional costs: 
 In some countries, fees and taxes can add another 15% of the purchase price. It must me added to the total.

5-Ignore the effect of currency fluctuations: 
 The value of Euro € may vary, increasing or decreasing based on the fluctuation with repect to other currencies like the US dollar $.

 6-Ignore the local tax system:
You must be aware of the tax obligations instead of assuming a similar system as in our country.

7 -Use a lawyer who works or has a close relationship with the promoter:
To avoid conflict of interests between the promoter or agent to whom you are buying the property.

8- Purchase with your heart instead of using your head: Most purchases abroad work quite well … …… But it may happen that the property of your dreams becomes a nightmare if you have not done the appropriate market research before deciding to purchase the property.

FOOTBALL ACADEMY in the new luxury RESORTS

4 September, 2011 No Comments

Football breaks down barriers by creating a language that everyone understands….. David Beckham and Lee Sharpe introduce tourist destinations in Brazil for 2014.

The usual activities most performed in luxury resort are water sports, tennis, and golf. Due to the global impact that football has had, resorts have started to build football academies, because for what we know this country is the land of football and sun.

As shown in the video, David Beckham, Los Angeles Galaxy player since 2008, disclosed his intention to build a soccer school in the beach of Sao Roque, 50 km from Natal, northeast of Brazil. It’s a project which envisages also the construction of a resort with sports facilities including a mini-stadium and eight soccer fields, as well as a golf course. It will be managed by the David Beckham Academy, currently headquartered in Los Angeles. The complex, financed by Norwegian capital, the Brazil Development turisticos Investimentos Ltd., will count with the construction of 8 hotels and luxury apartments as well.. in anticipation to the World Cup of 2014. It will also have a kart track for Formula 1 training, with the collaboration of F1 world champion Rubens Barrichello.

David Beckham introduces Football Academy, World Of Sport Complex in Brazil

watch?v=7eFRVKpOXKY&feature=player_embedded

Another example, ManUnited Lee Sharpe will be in charge to manage the football academy that bears his name, in the White Sands Country Club resort in Natal, in particular, facing the Genipabu beach, located in the Northeast.

The complex and its Lee Sharpe Football Academy, sponsored by Planet Green, will have 244 residences, with plots ranging from 360-515m2, located 15 miles away from Natal International Airport, which it’s expected to reach an investment return of 15 -20% annually.

These examples are further evidence that investing in Brazil today is to benefit from its economic boom. In addition to the economy, add the advantages of this location, because the Northeast part of Brazil is the closest to Europe (roughly a 7 hours flight). By 2012, what will be one of the largest airports in Central and South America, Sao Gonçalo, should be operative with more flights to the area, which will increase the overall area’s value, specially from properties.

The equation is quite simple: World Cup + The Olympics + a growing economy + scarcity of homes = Benefits …… and a tight calendar to become a developed country, which, according to consultancy Ernst & Young, by 2020 Brazil will no longer be the eternal emerging country. During the presentation of the new brand of Banco Santander in Brazil, the result of a merger between Banco Santander and B. Real (Brazilian) in Sao Paulo, Emilio Botin talked about growth, growth and growth in the Brazilian market, as its primary objective. (Expansión 11/25/10)

Brazil has gone from being a country with an enormous potential to be a solid reality, with high expectations that locate it the fifth world economic power in only 10 years. To be successful, politicians are focusing their efforts mainly on job creation, a higher base salary and a policy for economic stability.

As I’ve previously mentioned in other posts, the investment opportunities for Spanish companies are favored due to the next World Cup, the Olymplic Games of Rio de Janeiro in 2016, as well as governmental plans to improve infrastructure and housing .

Another challenge for Brazil during the World Cup is that the trophy will be a green goblet featuring the country’s great power in photovoltaic solar energy as an example of renewable energy. They will also build solar stadiums (based on the Stade de Suisse Wankdorf) with huge solar panels such as the Mineirao in the state of Minas Gerais (an initiative from IDEAL, Institute for alternative energy Development in Latin America). The proposals of Qatar and Taiwan (World Games stadium) as possible hosts of the 2022 World Cup, also bet on solar stadiums.

…. in a globalized world the only way to be competitive is to expand ….

The former English Manchester United player, is expanding his football academy in Egypt, in particular building another in The Pearl of Sahl Hasheesh resort in Hurgada, Red Sea.  this exclusive resort on the Red Sea coast, counts with 165 apartments of various sizes, located in four small islands, with 12 luxury villas of 222 m2 in a plot of 500 m2.

(5) IBI, PROPERTY TAX : shopping around the world

4 September, 2011 No Comments

Real estate tax, impôt foncier, Grundsteuer, stondbeleisting, owners fiscale, Tax on properties, EMLAK vergisi ………. Taxes are paid one way or the other in the majority of countries

Taxes are inevitable. There are different property taxes:

1 – Taxes from the purchase of a property; they are in force in most countries and can be referred to as stamp duty, TRANSFER TAX, TAX PURCHASE, but in the end is the same tax that the respective governments collect. Even though the amount may vary from country to country, some countries only charge a fee on the resale and not on new construction properties. Usually VAT is applied on new construction buildings.

2 – Taxes regarding the ownership of a property: In Spain we refer to as the IBI, based on the assessed value of the property. Every property owner must pay it no matter what his/her status is. Since we are talking about a municipal tax the amount usually varies depending on the size of the property and its location. This tax is paid annually and the amount is automatically charged into the owner’s bank account. In the UK would be similar to Council Tax.

3 -. Taxes levied on the profits from the sale of the property: In many countries this tax is applied to the gain obtained from the property’s purchase price and its sale price (note; some countries allow the deduction of expenses such as maintenance, repairs or improvements made to the property (which must be justified with receipts and vouchers). Also referred to as Capital Gains Tax (CGT), is applied at the time of sale. In some countries the amount due is paid gradually ie. Turkey. In other countries such as France, this tax is paid off in fifteen years. Outside the US, there are different ways to view this tax, considering if they are residents or nonresidents in the country. Many investors are  mistaken because they beleive that if the tax is not imposed in the country where the property is being sold, they do not have to pay anything …….Wrong! You are exempt only if you are tax resident in the country. In the case of being resident, for example in the UK, a tax will be charged on any profit earned around the world. In general, the seller of any property will pay CGT or any similar tax to the country where the property is located because a tax applies for any sale.

Regarding double taxation: be careful not to pay taxes twice (the country where the property is located and the country that you belong). Countries often sign double taxation treaties to avoid its citizens to pay taxes twice for the sale of a single good. In these cases, the amount paid in the foreign country should not be re-paid in the country of residence.

It is almost “mandatory” to seek advice from a tax lawyer or a specialist in the country where the good is bought, so that he helps, within the framework of the law, to minimize the amount to pay in each case.