Investing in Branded Residences

• 9 December 2016
• Property Focus
• 2202 Views

Buyers all over the world are looking for interesting real estate opportunities. Over the years, the branded residence sector has continued to intrigue developers and real estate investors in Southeast Asia. Here in Cambodia, the market forbranded residences is relatively small but expanding.

The number of hotel operators offering branded residences has been gradually increasing over the last 10 years. Some of the established players have included Four Seasons, Starwood and Shangri-La. These brands are as known for their exquisitely finished privately-owned residences as their deluxe hotel rooms. The majority of these new branded residences form parts of developers’ mixed-used developments.

In Bangkok, Ritz-Carlton Residences at the recently completed MahaNakhon features 200 residences at the city’s most prestigious address. In my opinion, I believe the market definitely sees strong potential for brands to perform well and continue to command significant residential price premiums in the upcoming years.

Branded residences are not hotel projects. It is a different offer from serviced apartments. Buying branded residences provide buyers the security, an element of prestige and most importantly, a hassle-free holiday home, and buyers can expect hotel services to be offered with the high-end branded residential development. On the other hand, it provides investment benefits – the rental and management by the brand also gives buyers a key investment opportunity.

‘Buyers are willing to pay more for branded residences because they’re paying for the beautiful decorations and designs; it allows buyers to enjoy a comfortable hotel lifestyle at home.’ said Chan Mlop Sokha, from Sokha Law Office in Phnom Penh.

Branded residences are units managed by well-known hotel chains. Most of them are developed within the hotel compound, which offers buyers the benefits of the use of hotel amenities and services. They provide access to the hotel services, like the business centre, concierge, F&B, fitness and spa, housekeeping etc. These additional values, plus the finishing guarantees a high product quality that meets the standards of the brand.

“Purchasers buy these branded residences to show off their status. Besides the option of buying for investment, they also buy for their own stay. Sometimes they don’t care how much it costs,’’ said Veasna Sea, Sales Lead for Phnom Penh City Center.

There are several rental systems in use for branded residences. For branded resort villas located in coastal areas, most developers adopt a leasehold structure, as foreigners are prohibited from owning freehold land in Southeast Asia. It should further be noted that choosing to purchase in top tourism destinations (such as Hua Hin, Phuket and Samui in Thailand, and new hot travel destinations such as Da Nang in Central Vietnam) could ensure a higher rate and occupancy for the property.

A rental pool system is a common practice for individual owners and operators in branded residences, where the income from all units is pooled and proportionally distributed between the individual owners and the operator. For individual owners, they have the option to live in the residence all year round, or by choice elect to enter the property into a rental pool agreement. In the scenario of branded residences, adopting a leasehold structure gives the particular branded hotel operator complete control over management, which is essential to keep up and operate the property to the required brand standards.

Many branded residences also offer a guaranteed yield for the initial years. Investors need to thoroughly understand what is being offered and look carefully at their investment purpose. The key deciding factors is whether investors would like to purchase for investment, or their own use, the trust of the brand itself and location preference.

From the buyers side, they should be aware of the owner’s allocated usage per year, and if there are any restrictions on use during the peak and high seasons etc. before making their decision to buy.

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