x Abu Dhabi, UAE Thursday 20 July 2017

Investment holiday

Homes In a new twist on the timeshare, property clubs allow members to use luxury homes around the world - and retain some of their equity.

Members of property clubs have access to villas, such as this one in Portugal, around the world. Many include housekeeping staff and a concierge.
Members of property clubs have access to villas, such as this one in Portugal, around the world. Many include housekeeping staff and a concierge.

Holiday homes require commitment. True, they may bring familiarity, comfort and stability to your life, but there is one major drawback: unless you're really rich, you have to remain faithful to them. And for anyone who feels the prospect of limiting themselves to one home for the rest of their lives too constricting, there is a holiday home option for commitment phobes: overseas property clubs.

The idea of these clubs is that, for the same price as a fairly ordinary overseas home - around Dh1.18 million - you get the use of several multimillion-dirham pads around the globe. The main companies operating these schemes are Rocksure and The Hideaways Club, both of which started in 2006. The concept, which came from the US, is an extension of fractional ownership combined with the more appealing aspects of upmarket timeshare. Over the Atlantic, fractional ownership - where you buy a share of the property, often a quarter, and get an allotted time to use it each year - is very common. Buying into a club like this, however, where you get to use villas around the globe, is a more recent development.

Rocksure was the first to open its doors for business in early 2006. The club has six luxury pads to offer its members: in Portugal, Marrakech, Brazil, Phuket, Colorado and Croatia. All properties will have at least four double bedrooms, with a good-sized swimming pool and terrace. Each one comes with its own housekeeper and a cook to rustle up something delicious for dinner. Full membership costs Dh1.12m, plus an annual service charge of Dh10,660 - which works out to Dh2,664 per week if you're using the four-week quota - and covers cleaning, gardening, utility bills and a welcome pack that contains drinks and food. The first fund of 36 members sold out. Now Rocksure is selling its second, with a maximum membership of 40.

It describes itself as a "property fund" with a lifespan of seven years. Once the allotted years have lapsed, all the properties will be sold and the profits distributed among its members, minus a 17.5 per cent charge levied by the fund's managers. Not all the money goes into the fund - Dh8.9m (or five per cent of the total cost) is kept from the money raised to cover costs, such as stamp duty taxes, renovations, furnishings and contingencies. Service charges, which include maids, are kept down by renting out the properties on the open market when investors do not want to use them.

Rocksure is different from the majority of the US models in that, like the Hideaways Club, it is equity-based. "I had been involved in destination clubs in the US, but realised they weren't fair to the people writing the big cheques, as they had no equity in the properties at all," says David Rogers of Rocksure Property. "With us, the people writing the cheques own 100 per cent of the real estate and get the benefit of the appreciation of the capital growth. Whatever gain there is, we share."

The Hideaways Club has big UK business names among its founders, such as Mike Balfour, the founder of Fitness First, and John Lovering, the chairman of Debenhams. It also offers its members ownership of its 14 properties - and like Rocksure, they are all worth at least Dh6m. Locations include Croatia, Cyprus, the South of France, Italy, Mallorca, Morocco, Portugal, Spain, Switzerland and Turkey. Properties in Malaysia and Mauritius have recently been added to the portfolio and will be available for members' use next summer. The properties come with at least four bedrooms, and some have gardens and a tennis court. Members are picked up from the airport by a driver; they also have a housekeeper and concierge, who makes sure the best table at the local restaurant is booked, and who acts as tour guide if desired.

It is slightly more expensive than its competitor, possibly because these properties aren't rented out to non-members. Prices are Dh1.3m for full membership (which gives four weeks' use of the properties annually), Dh680,000 for half-membership (two weeks) and Dh887,387 for a "lifestyle" membership (a similar amount of time to full membership, but for people who can travel out of season). The annual charges are Dh71,028 a year for a full member - or Dh17,757 for every week you use one of your properties. So far it has 70 members, and it's looking to swell its numbers to 100.

Membership has a minimum time span of three years - and the project hasn't been running long enough for anyone to sell yet. The club will be regularly revalued so, when the time comes, exit prices can be set. When a member sells, Hideaways takes 20 per cent of the increase in profit. So far, both these schemes are untested. No members have sold their shares, so there is no way of knowing by how much shares are going up. Stephen Wise, Hideaways Club's CEO and co-founder, suggests an "unofficial" figure of 15 per cent growth in the first year; Rocksure isn't giving a figure. Potential investors also may be concerned about exit strategies: who do they sell their share to? And if you were trying to sell your share, would you be in competition with the overseas club itself?

Hideaways suggests that, when the time comes, it will avoid this issue by establishing a system whereby every third new member buys out a member who is looking to sell. And should any of Rocksure's members want to sell before the seven-year lifespan of the fund plan, they will write to the other members of the club and see if anyone wants to buy another share in addition to their own. If none of the members does, investors may find themselves paying to advertise to sell their share.

Wise believes the flexibility offered by the scheme is its greatest strength. "Finding a location for your holiday home that fits all your holiday needs is hard. Do you want to go skiing or to a villa in Tuscany? I want both at different times. Then there are the other hassles of owning your own home overseas - such as taxes, language and security." Another bonus of this type of investment, Wise points out, is that it's varied. He claims to have seen an increase in interest since the banking crisis began.

"People don't really know where to put their money at the moment. If you invest it with us then you're in a diversified portfolio of more than 10 countries, so it's a far safer bet." "Clearly, your money is far better invested if it's not tied up in one property market alone," adds Mike Balfour, the founder of Fitness First. "You're hedging your bets - so you can benefit from the good growth we're seeing in Morocco without losing out because of the low growth in Spain, for example. I own a holiday home in Spain - although I now wish I didn't - as well as my membership in Hideaways. I really wish this scheme had been around when I was looking for my holiday home, as it would have saved me a fortune. I'm a great believer in the concept of fractionalisation - it's all about enhancing your lifestyle for as little money as possible."