The luxury vacation home investment fund manager, Equity Residences, had a successful year in 2021. Its Equity Platinum Fund attracted a record number of investors who poured $18.7 million into the Fund. New homes additions during the year, mean the fund is over half way to its target of 25 vacation residences.
Investors in the funds are given preferred access to the fund homes, and then any extra time is used to generate rental income which offsets annual maintenance and running expenses.
“Our business model combines financial returns with lifestyle dividends through collective ownership of a luxury vacation home portfolio,” said Marina Salley, Equity Residences Director of Investor Relations. “Our banner year is a testament to our track record and our unique offering. We’re on pace to close out the Equity Platinum Fund in 2022.”
Salley reported that appreciation of the Platinum Fund portfolio is paralleled by a 16% increase in rental rates. This translates to enhanced cashflow from rentals and higher valuations for investor vacations.
“We’re perfectly positioned to capitalize on the robust second home market and growing demand for shared-use residential investments,” according to Salley.
The Equity Platinum Fund recently added two new homes, in Islamorada, Florida and Los Cabos, Mexico, to its portfolio and plans to add several new residences in equally prestigious locations during 2022.
Islamorada, Florida Residence
The Platinum Fund’s Islamorada penthouse is a 90-minute drive from Miami airport. It offers a resort-style pool and beach with easy access to water sports like snorkeling, kayaking and swimming. The Florida Keys residence is located in The Maison, a prestigious beachfront community. The Maison is at the heart of Islamorada and boasts 350 feet of private beach and a 150-foot pier. This exclusive, gated resort complex is on the Atlantic side of Matecumbe Key. It is home to white-sand beaches, clear waters, and warm weather. Equity Residences opportunistically acquired the home at auction for $2.7 million. The home is expected to offer double digit cap rates.
Los Cabos, Mexico Residence
The Los Cabos home is located in the Cabo Corridor between Cabo San Lucas and San Jose Del Cabo. The house, overlooking the Sea of Cortez, was built in a prestigious, gated, beachfront enclave called Blue Sea and is nestled between two 5-star resorts. The home is steps to a sandy beach and close to Chileno Bay, which is a Blue Flag beach ranked as one of the cleanest in Mexico. Investors and guests enjoy magnificent ocean views and can observe humpback whales from the terrace. With six bedrooms, seven bathrooms, a pool house and maid’s quarters, it is one of the largest homes in the Equity Platinum Fund portfolio.
Equity Platinum Fund directors worked with the developer to add a fifth bedroom and bunkroom, which required the relocation of the laundry room, as part of the $2.6 million purchase price. At the time of the acquisition, the inventory of available beachfront real estate started to dwindle. According to a local realtor, Cabo real estate saw an increase in offers for houses starting in November 2020. He considers 2021 to be a record year in terms of sales, and says inventory is going down and the value of the Blue Sea home is climbing.
“When you are this close to the ocean, you are running out of space to build on the ocean. It is a great investment,” the realtor said. “I anticipate high demand for this house.”
Update on the Equity Platinum Fund
Equity Residences has 21 homes in its portfolios, including seven homes in the initial Equity Villa Fund. Equity Platinum Fund investors can travel to the Equity Villa Fund homes, which expands their vacation options, as does access to hundreds of other luxury residences through the Elite Alliance and ThirdHome exchange programs.
The Equity Platinum Fund is raising $50m+ with plans to buy a total of 20-25 homes in the US, Caribbean, Central America, and Europe. It currently has 14 residences.
Many real estate markets have experienced unprecedented demand for vacation homes. This demand, combined with supply shortages in labor and building materials, seems to be driving real estate prices upwards in both domestic and international markets.
As the Equity Platinum Fund expands its portfolio, its investors gain more opportunities to travel to a variety of destinations. Equity Residences analysts target homes based on investor location preferences, projected cap rates, anticipated appreciation, and maximum seasonal appeal.
Changing Travel Patterns
Changing Travel PatternsTaylor Kudell, Equity Residences Manager of Partner Relations, says that after the height of the pandemic in the middle of 2020 travel picked up and is now busier than ever. Travelers who stayed at home due to lockdowns and restrictions are now coming back and booking the fund residences.
However, the pandemic has changed some activities. For instance, Taylor noted that more travelers, including Fund investors, now want private chefs to come and cook for them in the comfort and security of their vacation homes.
Overall travel patterns have also shifted during the pandemic. Mountain homes are now in demand during shoulder seasons, like fall and spring, whereas pre-pandemic these times were traditionally much quieter. At the Caribbean homes August and September were usually slow periods, but not so in 2021. Equity Platinum Fund homes in the Bahamas, Turks and Caicos, St . John, and Cap Cana were booked solid last August. And September was not far behind with 80% occupancy. This is a very high occupancy rate for the Caribbean homes compared to the years prior to 2021.
Kudell thinks people who can work from home are more willing to pull their kids out of school for vacations because, for many, school is online. Since the Equity Platinum Fund homes are rented when investors are not using them, this helps the fund to monetize previously slow weeks at higher rental rates, boosting Fund income, which benefits all the Fund investors.