Offshore investor returns eaten up by Sipp fees

Offshore investor returns eaten up by Sipp fees

A group of investors in luxury hotel complex The Resort Group (TRG) fear for their nest egg after returns from an offshore investment are not reaching the levels they expected.

Five investors FTAdviser spoke to had hoped for high annual returns from their Cape Verde commercial property but are now losing money as returns are low and fees and charges, including from their self-invested personal pensions (Sipps), are eating into their investments.

Some are also concerned about the liquidity of the investments, saying selling them on for a profit proved tricky.

Founded in 2007 by CEO Rob Jarrett, a former banker and financial consultant at Prudential, the Resort Group owns four luxury resorts in Tortuga, Dunas Beach, Llana and White Sands.

One marketing brochure issued by Kayden Estates, an independent partner which sold the investments to direct investors back in 2008, spoke of 20 per cent annual returns on the apartments.

Referring to “example figures supplied by the developer”, a two bedroom apartment purchased for €146,950 would return a profit of €106,979 in three years, it stated.

A spokesperson for The Resort Group said it had stopped selling properties through Kayden Estates in 2010 and had no record of these figures.

They told FTAdviser: “Whilst we work very closely with our agents to ensure best practice, we are not in control of their sales and marketing approach, due to them being independent businesses.”

TRG itself speaks on its website of 5 to 7 per cent returns and a regular income through its hotel management scheme.

A pensions illustration used by self-invested personal pension (Sipp) provider Rowanmoor from 2013 projected a gross annual income of £4,500 for investor Owen Magowan, who purchased an apartment in 2012 for about £40,000. The projection showed the pension would be worth £106,000 by 2046.

But according to his latest Sipp statement, he received £520 from The Resort Group in tenant rent in the 12 months to April and faced Sipp fees of about £655, writing an overall loss.

Similarly, Andrew Walton, who invested €27,000 in an apartment in Dunas Beach in 2011, claims he has so far made a loss of £1,044.82.

Part of the problem seems to be that the management fee gets deducted after the returns have been calculated.

TRG says rental yields were never guaranteed but they are expected to go up as room occupancy increases.

It also stated the “secondary market for these types of properties in Cape Verde is growing”.

Many of the UK Sipp investors FTAdviser spoke to were sold the investments through Real Sipp, a company owned by now defunct regulated firm C.I.B. Life & Pensions.

TRG said it takes no responsibility for the suitability of the investment for individual investors.

TRG offers a money back agreement to some investors. But FTAdviser understands this is not offered as a standard service, as "all property purchases are negotiated on an individual basis.”

An estate agent who is involved in the local property market but does not want to be named, told FTAdviser the problem was the state of the market. In his view, the initial valuations may have been too high.