“It is certainly not a timeshare nor is it a real estate investment trust (REIT),” says the exclusive club’s chairman Mike Balfour when City & Country meets up with him.
The property fund comprises a portfolio of luxury villas and ski chalets located in Europe, South Africa, Mauritius and Asia. By buying into the Hideaways Fund, one gets not only a share of the entire property portfolio, but also club membership. This means that he can ride on the capital growth of the properties in the portfolio as well as use them for holidays.
While there are a number of such clubs in the world, the members do not own the assets and the usage scheme is more like a timeshare, says Balfour.
“The difference is that our members actually own the real estate. We do not rent out the properties; it is only for the use of our members. The Hideaways Club is a sharing scheme,” he adds.
There are three types of membership, with the entry fee ranging from £127,500 (RM623,156) to £245,000. Members are also required to pay an annual cost contribution (ACC) of £7,000 to £14,000 for the upkeep of the properties and are entitled to use the properties from two to six weeks (more usage points can be purchased). All these features depend on the type of membership.
The Hideaways Club has also formed alliances with Banyan Tree and Equity Estate, the largest residence fund in North America, giving members access to their properties and vice versa. “Between the two of them, they have 22 properties, effectively giving our members access to 50 properties worldwide,” says Balfour.
The properties range from 3,000 to 12,000 sq ft and have an average of four bedrooms and a swimming pool.
“Location is critical as well. It should be semi-private and not more than an hour away from the airport so that it is easily accessible,” says Balfour.
Each property will have its own concierge service, at hand to arrange everything from meals and car rentals to massages and outings.
The club is ideal for those who enjoy vacationing in different locations and those who want to own properties overseas, says Balfour.
“If you buy a lovely villa overseas, there’s the hassle of maintaining and owning a property and you have to keep going back to the same place for holidays. However, if you join a fund like ours, you’re investing considerably less than if you bought a villa; there’s no hassle of maintaining and owning a property, and you get ownership of a property portfolio that crosses many different jurisdictions across the world,” explains Balfour.
Properties in the portfolio are kept for capital appreciation unless they lose their appeal and are no longer utilised by members. Should that happen, the property is sold and another is acquired to replace it.
Balfour says, a return of 5% to 6% can be expected from the portfolio, and that indicative property valuations suggest there is already composite growth in excess of 15% in the first year of operation. However, he says, the returns are higher if you factor in the cost of a vacation.
“The ACC you pay buys you a holiday that costs a lot more. So, the money you save on your holidays will give you an additional estimated 9% return. Add the numbers together and you have a nice 14% to 15% return on your investment,” says Balfour.
Returns can only be cashed out when a member sells his membership.
“If a member wants to leave the club, we will facilitate the sale for him. The outgoing member will benefit from 80% of the capital upside between share entry and share exit value, while we keep 20%. The shares are revalued every nine months,” explains Balfour.
This ensures only the best properties are acquired or built, and at the best prices.
“If the members make money, we make money,” says Balfour.
The fund will be closed once the portfolio hits 100 properties and 600 members, which Balfour expects to achieve within the next two to three years.
“It would be quite interesting once the fund is closed. The share price will find its own level because the only way anyone can buy a share is to find someone who will sell it,” observes Balfour.
Growing in Asia
Since its inception in 2007, The Hideaways Club has amassed 27 properties worth just over US$50 million and signed up 170 members. But it was not until only four months ago that it ventured into this part of the world.
The club is now concentrating on Hong Kong, Singapore and Malaysia, and will eventually move into China. “The response has been very good. We see Asia as a big market for us,” says Balfour.
Asians now make up about 15% of the total membership, and Balfour expects this number to grow to 35% to 40% within the year.
Because of its beautiful villas and great service, Balfour finds that both European and Asian members love to vacation in Asia. The club now has five properties in Asia, including one in Kota Kinabalu.
“We will add about 15 properties to the portfolio per year, of which at least six will be in Asia,” says Balfour, who sums up the benefits of The Hideaways Club as “enormous choice, no hassle and less cost”.
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 814, July 12-18, 2010
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