Magenta Shores carve-up

Author: Lisa Allen
Date: 8/07/2010
Publication: Australian Financial Review

Mirvac Group has agreed that parts of its Magenta Shores development on the NSW Central Coast be carved up under a new “shared ownership” scheme proposed by hotel advisers Dransfield Hotels and Resorts.

From September, and following regulatory title approval, Dransfield managing director Dean Dransfield will offer slices of the resort’s beachfront and golf homes to up to eight individual owners per property.

Furnished four-bedroom golf homes will be offered from $225,000 apiece for up to eight owners. Portions of beachfront houses will be offered from $400,000. Owners must also pay an annual fee of $8000, which pays for all cleaning and maintenance as well as access to the golf course. The fee includes a $2000 payment to Dransfield to manage the property’s holiday schedule.

Shared ownership is similar to the fractionalised ownership concept becoming more popular in Europe because it gives owners the chance to own a holiday house at a fraction of the cost and make capital gains upon the sale. Fractionalised ownership differs from the time-share concept because time-share vendors usually only allow the purchase of the right to use property for a period and rarely include any direct share of the leasehold or freehold of the property.

But there is a downside and there may be some objections from existing residents at Magenta Shores, which struggled to sell properties during the global financial crisis.

“Some people feel it is opening the doors to people less fortunate, but they will be in the minority,” Mr Dransfield said. “The people buying these things will have equity or near equity whereas some of the existing (Magenta Shores owners) might have a substantial mortgage directly on the property. It’s not necessarily poor people who are moving in. We are giving access to smart people and people who have less wealth. But no one buying a second home for several hundred thousands of dollars which also has annual maintenance costs is in the poorhouse.’’

Mr Dransfield is hopeful the concept will take off and envisages controlling up to 10 locations over the next five years. “But we will be very select about our choice of sites. We are only doing high-end luxury holiday homes and we don’t want to hurt our brand. Once a property gets over $600,000, it stops making sense on the investment for yield side,” he said. “We look at what we think the market value of the property is and we charge a 20 per cent premium to offset the cost of establishing the scheme and to pay advertising. It has cost us well in excess of $1 million to establish the scheme so far.”

Mr Dransfield said the concept would allow owners to spend up to eight weeks a year at the resort and they would get a guaranteed Easter or Christmas Holiday break every three years. Owners would also get a guaranteed two weeks during school holidays each year.

“You can’t get to pick and choose when you use it,’’ Mr Dransfield said. “But each owner can on-sell their share at any time, rent it out separately or put it in the letting pool. Owners can also decide to sell the whole house at any time.”

Mr Dransfield hopes his scheme might enlarge the market of buyers at Magenta Shores by up to 25 per cent by bringing it within reach of more people.