The chief operating officer of a luxury offshore property scheme, which is held in a number of UK-based self-invested personal pensions, has admitted investors may find it difficult to part with their assets during the pandemic.
In an email to a UK Sipp investor dated June 3 Charlie King, COO of The Resort Group, admitted there was now almost no buyer interest in fractional stakes in the group’s properties.
He wrote: “The property is being marketed as a full property rather than its fractional parts.
“At the moment there is almost no interest from our sales distribution channels for fractional properties and the few sales that are being achieved are [at] very substantially lower prices than asking prices.”
The Resort Group's property assets were sold in one of two ways - whole hotel rooms and fractional shares in rooms.
Investor Nick Cannon bought a 50 per cent share in a room in the group’s Dunas complex for €62,977.50 (£56,500) in 2013, but asked the hotel group to sell the investment a couple of years ago after not receiving the returns he had expected.
Mr Cannon said the yield had fallen to a recent low of less than 2.5 per cent per annum, threatening his planned retirement, and said he had not received any rental payments so far this year.
Having contacted Mr King directly, on June 3 he received a reply in which the COO admitted it would be hard to sell the property, in part because of the inability for potential investors to visit the properties due to the pandemic.
Mr King said that as the group had made a commitment to Mr Cannon to return the sum he had paid for the share without deducting any agency commission for the sale, it had had to factor this in the asking price.
He added: “We have also increased the asking price in order to give a guaranteed rental return for a fixed period which we believe will significantly improve the chances of finding a buyer.
“Therefore the marketing is at a headline price of €200,000 (£179,400) for the property with a view to allowing some scope to consider offers.”
Mr King did not respond to a request for comment.
Valuations 'hamper claims'
Mr Cannon has brought a claim against the now defunct adviser, C.I.B (Life Pensions) Limited, to the Financial Services Compensation Scheme but said an 'unrealistic' valuation of the property had impeded his claim.
Mr Cannon said: "I feel that Sipp providers must be accountable and be told by the FCA to immediately and independently revalue all Cape Verde/TRG properties.
“My own FSCS claim has been hampered by the Sipp company just taking the value from the TRG valuers.”
But the FSCS said it had now factored in a reduced valuation: “As part of the FSCS’s investigations we will seek to establish if the investment holds value, as FSCS does with the hundreds of other investments we deal with.
"The TRG investments relate to holiday resorts that have been built and are largely operational, with the investment manager still providing valuations.
"As with investments of this nature, we continue to monitor the situation closely [...] Following updated reviews of the issues with the different types of investment in TRG, [we] allowed customers with full ownership of units to utilise independent valuations, and customers with fractional memberships to utilise nil value for the purposes of compensation calculation."
Returns falling short
It is not the first time the Cape Verde-based property group has spelled trouble for the UK savers who invested in the assets over the past decade, some on the advice from firms that have since left the industry.
FTAdviser reported in 2018 how many investors claimed they had been promised guaranteed returns on their investments, only to be disappointed by the returns that materialised - leaving them with Sipp fees that offset the returns they did receive.
Like many hotel groups across the world The Resort Group has been impacted by the coronavirus crisis and associated lockdowns.
In a letter sent to investors in April, seen by FTAdviser, Rob Jarrett, executive chairman of TRG, warned that as of March 18 TRG could would not continue its payment of rental income to investors due to all hotel operations being suspended.
He cited so-called force majeure clauses - commonly used clauses that allow contractual obligations not to be performed due to an extraordinary event.
But investors are still expected to pay for the upkeep of the rooms, albeit at a rate of 50 per cent during the force majeure period.
carmen.reichman@ft.com
