Investors can buy into the property market of holiday destination Cape Verde as a new crowdfunding platform has come to market.
The platform, Resort Crowd Limited, offers investors a potential yield of 7 per cent on properties that are ‘under construction’, and 5 per cent on properties where construction has been completed.
The minimum investment required is £10.
There is no upward limit on how much can be invested by an individual, though the company state that no single investor can own more than 19.9 per cent of an individual property
Kim Collier, operations director at Resort Crowd, said: "Cape Verde is one of the fastest-growing tourism markets in the world.
"We’re giving investors the chance to beat the crowds and be among the first to buy into this next big holiday destination through what is an increasingly popular form of DIY investing.
“Not only can they add a slice of resort life to their investment portfolios, but they can also get fixed, market-beating returns, guaranteed by one of the biggest companies in the industry.”
The Resort Crowd Limited works in a similar way to other crowdfunding property websites.
Customers can invest in shares in a special purpose vehicle company (SPV) which owns one or more overseas properties, choosing from a range of resort properties across different Cape Verde islands.
But advisers have met the launch of the product with extreme caution.
Ian Lowes, managing director at Lowes Financial Management, said this is not a product he would recommend to clients.
He said: "This is a good example of what we will not be recommending to our clients and in fact, would recommend all would-be investors to stay away from such tempting offers.
"It is unfortunate that over the years there have been so many esoteric schemes, offering enticing returns that have ultimately failed for one reason or another, taking investors cash with them, to the extent that any genuine offer is ‘tarred with the same brush’.
"However, even without all of the ‘red flags’ from history, you have to ask yourself: 'Why am I being offered this?'
"It isn’t always the case but in far too many instances, by the time this sort of proposition is offered to UK retail investors you can be sure that it’s been passed up by a number of banks, institutional and professional investors.
"I don’t expect any regulated advisers in the UK will be suggesting clients expose their money to such an arrangement – it's just not worth the risk.."
Suzette Brown, PR manager for the Financial Services Compensation Scheme (FSCS), said the scheme only covers crowdfunding investments in circumstances where ‘unsuitable advice’ has been given about a crowdfunding investment, and does not cover the failure of the investment otherwise.
Mel Kenny, chartered financial planner at Radcliffe and Newlands, said: "Anything offering high guaranteed returns has to be treated with caution.
"Despite a cozy website and the mention of the regulation in places, without the backing of the Financial Services Compensation Scheme if everything goes wrong, the arrangement does not even get a look in for me."
According to The Resort Crowd, the 7 per cent return is sustainable because, “the underlying assets (the properties) are supported by a guaranteed revenue agreement secured with a leading international tour operator".
"The agreement ensures minimum levels of occupancy and guarantees 94 per cent of the asset providers assumed hospitality revenues, whilst only accounting for 57 per cent of existing hotel inventory.
"This effectively means a set return based on the agreed levels of income in the agreement, as well as allowing for other large tour operators to contribute additional occupancy performance and hospitality revenues to the asset provider.
"In effect, the property will receive a return by way of room revenue regardless of whether it is actually occupied, which clearly demonstrates the asset provider has the ability to service its contractual obligations to investors."
david.thorpe@ft.com
