27 May
2019

Introducing Pine Hills, Vilamoura. A Case study in MESPIL’s Algarve Property Investment success.

Since 2016, MESPIL has been focused on leisure property in Portugal’s Algarve where we have found there to be strong business for acquiring distressed properties at discounted rates.

MESPIL’s focus is to:

  • acquire properties at a discounted rate through our established political, legal and agency networks
  • refurbish, upgrade and add value
  • establish management, operation and rental companies in each project
  • sell units to market at best value for our buyers and profit to our investors

This cycle has been successfully executed to completion in the case of Pine Hills, Vilamoura, the Algarve.

Portuguese banks/funds continue to hold a number of distressed tourism & leisure properties on their books and MESPIL’s relationships in the banking, legal and political sectors allow us to acquire these properties at a deep discount on market value.

Factors encouraging investment in Algarve

Airport hub
Ryanair has made Faro a new European hub, basing seven aircraft at the airport with 31 routes and increasing passenger numbers to 1.7 million per year. Total passengers through Faro have reached a record 8M+ with further growth predicated into the future.

Golf
The Algarve boasts 42 golf courses in less than 100 miles and is internationally recognized as one of the top golfing destinations in continental Europe and the world winning numerous accolades year on year.

Coastline and Beaches
The Algarve’s 100 miles of Atlantic coastline is punctuated by jagged rock formations, lagoons, and extensive sandy beaches, many awarded coveted Blue Flags from the European Blue Flag Association. The Algarve has also won best European Beach Destination at the World Travel Awards a number of times with Falesia Beach winning 3rd best beach in Europe this year.

Ex-Pat Community
The Algarve has been attracting foreign retirees for decades and is home today to more than 500,000 resident expats. Forbes magazine voted Portugal as the number one friendliest place to retire in the World.

Non-Habitual Residency (NHR)
The Portuguese Non-Habitual Residency status enables those who become tax resident in Portugal through the NHR scheme the opportunity to receive qualifying income tax free both in Portugal and in the country of source of the income. Also covered is professional foreign income from qualifying value add activities which are eligible for a flat rate of 20% tax making Portugal a very attractive destination for many different nationalities.

This has been a crucial boost to the market and to the success of MESPIL’s investment in Pine Hills.

Climate
The Algarve boasts 300 days of sunshine a year with temperatures staying above 14 degrees Celsius in winter. The climate facilitates outdoor living that contributes to quality of life of its residents.

Why Pine Hills, Vilamoura?

Pine Hills, Vilamoura was identified as the first suitable project for MESPIL to undertake. The property consisted of a development of 55 premium residences, available in available in one, two and three-bedroom units, set in a beautifully landscaped garden with a feature 300 sq/m central swimming pool with a large sunbathing deck.

The architectural style of Pine Hill Residences draws heavily on the elegant influences of traditional Portuguese manor houses, with doorways and windows outlined in natural stone. This classic approach, combined with underground car parking throughout, gave the resort a timeless appeal.

Thorough due diligence was carried out to support the decision by which assessed price, quality and management on several comparable developments in Vilamoura. MESPIL considered the prestigious location of Vilamoura within the Algarve’s Golden Triangle, examined recent sales activities in the area, reviewed in detail the price trends and demand with agents.

Once satisfied that Pine Hills was a viable project, MESPIL raised €5 million of mezzanine finance to support the acquisition of it from Novo Banco in 2017.

Other property we looked at in Portugal (& why rejected)

MESPIL examined approximately 30 real estate projects prior to purchasing Pine Hills.

All were rejected for one or more of the following reasons:

  • Location: There were several other projects further down the coast which were deemed less central and not as coveted in location.
  • Operation: There was already an operator in place or owner wanted to operate, MESPIL wanted full control of operation in order to ensure the service and standard would be to their level.
  • Value: MESPIL reviewed a number of projects that were built in the wrong place or required too much work to get to completion
  • Work required: When Pine Hills was purchased it was cheaper to buy an existing asset than build a new one due to the discounted prices. (this is no longer the case in most instances).

Once the property had been acquired, the following solutions were implemented:

Operations

  • A team was hired on the ground in Vilamoura to manage the complex day-to-day to the highest level of service
  • Guest-centric software was introduced and a digital marketing strategy was launched
  • MESPIL established a contract with Online Travel Agents (OTAs) to maximise the visibility of the development to online holiday bookers. This led to immediate demand, last minute 2017 bookings far exceeded room rate expectations
  • Pine Hills was awarded a 2018 International Property Award under the “Best Apartment” category and also a Trip Advisor Award
  • Rental contracts with new property owners were signed for 2019

Renovations and Repair

The development was unfinished and had been dormant for quite some time at the time of acquisition so the following areas of the complex were completed and refurbished to MESPIL’s high standard.

  • A Reception/Marketing Suite was completed
  • NEW branded shuttle bus & car were purchased in order to take guests to nearby towns/beaches for their convenience from Pine Hills
  • Significant landscaping was carried out on the gardens by BLOOM landscaping.
  • NEW cafe, poolside bar and convenience store were built and opened
  • Common areas & car park renovation
  • NEW gymnasium and spa treatment fit out

Results - Sales

Pine Hills exceeded its sales targets by 110% having sold 33 units by 2018 over a projected 14. As of April 2019 they are 92% sold.

  • MESPIL’s sales team was hired in Nov-17
  • Marketing collateral was completed within 3 months
  • The agency network was established in 3-6 months
  • New show apartments were launched Jan-18
  • Sales of Pine Hills are almost €1.5m ahead of projections
  • The sales process will be completed more than 6 months ahead of schedule
  • Savings have been delivered in Sales Commission, Professional Fees and Management Fees

Conclusion

MESPIL’s investment in Pine Hills was a significant success bringing figures over €1.5 million ahead of projections, and completed ahead of schedule by over six months.

Economies of scale are now becoming significant as the MESPIL team and projects grow. We will be shortly introducing our new project in Carvoeiro to the market and its subsequent ongoing management, as well as other properties MESPIL have acquired for development, including Lisbon, Faro and beyond.

Our integrated property opportunities and international sales reach allow us to add real value to property assets.

We drive a partner approach with our investors through our multi-disciplinary teams based in Dublin, Ireland; Vilamoura, Portugal; and Beijing and Shanghai, China.

MESPIL are well positioned to take advantage of market opportunities through established political, legal and sales agent relationships. Furthermore we have built a diverse database of future projects to bring value and return to our investors.

MESPIL’s Mission

Currently MESPIL offers pan-European real estate investment opportunities, facilitates idyllic lifestyles, provides value and return to our investment clients and creates future-proof wealth for our business partners. Our current mission is to be the leading end-to-end property developer and operator in Portugal, providing a peerless service. A company giving you property you deserve operated by people you trust.

MESPIL is regulated by the Property Regulatory Association of Ireland and are affiliated with both the Society of Chartered Surveyors Ireland (SCSI) and the Royal Institution of Chartered Surveyors (RICS)