© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
Last updated: March 3, 2012 2:16 am
The Palms at Playa Flamingo is one of Costa Rica’s few fractional ownership schemes. The 25-villa development sits directly on the ocean front, a rarity along this protected Central American coast, at the end of a track that redefines the word ‘pothole’. The few strangers who bother with the journey find white sand and Pacific surf.
It is a dream second-home destination with easy access via Liberia International Airport about an hour away. Location aside, the question central to anyone thinking of buying into The Palms, or any of the other fractional ownership (FO) models on offer worldwide, is whether to embrace this relatively new kind of home ownership.
The concept of FO began about 30 years ago in the US and, today, high-end schemes provide serviced holiday homes without the usual hassle of multiple home ownership, such as maintenance, cleaning and guilt about not going there often enough. What makes this form of ownership especially attractive in the current climate is that it costs a fraction of the capital of buying a property outright.
At The Palms a one-tenth ownership costs $129,000 and one-eighth costs $149,000. Twelve villas have already been sold either in FO or total ownership. On top of the capital expense for FO come annual charges of $5,646 and $7,040 respectively, which cover everything: condo fees, maintenance, housekeeping, electricity bills, property taxes, furniture and appliance replacement every seven years, 30 per cent for reserves, pool and landscaping, water, refuse and sewage. The daily use charge is $20 per villa, which goes towards cleaning and wear and tear.
In financial terms it is difficult to judge whether FO comes out ahead of renting. It depends on service charges, the market at the time of sale, and tax jurisdictions which may, for instance, give capital loss allowances.
In the words of Eric Pierce, project director for The Palms Private Residence Club, “Ownership at The Palms is a unique investment, one focused on lifestyle as much as it is real estate.”
And The Palms provides plenty of holiday lifestyle. The villas have views across the infinity pool and between palm trees to the ocean, and the interiors are decked out with rich red-brown wood from the Enterolobium cyclocarpum, commonly known as Guanacaste or Elephant Ear Tree, which grows prolifically in parts of Costa Rica. The villas are very alike and, if there is one concern, it is the proximity of neighbours: great if you all get on, but ...
The main difference between the villas is that the beach is about two minutes’ walk across the lawns from some of the villas, as opposed to one minute’s walk from the others. The only way you could stay closer to the ocean would be to buy a yacht.
Between the villas and the ocean, overlooking the swimming pool, is the bar where concierge Roy Saenz makes fresh fruit cocktails, organises trips or explains where to find anything from iguanas to iPads. As one owner puts it: “Roy is The Palms – simple as that.”
The Palms’ other great selling point is its proximity to the beach because, unusually for Costa Rica, there is no road or path between the development and the ocean. In contrast, Playa Flamingo, a small community of shops, hotels and condos 20 minutes from The Palms, is on the far side of the road from the ocean.
A 40-minute walk around the headland takes you to Brasilito, where pigs and horses wander around the Indian almond trees fringing the beach. A mile or so along the shore, cafés appear beside a dirt road. They are illegal and will probably be moved eventually but, for now, it’s possible to eat ceviche (raw fish marinated in lime or lemon) or freshly-caught lobster right beside the waves. Playa Tamarindo, 40 minutes’ drive away, offers fine international cuisine – particularly sushi – although the prices would not look out of place in London.
North of Playa Flamingo, dive boats operate day trips among puffer fish. Inland there’s canyoning and hiking while longer trips access volcanoes and rainforest. Zip wires zigzag through the forests, which are packed with wildlife thanks to Costa Rica’s long-held conservation laws. For those who like their nature tamed there is a 6,800 sq m Mike Young golf course nearby.
So there’s plenty to do but, for many, the point of FO is to have a pick of a variety of destinations. The Palms deals with this by giving its owners free two-year membership of 3rd Home, a Nashville-based holiday home exchange company with properties in places as far apart as Argentina, New Zealand and Switzerland. From then on it’s $495 per exchange.
Other high-end FO companies, including The Hideaways Club and Rocksure, have their own portfolio of homes, although the model varies.
The Hideaways Club uses a traditional model. The company has various schemes, with initial investment of £65,000-£250,000, providing equity ownership in a portfolio of villas and apartments from Miami, London and Paris to Tuscany, Phuket and Mauritius.
“Depending on their fund and share type, we can offer investors a structure that suits their lifestyle – from 12 nights’ to eight weeks’ use of the various properties. In addition they pay an annual charge ranging from £2,760 to £14,000 a year, which covers all maintenance and upkeep,” says Stephen Wise, co-founder and director of The Hideaways Club.
Rocksure uses a slightly different model whereby properties are sold at the end of a set term. Different funds offer various options. “The Crystal Fund offers villas around the world and the Capital Fund offers city apartments,” says director Desmond Patrick-Smith. “The minimum investment is €57,500, which allows seven to 14 days’ use of the properties. An annual charge of €1,050 – plus a €200 visit fee – covers all costs, staffing and concierge services. The funds’ lives are seven to 10 years, after which the properties are sold and the proceeds returned to the investors.”
The question that lingers over this and all FO schemes is the final cost once all the charges and extras are taken into account and that, like most property investment today, is almost impossible to predict.
Jane Owen was a guest of The Palms
● Good location to escape US winters
● Rare direct access to the ocean
● May make money
● The villas are very close together
● Only one location after the first two years
● May lose money
What you get for ...
$100,000: Nothing. $129,000 buys a one-tenth fractional ownership at The Palms
$1m: Outside the FO scheme, a two-bedroom villa costs from $1.2m
The Palms sales: two-bedroom villas cost from $1.2m to $1.5m; three-bedroom apartments cost $2.3m and $2.5m (also outside the FO scheme)
Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.