An investment that allows you to have your cake and eat it too
BY TONY ZERUCHA AUGUST 22ND, 2014
Most people like to make money, but few have as much fun doing it as, say, Uncle Scrooge or Ted DiBiase.
Sure it’s great to get the updates every month and watch your nest egg grow while imagining spending it when the kids are gone and you’re retired. But are your investments fun? Do you get any enjoyment out of them while they grow your wealth?
If you invest in a new venture created by I-Bankers Direct you have that rare opportunity to enjoy an investment while it generates wealth. Called “Quality of Life Investing,” I-Bankers Direct, through issuer Immobilaire Meneghina, is offering Senior Secured “Luxury Travel Notes” in Villa Gallietta, an exclusive property on Italy’s Lake Como.
Villa Gallietta was built in 1772 by Italian nobility and has been designated as a historical property by the Italian government. It has several links to history. The fresco above the entrance hall was painted by Andrea Appiani, Napoleon’s court painter. Czar Alexander II stayed there during a state visit in 1838 and Franz Liszt performed there many times. Historians of a more recent vintage may recognize Villa Gallietta from several episodes of an international version of the Bachelor which aired last year. It is one of only seven lakefront villas on Italy’s Lake Como, and only one of four in private hands.
I-Bankers Direct was looking to retire $600,000 in external debt.
“We were thinking what we could do that was creative and interesting and which would attract attention and investment,” I-Bankers Direct CEO Mike McCrory recalled in an interview. “I ran this idea by many people and everyone liked it.”
The concept is at one time both novel and simple, and is one which is certain to be copied by many people across many sectors. In exchange for purchasing the Luxury Travel Notes, investors will receive an annual ROI of 12%, split equally between six percent interest and six percent in a travel voucher applicable for a stay at Villa Gallietta.
Let’s use the example of a person who invests $50,000. After three years, they will earn $9,000 interest and $9,000 credit toward their stay at Villa Gallietta. They can also use each year’s credit separately, with the first year’s credit immediately available upon participation. The credits are good for up to 25 percent of the costs of staying at the main villa, and 100 percent of the costs of staying in one of the two apartments on site. The main villa can accommodate 16 people with the apartments handling seven each. The combined square footage of the three places approaches 20,000 square feet.
In the first month, 75 percent of the notes were sold, a pace Mr. McCrory called “robust.”
For such a simple idea, this concept opens up many lines of thought. With the global economy just emerging from recession, tourism took a hit, and initiatives which encourage travel are welcome.
“Even in good economic times, properties do not experience 100 percent occupancy throughout an entire year,” Mr. McCrory said.
Every vacant day is lost potential revenue, Mr. McCrory explained.
“Unused room stays are a perishable inventory that you cannot get back. Once they are gone, they are gone.”
This inefficiency led Mr. McCrory to think of ways to eliminate those missed opportunities which is when he came up with the concept of Luxury Travel Notes. Given the lower cost of staying off-season, many investors will be willing stay during those periods, which will serve to reduce spare capacity faster than other methods.
“This is a great opportunity at any time of year, but especially in the off season when the costs are lower,” Mr. McCrory advised.
In developing this investment opportunity I-Bankers Direct capitalizes on the fact the demographic of the average Villa Gallietta guest closely resembles that of the typical property investor – high net worth individuals likely to look online for investment opportunities.
There is no better advertising than those with a positive experience at the property and McCrory is counting on those happy tourists spreading the word.
“Happy investors are great sales people for the platform and the concept.”1
There are several reasons beyond content customers as to why this concept will become popular. When most people think of investing in property, they think of new projects or ones which have undergone significant redevelopments. Villa Gallietta is a known entity situated in a desirable location. It has generated a profit for three consecutive years following a significant renovation. With a loan value of only three percent of the value of the property, this is not a sink or swim proposition.
Crowdfunding also makes sense because traditional financers will not undertake the effort unless the return is sufficiently large.
“The reason there are such market inefficiencies is the economics don’t work, ” McCrory explained. “The due diligence required is the same for $500,000 as it is for $500,000,000. There are no shortcuts.”
The level of oversight from regulators and potential liabilities further remove incentive for traditional entities to work on smaller projects.
“High fees make it worth it, while smaller fees lead them to ask if this is worth it,” McCrory added. This leaves a void while the big firms chase the next IPO.
In the traditional world that leaves many going to smaller, more retail-oriented firms. What many companies find is these firms wish to put up only a small amount in a bigger deal and do not like being the first ones at the table. They are also more likely to be exposed to firms of questionable quality.
In a sense this is a similar concept to Stub Hub and other ticket resellers in that a fan can purchase a pair of season’s tickets to a high volume sport like baseball, take the games he wishes to see and sell the rest. One man from central Canada did that for the last season in the original Yankee Stadium. He caught three games and the profit he made off of what would have been 78 games of burnt inventory covered the entire cost of his trip.
Mike McCrory envisions this concept spreading to luxury jets and yachts, assets which often sit idle while their owners are working, traveling or otherwise unable to use them.
“This will allow them to recoup some of their investment in them.”
For now, it starts with luxury properties, a market McCrory estimates at hundreds of thousands of properties.
“It does not take too much effort to monetize that.”