El Nido Beach Spa Resort – Investment Overview June 2020
In this review we are going to look at this Hotel Room passive investment with its benefits, drawbacks and also some market comparisons of comparable projects in South East Asia in relation to price and investment returns.
Overview of Project
Very simply the developer is constructing a beach front resort in El Nido Philippines and inviting investors to own a unit and offers these investors a guaranteed exist strategy after 5 or 10 years of trading.
The resort is due to open in March 2022 which means it’s a 7-year investment for investors giving them between 170% to 190% return in that period. The project is ultra-luxury being built on a massive 10 Hectare site.
The Luxury hotel chain Pavilions (paviionshotels.com) who own and manage hotels throughout the world will be the hotel management company.
Investors get to stay in their unit 30 days a year for free and have other special usage privileges.
KMC Savils, the Franchise holders for the Savils brand in the Philippines are the project managers to make sure the project in built on time and budget.
Prices are currently $216,000 for a 54 square meter one-bedroom villa, $325,000 for a 65 square meter overwater Studio and $432,000 for 108 square meter two-bedroom villa.
For the first 5 years of trading the Developer offers a Guaranteed rental return of 10% PA and for the second 5 years the owners go into a shared rental poo. This is projecting 15% PA for the Villa units and 25% PA for the overwater studios.
The developer also offers an exit strategy with 120% buy back after 5 years and 130% after 10 years. The Developer also offers 10% cash back during construction on fully paid units. At the other end of the scale an investor can enter for 10% down with 40% paid over two years and 50% on completion. As stated above this makes the return between 170% to 190% over the first 7 years including the construction period. Most importantly the construction has already started.
El Nido is a worldwide tourist destination the jewel in the Palawan crown which has been voted the world’s number one island on several occasions. El Nido and Boracay are the best places to invest into in the Philippines after Manila. Luxury 5 Star resorts like this have a 78% occupancy level prior to Covid-19.
Market comparisons based on Price per Square Meter.
The project is being sold at 4000.00 dollars per square meter but it is very hard to find any true comparisons of 5 Star beach front resorts especially in the Philippines because none currently exist that are open to passive investment. You may be able to buy a whole resort but not invest into one like this. The closest comparable would be Condo Hotels in Boracay and Mactan in Cebu using the Savoy Brand. They are priced at around $6500.00 Per Square Meter. However, they don’t offer investors rental guarantees and do not offer investors a buy back or guaranteed exit strategy.
The best comparison would be in Phuket, Thailand and Montazure Twin Palms beach resort. This is frontline beach in a very desirable. This is a Condo Hotel project selling at over $6500.00 per square meter and they are offering 7% guaranteed return for three years. However, they do not offer a buy back option or exit strategy. Being a Condo based project you could argue that you may find a private buyer for your unit.
Beyond that it’s very difficult to compare like with like.
Let’s start here because there are very few the first is a long shot in that if Covid-19 is still here in 2022 it would affect the trading of the new business. Secondly is that even though the development team is very experienced and have a track record the Development company for this project is a new company.
The land the project will be built on is debt free and has an appraisal value of $17 Million USD. It also has an estimated value when complete of $75 Million USD.
KMC Savills/T1 the project managers have a proven track record of building project on time and on budget including the Okada Casino in Manila and if they can build a project like this on budget and on time they would be expected to do the same with a relatively small frontline beach resort. They also have experience of projects in Palawan.
Pavilions Hotels a five-star luxury brand with a proven track record will be managing the resort and have a proven track record of managing their own and other companies Hotels.
The Development team has a huge amount of experience in the construction and management of these projects and a high degree of skill in the area of Hospitality.
High demand and occupancy levels for a resort like this in El Nido
Excellent returns for investors from day one of the investment as well as very desirable benefit in kind, getting to use the resort 30 days a year for free.
Gray Stuart Investment Review Score
As a series we will be reviewing several Developments and Projects like this and will be scoring then out of 100 using the same following factors for each review
Developer – Score 18
As stipulated above the Development team is extremely strong and had the actual development company been established longer then we would have given this a max 20.
Returns and Capital Growth – Score 20
As above this is simply the best project for guarantee returns currently in South East Asia and as there are only 100 units in total available. There should be good capital growth especially when considering the price per square meter the project is being bought for.
Country Performance – Score 19
So this was harder than normal to score as the project is in Philippines and the contracts are issued from the Tax Free state of Labuan. So Philippines Real Estate has one if not the highest growing property markets, however if you then take the factor of taxation and ease and doing business that would reduce the score somewhat. However, as the Labuan factor takes care of the negative side and gives tax free returns this makes the score high.
Security, Risk and Exit Strategy – Score 17
The only real risk in this project is during the construction and that is mitigated by the development team as well at Pavilions Hotels who will be managing the resort. The exit strategy is guaranteed and very well enhanced .So overall the score here is very high as we automatically discount score by 10% for any off Plan project.
Market Price and Value for Money – Score 20
This was the easiest to score with 35% below and comparable competitor this scores the maximum.
TOTAL SCORE 94% – This score is likely to be one our highest scoring developments in the series.
First things first my company Gray Stuart is the Master Agent for this project and I am personal friends with the Developers. For this reason, I have tried to stick to facts and not use this article as a sales tool but to give you the reader and investor the opportunity to form your own judgement.
In reality the project and returns sells itself but with an end valuation of $75 Million and projected income of the resort, it’s easy to see why the developer is able to pay the returns on offer. Also for the people who decide to hold the asset there is the potential for a significant capital gain over the medium to long term hence why the developer is happy to pay a premium on the buy-back exit strategy.
For those of you who want to wait for the project to be finished you need to invest in another project that is finished because the reality is 5 Star resorts like this at these prices and returns get sold out long before completion. Until Covid-19 appeared we expect to sell the resort out by July of this year but now it will probably run into the end of 2020 to early 2021 depending when the virus lockdown will come to an end. As Owner and MD of Gray Stuart dealing with lots of clients I appreciate that this project will not be for everyone and if it’s not we can help you find a finished completed project with close to zero risk. However, as Covid-19 has proven there is no 100% risk free investment in the world.
So my conclusion is a very simple one read all the facts above and if you share my view that this is a once in a lifetime lifestyle investment opportunity then please contact me or one of my team to learn more about El Nido Beach Resort and Spa.