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Why Invest in Resorts?
So why would anyone invest in real estate, especially resorts? What benefits does real estate bring to an investment portfolio? Real Estate is an excellent addition to a mixed asset portfolio, consisting of equities, bonds, debt securities, alternative investments, and cash. The answer to the opening questions is found in four reasons.
Diversification. The most important reason to include real estate is because it is a great portfolio diversifier. Real estate brings significant risk reductions to the portfolio because of its low correlation with stocks, bonds, and cash.
Returns. Real estate produces lower total returns than stocks, and about the same total return as bonds. When the total return is broken into its two components, the income return and the appreciation return, we see that real estate excels in producing income returns. Favorably, real estate provides reliable income returns, much higher than the dividends available from stocks and roughly similar to the cash returns available from bonds. Due to the low correlation with stocks and bonds, real estate provides returns when other assets are not performing well.
Inflation. Real estate functions as an excellent inflation hedge, much better than bonds, and better than stocks in the short term.
Everybody does it. Real estate is an accepted part of the investment universe. Once one starts accumulating a sizable amount of wealth, you need to consider investments in real estate, given that real estate is from 8% to 15% of the investable universe in most economies. Not investing a market weight to real estate is equivalent to betting that real estate will decline relative to other investment alternatives.
Felicity Resorts investment parameters are focused on the acquisition and management of undervalued assets and assets that have expansion or development opportunities.
The firm predominately focuses on value-added real estate transactions that possess the following characteristics:
• Acquisition price represents a discount to replacement cost
• Properties that are un-affiliated and unbranded
• Transactions contain a value-added component
• Properties that have less than 30 rooms
• Deployment of targeted capital expenditures to renovate or reposition an asset
• Implementation of operational improvements
• Acquisitions will be fully supported by a comprehensive marketing, branding and positioning plan to drive revenues
• Investments will be located in jungle, mountain, beach and desert locations, generally areas that have a certain remoteness and proximity to nature.
By selecting resorts in various geographic areas, Felicity Resorts will seek to diversify the portfolio and therefore reduce the economic and geo-political risk.
Felicity Resorts seeks development partners with acumen in commercial real estate and finance to put the deals together. Felicity Resorts brings the operational and management expertise as well as the team to ensure success, return on investment and asset appreciation. Felicity Resorts looks at the long play, not short term gain. Building a brand and network of micro resorts takes time to reap the rewards of investment through vision and expert execution.
Risk and Reward
Felicity Resorts will endeavor to provide an excellent rate of return on investment both through cash flow distributions as well as asset appreciation at the time of liquidation. As with any investment there is risk involved with resort operations however Felicity Resorts is confident that returns will be strong over the hold period, weathering the economic ups and downs. However, investors need to determine their own level of comfort as with any investment strategy. The rewards of investing in Felicity Resorts are not just monetary in value but something bigger. Felicity Resorts endeavors to change the way resorts operate and engage guests. Opening up the world to travelers and ensuring its future survival and the flourishing of people, cultures and the environment. We believe, in the end, that we will give more back than we receive.