Money Observer - August 2010

Heaven sent in St Lucia

A villa at Sugar Beach, the five star renovation of the Jalousie Plantation resort in St Lucia, could be an investor’s dream purchase. Ruth Emery reports

Lying on a beautiful white sandy beach and being gently hypnotised by the waves lapping the shore. Watching the sun set over the turquoise Caribbean Sea from your private plunge pool.

Welcome to Sugar Beach, a five-star $100million (£66 million) renovation of the former Jalousie Plantation resort in south-west St Lucia Built on a UNESCO World Heritage Site, Sugar Beach is nestled between the Pitons, a pair of magnificent volcanic mountains. The renovation project should be finished in December 2011, when the resort will reopen as The Tides Sugar beach.

The resort marries beautiful countryside (the plantation dates back to the 1700s and is home to 20 different types of mango tree as well as other lush vegetation and wildlife) with luxury facilities. These include 24-hour butler service, three restaurants, two sandy beaches and a rainforest spa.

But it’s not all just about sunbathing and pampering. There’s potential to make money here too. The resort boasts 64 one- and two-bedroom fully furnished hotel villas, of which 17 are still available for sale. Prices range from US$700,000 to a cool US$2.1million.

Owners are allowed to stay in their villa for four weeks a year. For the rest of the year the villas are rented out and income goes into a pool. Just over a third of the pool (37.5 per cent) is released and shared by the owners, depending on what price they paid for the villa. So even if your villa’s occupancy is low, if you paid the highest price, then you’ll get the most money. Lisa Basire, marketing Director at Sugar Beach Villas, says this is unique. “Nowhere has a revenue split like this,” she explains.

As the recession swirled around the world, the St Lucian property market was not immune. Property prices have fallen by around 15 per cent over the past year, according to David Farrin, Managing Director of St Lucia estate agent Doubloon Real Estate.

Business is slow for many estate agents. Farrin admits that his agency was selling about four properties a week five years ago and now it’s more like one a month.

Developers have been hit hard too. One resort was backed by Lehman Brothers, so that development stopped. And construction on hotel and golf club Le Paradis is on hold.

That said, the Caribbean island is generally becoming more upmarket with boutique houses and hotels now dotting its coastline.

Although critics say the development of Sugar Beach is slow, Basire says there is no chance of it being halted. “The development is not reliant on bank finance, so it doesn’t matter if occupancy or sales of villas drop. Development will continue.”

The owner in question is Roger Myers, founder of Punch Taverns and the man behind Cafe Rouge.

Sasha Cole, sales manager of Island Villas, part of the Savills group, thinks Sugar Beach is as good investment. “It offers a 5 per cent annum minimum rental guarantee, and not many developments are offering this anymore. The occupancy levels are high: almost 80 per cent now, and this is low season. Sales are very good this year too.”

Indeed, three villas and four private residences have been sold in the first half of this year. As well as the rental villas there are 46 private homes for sale, ranging in cost from US$2.4million to US$9million.

Farrin calls the Sugar Beach project a ‘protracted job, but a good job’. He adds: “It’s a big challenge to bring the standards up in the hotel. It’s going in the right direction though.”

There are sweeteners for investors to help offset the inconvenience of the whole complex closing for five months next year before the reopening. As Cole mentioned, there is a 5 per cent rental guarantee that lasts from the handover and for the first 12 months after the hotel reopens in 2011. After the guarantee has finished, the villas are expected to deliver a 5.98 per cent return in 2012, 6.98 per cent return in 2013 and 7.48 per cent return in 2014.

Sugar Beach has also been granted a 15-year income tax holiday by the government, as well as a 50 per cent reduction on annual property tax for five years, which brings it down to 2.5 per cent. There is not VAT, inheritance tax or capital gains tax for St Lucian residents.

However, as expected with a million-dollar villa in a five-star complex, there are a few fees. The annual charges include around US$5,000 for insurance and US$2,000 for maintenance.

If you buy the villa before building has started, stamp duty is charged (2 per cent value of the lot – a lot is worth roughly US$75,000). Foreigners must also stump up US$2,500 for an ‘aliens land holding license’, while lawyer’s conveyancing fees come in at US$7,500.

When it comes to selling the property, there is a 10 per cent vendor tax. Farrin says a popular way to get around this is to set up a company to buy the property.

“Selling the property will then only incur a 0.5 per cent share transfer tax, rather than the 10 per cent vendor tax. Setting up a company takes about six to eight weeks and costs around US$2,000.”

So what about financing your luxury villa? Banks on the island such as Royal Bank of Cana and First Caribbean offer mortgage rates as low as 3.5 per cent to foreigners if they open a US dollar bank account, according to Cole, for up to 75 per cent loan-to-value. How-ever, Farrin says getting a mortgage in St Lucia is a ‘long drawn out process’ for foreign buyers. Instead, he recommends that people use any collateral they have in their UK property.

So why should investors choose St Lucia? Well, it’s cheaper than St Barts, Mustique and Barbados. Basire reckons a comparable purchase in Barbados would be 30 to 40 per cent more expensive.

Farrin says that although house prices have stagnated this year, there are signs that they will pick up soon and ‘we’ve seen quite a few enquiries from developers.’ He adds that the rental market is holding up well and tourism figures are up this year.

SVG launches St Lucia-Canouan Service

Regional carrier SVG Air launched daily, roundtrip service between St. Lucia’s Hewanorra Airport and Canouan Island in the Grenadines.

The 20-minute flight departs St. Lucia at 4:15 p.m., allowing travelers from the mainland U.S. to connect from earlier flights arriving on American, Delta, JetBlue and US Airways.

From Canouan, the flight leaves at noon, in time for onward return flights to the U.S.

Canouan is home to Carenage Bay (the former Raffles resort) and Tamarind Beach Hotel & Yacht Club.

Dubai Property Weekly

Mubadala venture sets sights on St Lucia

Ginetta Vedrickas

Freelance Writer

One of Abu Dhabi’s leading investment companies has found a choice spot for itself under the Caribbean sun. This comes in the wake of Mubadala Development Company picking up a 50 per cent stake in Los Angeles-based Viceroy Hotel Group, and together they will be focusing on an aggressive rollout of newproperties bearing The Tides and Viceroy brands.

First up will be a hotel on the sunkissed island of St Lucia. A sizeable sum of $100 million is being invested to turn the world-renowned and much-loved Jalousie Plantation into a world-class five-star hotel and residential development.

The Viceroy Hotel Group was “specially selected from a beauty parade of hotel operators,” says Naomi Cambridge, sales director of Sugar Beach villas, who believes this would give potential buyers confidence in the product. “We believe that we have found the perfect combination of partners to provide the expertise necessary to create one of the best resort developments in the world.”

That the developer is not reliant on ban finance to complete the development may also add to investors’ sense of security at a time when many prestige projects are faltering across the world.
Wide reach

The Viceroy Hotel Group is one of the fastest growing deluxe hotel brands, currently opening hotels across the Middle East as well as flagships in London and New York, while continuing to manage existing properties in Miami, Los Angeles, Mexico and St Lucia.

With the World Bank placing St Lucia in the Top 30 countries to invest, 37 of the 85 privately-owned, buy-to-let villas have already been snapped up. Completion is expected by the end of 2011.

The Sugar Beach villas’ selling agents, Cardea Property Consultants, believe buyers won’t just be attracted by lifestyle opportunities but also by the investment potential. The villas form part of the hotel’s rental pool, affording owners four weeks free usage and a revenue split of the rental return, guaranteed at a minimum five per cent net until the end of the first year of operation. St Lucia may not yet have the profile of other Caribbean destinations such as Barbados, but Sugar Beach’s sales director Naomi Cambridge says: “Over the last few years property in St Lucia has experienced a 15 to 20 per cent annual appreciation, which is set to continue.

Buying would be 30 to 40 per cent more expensive in Barbados, in comparable terms of beachfront location and the five star hotel management company.”

Safe haven

Cost aside, few other developments in the world have a protected Unesco World Heritage status. Naomi predicts that returns on rental villas will be around seven per cent by the end of third year and adds the island is a safe haven for investors. There is no VAT, capital gains, inheritance or estate taxes in St Lucia, and a stamp duty of two per cent is payable only on the land if construction has not started on your particular villa.

The St Lucian government has also granted buyers at Sugar Beach a 15-year holiday on income tax and a 50 per cent waiver on annual property tax for five years.

The villas start from $610,000 up to $2,100,000 for buyers opting to use the rental pool model, but totally private villas are also being offered for $2.30 to $9 million. Private residence buyers can still rent their properties with full management from the Tides brand. Resort facilities include a luxury spa, three restaurants, four bars and beach club, while no other building permission will be granted on the 192 acres of rainforest and pristine beaches surrounding the development.

Naomi believes UAE-based investors will be tempted to followin Mubadala’s footsteps, “The Abu Dhabi Sovereign Wealth Fund has a lot of cache with UAE investors, the fact that they have chosen to invest in the Viceroy Hotel Group highlights that it is a solid investment.”