By Ferdinand Mwongela
- 29th Sep 2011 00:00:00 GMT +0300
The development of Kenya’s real estate and hospitality industry has seen the revolution of ownership structures. A development in Malindi has introduced a new concept, fractional ownership, through a project dubbed Mwembe Village. While fractional ownership started in the early 1980s in North America, it is only now reaching Kenya. Baobab Development Group is putting up the multi-million development that the developers say will be one of its kind in the region once complete. Picture a home where you have butlers waiting on you and a run of several world-class resorts.
SEE ALSO :Man narrates how he helped kill businessmanFractional ownership refers to a structure where individual owners buy shares of an expensive asset. This could be motivated by the price of the asset — where one is unable to buy it alone, or practical considerations.This is the concept that the Baobab Development Group project of holiday homes adopts. The motivation for this development is that it might not make financial sense for owners to have a holiday home that they would only be using a few weeks a year.Limited liabilityIn this arrangement, owners share expenses such as maintenance costs and management fees while having access to the property for a certain period of the year. "It does not make economic sense to own a holiday home you are going to use very little in a year," says Angus Jackson, the group’s sales manager.
SEE ALSO :Malindi business community launches monthly clean upIts uniqueness is not only in its ownership structure, but also its planned facilities and services. According to the Group Chairman, Renzo Quiaciari, who is also the chairman of the Malindi Tourism Board, the development is going to be "one of the most exclusive developments in East Africa".The development of 40 units on 5.4 acres of land does not rival other mega luxury developments along the Coast such as English Marina Point or Vipingo, but it promises to offer a unique VIP service, with butlers and chefs, coupled with access to hotels and resorts under the group. Fractional ownership stands out because it is an investment that counts as a bankable asset. According to Jackson, the development will have 40 limited liability companies, one for each of the units. Thus when one buys their fractional ownership, they will essentially be buying shares into a limited liability company. With this, the investors get a share certificate and a 99-year renewable lease. Partial ownership"Our aim is to give Kenyans a chance to own a holiday home," says Jackson.
SEE ALSO :Man in defilement case says he was framedQuiaciari says the development will be closed in May every year for refurbishments. "Come the first of June every year, we will essentially be opening a new development," he said. At the same time, Quiaciari says investors who own shares in the luxury development will have access and use of resorts, including next door Mwembe Resort, Rosado Beach Club and White Elephant Resort among others. Not to be confused with timeshare, another popular structure, fractional ownership essentially means the asset and title deed are divided into shares.It has also been used for other luxury assets like planes where one’s partial ownership guarantees them a certain number of flying hours, depending on shares bought.
SEE ALSO :Coastal mood ahead of Easter HolidayIt allows several unconnected buyers to collectively share ownership of a specific property that usually forms part of a holiday resort, residential building or private members club.In this case, therefore, the investor owns a part of the title and with it the property. This means if the property appreciates in value, so does the owner’s shares.Essentially, what this concept means is that both the real estate and hospitality industry is diversifying and expanding its options with a changing world. Over the last few years, developers in the hospitality industry have been adding more variety, with such additions as apartment hotels coming up. Mwembe Village’s development goes to further consolidate the coastal region as a luxury development forte. It is also expected that with several developments coming up in the Watamu, Malindi area, capital appreciation for such developments are going to increase exponentially.
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Malindi Baobab Development Group