Turks and Caicos / Caicos Beach Club Resort & Marina
FREQUENTLY ASKED QUESTIONS
Q) Please provide details of the Private Lodging Plan.
A) The Resort Residence can be used for personal use or placed in a Rental Pool
Personal Use:
As the Owner of the Resort Residence you may use your Resort Residence at any time. There is a monthly maintenance fee and a use fee when occupied.
Rental Pool:
The Resort Residence is placed in the Rental Pool on an annual basis. All Units in the Rental Pool share in the income and expenses, the Units are not treated on an individual basis. There is a monthly maintenance fee, a management fee charged when the Resort Residence is rented and a use fee charged only when the Resort Residence is occupied.
At the end of each quarter, the gross Rental Pool revenues are computed, the management fee and use fees are subtracted from the gross lodging revenues and the net lodging fees are placed in a holding account on behalf of the Owner within 45 days of the end of the quarter. Owner funds in the Holding Account are disbursed pursuant to written instructions from the Owner.
In addition to the receipt of net Rental Pool proceeds, as a member of the Rental Pool, Resort Residence Owners shall receive Two (2) Free Bonus Weeks of usage per year in the Resort Residence type purchased. Neither Maintenance Fees nor Use Fees shall be due from the Owner when utilizing his Two (2) Free Bonus Weeks of usage per year. While the Owner is vacationing, their Resort Residence is in the Rental Pool earning revenue. In the event the Owner desires to stay in a larger Resort Residence during the Two (2) Free Bonus Weeks, the Owner shall pay the difference between the posted rack rate of the larger Resort Residence and the Resort Residence owned.
In addition, the Resort Residence Owner may at any time call within 14 days of when they would like to vacation and if the Resort is less than 70% occupied, the Resort Residence Owner may reserve any size Unit available with the only charge being a housekeeping fee and a nominal administrative fee. While the Owner is vacationing, their Resort Residence is in the Rental Pool earning revenue.
In addition to the receipt of net Rental Pool proceeds, as a member of the Rental Pool, a Resort Residence Owner desiring to stay additional time during the year (previously used their two free weeks) and making a reservation more than 14 days in advance, shall pay Fifty (50%) of the posted rack rate of the Resort Residence size reserved while earning revenue from the Rental Pool at the same time.
True Rental Pool, all income and expenses are pooled
Economies of scale, one bill for insurance per Building not per Unit, etc., much more cost effective.
Q) What do the expense associated with the operation of the rental pool cover
A) The maintenance fee of $300US per month covers the fixed expenses such as insurance, electric for common areas, fixed electric for the Unit, etc.
The use fee covers variable expenses such as daily maid service, linens, laundry service, additional electric, water, fungibles, etc.
The management fee covers the management cost associated with operating the Resort and Rental of the Resort Units
Q) Is there a guaranteed minimum occupancy in the above plan?
A) No there is not a guaranteed minimum occupancy however on the website the investment proforma was done very conservatively. The occupancy rate at 55% and a rental rate approximately 35% below the annual rental rate (should use the seasonal rental rate which is much higher) yields a 22.4% net return after all expenses and the mortgage/promissory note payment have been deducted.
Q) If you do not use your two free weeks.
A) You can either use the two free weeks or rent them out through any means you would like. The two free weeks cannot be put into the rental pool because it is a conflict of interest in regards to the rental responsibility we have to all the participants in the rental pool.
Q) If the Unit is not actually being rented out within the plan, is it free to be used by the owners at any time?
A) Yes, if the Unit is not in the rental pool the Unit can be used by the owners at any time. If you put the Unit into the rental pool, the Unit is put in for the whole calendar year. This is a decision made each year three months prior to the start of the next calendar year.
Since the rental is operated as a pool, no one is allowed to put it in and take it out during the year because it would destroy the integrity of the rental pool.
Q) How would an Owner sell their Unit eventually?
A) The Developer will resell the Unit or there are approximately 20 Real Estate Brokers/Offices in the Turks and Caicos Islands which will be happy to sell the Unit for you. I would suggest the Developer since the primary market is anyone staying at the Resort.
Q) Closest airport?
A) The Island of South Caicos has an International Airport with both Customs and Immigration. A brand new air conditioned terminal building and tower are being built by the Government for this Island. The International Airport on South Caicos is approximately 4 miles from the Resort.
Q) Is the purchase freehold or leasehold?
A) The property is purchased under a leasehold for 99 years.
Please note the following advantages to owning a Ninety-Nine Year Lease as opposed to Fee Simple Title:
The Developer is marketing the Resort Residences approximately 50% below current Market Value in The Turks and Caicos Islands
The Real Estate Transfer Tax in the Turks and Caicos Island is currently 9.75%. The Developer has negotiated the Transfer Tax from 9.75% down to 3% on the transfer of the Ninety-Nine Year Lease. For Example, The average price for a One Bedroom Ocean View Resort Residence is $500,000.00US as opposed to the current price at Caicos Beach Club of $269,000.00US. The transfer tax on the $500,000.00US purchase price would be $48,750.00US paid to the Turks and Caicos Island Government at closing as opposed to the transfer tax on a Caicos Beach Club Unit of $8,070.00US or an out of pocket savings at closing of $40,680.00US.
This Resort Residence is not an individual’s primary residence but is, in fact, an investment property. The average term of ownership in investment properties is between Five to Ten years. Why then, would someone want to pay an additional $40,680.00US at closing to own a property between 5 to 10 Years.
In addition, if someone were to purchase Fee Simple Title they would not fall under the Developer’s Development Agreement with the Crown, which we call an “umbrella of rights”. A few examples of rights that would be lost are as follows:
The Purchaser would have to pay duty of 35% on the furniture in their Unit (Developer pays no duty).
The Purchaser would pay the higher Transfer Tax illustrated above
The Purchaser would pay Higher Individual Insurance Rates
The Purchaser would have to pay the Resort Residence operating expenses separately and on their own, as opposed to the expenses paid out of the rental pool. Not only would an Owner have to pay the bills on their own, they would pay the bills at a higher rate both by economies of scale (i.e.: the more people that pay the same bill in the rental pool lowers the cost per person) but the rate at which items are charged will be higher, i.e.: an electric bill paid for a Unit owned under a 99 year Lease in the rental pool is paid at the discounted Developer Electric Rate negotiated in the Development Agreement which is much lower than the regular electric rate charged.
If owned in Fee simple, their would be no rental pool as everyone would have to pay their own electric, water, etc. In the rental pool all expenses are pooled and paid by the Management Company on behalf of the owners. Also the income is pooled and everyone receives his or her prorata share as opposed to only receiving income if your individual Resort Residence is rented.
The Developer has the right to import unlimited foreign labor to keep costs down which labor can only be used to operate and maintain the Resort Residences operating under the Development Agreement.
Although there are currently no annual real estate taxes in the Turks and Caicos Islands, one never knows if this may change in the future. In the Development Agreement if any taxes whatsoever are ever imposed, the Developer has a 25 Year exemption from these taxes which term commences to run from the Completion of Phase I. By way of example, at the current real estate tax rate in the State of Florida, on a $510,000.00US property value, the annual real estate taxes would be approximately $10,000.00US.
These are just a few examples of why someone would want a Ninety-Nine Year Lease and the protection of the Developers Development Agreement as opposed to receiving Fee Simple Title, which does not carry these rights. In addition, every time a cost is increased the annual return on investment decreases.
Q) When will Phase 1 be completed?
A) Phase 1A consists of 274 Ocean View One Bedroom Resort Residences. This Phase will be completed approximately 15 months from now. These Units are being sold at under construction discounted pricing (approximately 50% under current market price). Later phases will be sold at full price and sold as fractionals, not whole Units. The Fractional Units are not placed in the rental pool.
Therefore one day when you want to sell the Unit we can sell it for you (we are no longer selling whole ownership) or there are 20 real estate companies in the Turks and Caicos Islands that will market it for you.
Q) How many more phases are planned and what timescale?
A) There are four more phases planned all together. These phases shall be built out over a Ten Year period. The Phases will be a Marina, Private Homes, Fractionals as previously mentioned and a Casino Phase. There will be gaming when we open Phase 1A.
Q) Is crime or security a problem in the Turks and Caicos Islands?
A) There are only 25,000 local people in all of the Turks and Caicos Islands. Then there are approximately 10,000 Brits and Canadians. There is virtually no crime in the Islands. The Islands are under British rule therefore there are no guns allowed. These Islands are part of the British West Indies which consists of Cayman, Bermuda and the Turks and Caicos Islands. These Islands are so popular because they are safe and clean. You can walk on the beach at 11PM and no one will bother you. It's not the Bahamas, Jamaica or the Dominican Republic where there are millions of people and there always will be crime and poverty. In the Turks and Caicos Islands the locals either own their own business or work for someone. The main areas of business are Offshore Banking, Tourism and the export of fish, lobster and conch. There is National Health Insurance and everyone either works or is taken care of through the local Government.
The Islands are not inexpensive to vacation in however it is tough to locate a room for rent in the season because the Islands are safe and clean. In fact after September 11 when world tourism was down, the Turks and Caicos Islands tourism was up 20% that year.
Q) What is the Tax Structure In the Turks and Caicos Islands?
A) There are no taxes (Corporate, Personal, Annual Real Estate, Estate/Inheritance Taxes) in the Turks and Caicos Islands nor is there any reporting requirements. There are NO forms to be filled out pertaining to income in the Turks and Caicos Islands.
Q) Acts of God/Hurricanes
A) Obviously you have to be prepared for Hurricanes. These Units are engineered to be Hurricane proof. The entire building including the walls, the roofs and the balustrade railings are pre-cast, pre-stress concrete. A 200 MPH wind can lift approximately 40 pounds per cu. ft. The pre-stress concrete roof weighs approximately 160 pounds per cu. ft. The windows and sliding glass doors are Hurricane impact resistant glass. In addition the foundations are 40 feet above sea level therefore you do not have to worry about flooding or tidal surge.
Q) Does the Developer offer any financing?
A) Yes, the financing offered is as follows:
Up to 70% Financing
10 Year Interest Only Promissory Note
Balloon payment
Citi Bank Prime plus 2 Points adjusted annually, approximately 8.25%
Non Recourse Note
No Pre-payment Penalty
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