Glitzy Investment Scheme Sells Rooms In Laugharne’s Corran Resort….. But Is It Too Good To Last?
So, plans for 200 ‘lodges’ on East Marsh, Laugharne, have been rejected by Carmarthenshire’s planning committee (webcast, December 3rd).
The development, a major expansion of The Corran Resort and Spa, looked very tempting to Cllrs Anthony Jones (Labour, Llandybie) and Kevin Madge (Labour, Garnant) and, citing the potential economic benefits, they both urged the committee to approve the plans, against the recommendation of planning officers.
But the majority of members heeded the warnings about flood risk and environmental damage, and turned the application down.
The Corran lies in a C2 flood risk area. ‘C2’ means it lacks any significant flood defence infrastructure.
The hotel, owned by Keith Stiles and Peter Burnett, looks very smart and comfortable, to judge from the promotional material, and Cllr Madge was highly impressed when he attended a function there. The lodges, plus a swimming pool and a restaurant, would surely be super-stylish, but they would be in a high-risk flood area and would also affect an important Site of Special Scientific Interest, Laugharne-Pendine Burrows, where the Golden Plover overwinters. The development would also have changed the landscape of the Taf and Tywi Estuary Registered Historic Landscape of Outstanding Historic Interest.
Mr Stiles and Mr Burnett announced in May that Wyndham Worldwide, a US-based multinational company with annual revenues of around $5 billion, and already big in the UK holiday self-catering business with multiple brands such as Cottages 4 U, would partner them in the lodges venture.
It would have been interesting to see whether the lodges village would have relied on a financial model which is in place for the existing hotel. Rooms in The Corran Resort and Spa are sold to investors through intermediaries, thereby providing funds for expansion. Property investment firms currently selling space in The Corran include Emerging Developments SL of Marbella, Spain, which is offering one twenty-sixth of a boutique suite for £18,000 (valuing the full suite pro-rata at £468,000), and is promoting the enticing potential returns from one package as 10% annually for ten years, 12% for the following five years, repurchase at 125% of the sale price in years five to 14, and at 150% in year 15.
The Villa Company is another property investment firm selling fractions of rooms in The Corran, from £18,000 and with returns up to 12%. “Invest with just £18,000 and receive on average £2,300 per year,” says an advert. “After 15 years the developer will buy back the property. Speak to one of our advisors now to learn more or book a viewing trip to The Corran.”
Selling investments in rooms and part-rooms, whether in hotels, care homes, or student accommodation, has become big business, fuelled by low returns elsewhere and now by the 3 percentage points stamp duty surcharge on conventional buy-to-let properties, announced by chancellor George Osborne last month in the Autumn Spending Review.
Big business – but risky. Investments in rooms and part-rooms – including investments placed in a self-invested personal pension (SIPP) — are not covered by the Financial Services Compensation Scheme, and should be targeted at experienced, affluent investors who can, in theory, afford to suffer a loss.
The Corran is luxurious and pretty pricey by local standards – it has to be, to pay the returns expected by investors. A top-of-the-range suite is £225 per night for bed and breakfast mid week, £340 per night for dinner, bed and breakfast at a weekend. A double room is £175 a night for a mid-week B&B, £290 at the weekend with the addition of dinner. A snip for an oligarch – and the presence of a helipad signals that The Corran works to appeal to international guests.
Now that the 200 lodges have been rejected, a question comes to mind: without a stream of new property to sell to investors, how easy will it be for The Corran to deliver the projected returns to those who have already invested?
On a wider scale, are the advertised returns from investments in hotel rooms really possible over the long term?