Equity Residences continues to add new residences in popular beach destinations in both Hawaii and the Caribbean. Managing Director Greg Salley told us about the two newest acquisitions in Providenciales, Turks and Caicos, and Poipu, Kauai. Both destinations are in high demand by the Equity Platinum Fund investors.
When the Equity Residences management team makes decisions on where to add new residences, they do a detailed analysis and due diligence beforehand to make sure that new luxury vacation homes can make money for the fund’s investors and also satisfy investor demand for luxury accommodations.
This is an important balancing act for the Equity Residences management and analytics team. Unlike some equity destination clubs, Equity Residences rents their homes to high net worth individuals to offset the operating costs. On one hand, this means investors can pay $0 in annual operating fees to travel, especially if they have the flexibility to use short-term vacation options available through the Equity Platinum Fund and its affiliates ThirdHome and Elite Alliance. On the other hand, it also means each acquisition requires extensive due diligence and calculation of the home’s rental potential.
Richard Kessler, the Equity Residences Director of Acquisitions gave us an idea of what the management team expects from the two latest additions to the Equity Platinum Fund.
Villa Capri is located on the island of Providenciales, Turks and Caicos and sits on the turquoise water in Chalk Sound National Marine Park. The house is close to a beautiful beach at Taylor Bay and only a short drive to Grace Bay the #5 beach in the world, according to Trip Advisor. Equity Residences East Coast-based investors have been eyeing the island for some time, and the management team started looking for a perfect residence in 2017, says Kessler.
Managing Director Greg Salley anticipates significant investor demand for the residence, as this has been a top demanded location for two consecutive years. The fund management team plans to add additional bedrooms to the 4-bedroom house, in order to accommodate larger groups of guests.
Cap Rates
The team expects the cap rate to be 8%-9% after upgrades. On the rental market, the average daily rate during the peak season is $1,600 and can go up as high as $2,900 a night for the holidays.
Poipu, Kauai residence is the second Equity Platinum Fund residence in the Hawaiian Islands. The first one is a house located in the Mauna Lani Resort on the Big Island. This new residence is a penthouse located on the grounds of the prestigious Villas at Poipu Kai Resort.
The resort has access to everything an active family desires on vacation: tennis courts, golf courses nearby, two beaches within walking distance, a pool, and a gym for those who don’t want to miss their workouts. There are a plethora of restaurants and farmer's markets in Poipu, so the investors and guests can enjoy authentic Hawaiian food and drinks.
The penthouse is on the top floor of the development with ocean, sunset and mountain views and elevator doors opening directly into the apartment. Greg Salley said that Equity Residences will install a new furniture package and make cosmetic upgrades including fixtures and paint. The management team estimates that this home’s cap rate is about 6.5-7.5%.
For the Equity Platinum Fund, it is important to diversify its portfolio across domestic and international markets to satisfy investor demand for travel, and also to find great deals in the current real estate market, noted Greg Salley.
