Futureneers were instrumental in setting up and launching the first Section 12J fund for the Pearl Valley Hotel by Mantis (located in the Val de Vie Estate in Paarl) back in 2019. After a very successful "sold out" season 1, a second tranche of section 12J investments were completed for the tax year ended February 2020. Our investors therefore received an upfront section 12J tax benefit, while sharing in the future earnings of the hotel as well as potential upside in capital appreciation in a property with arguably one of the best addresses in South Africa. While the first phase of the hotel is operational, phase 2 ownership will only transfer towards the middle/end of 2020.
The challenge -
COVID-19! Suddenly hotel rooms are empty. However, even more significant - a realistic expectation that the hospitality industry will be severely dented and probably only return to "normal" (which will be a different normal) after 12-18 months.
The Futureneers response -
Even before the outbreak of COVID-19, Futureneers were in constant discussions with international hotel operator, Mantis, to build a yield guarantee into the section 12J offering for the first 24 months. The rationale for this approach (even before Corona) was that any new operation takes a while to get traction, while the strategy of increasing the number of rooms to cater for the larger corporate and conferencing market will also only kick in 12-18 months thereafter.
The New Deal -
We are proud to announce that Futureneers and Mantis have reached a deal whereby all the Futureneers Section 12J Pearl Valley Hotel by Mantis investments will earn a 6% guaranteed gross yield, irrespective of occupancy rates and hotel performance for the first 24 months after transfer of the hotel units. We want to thank and congratulate Mantis for taking some bold and brave steps to conclude this arrangement in addressing the massive challenge the hotel and the whole industry is facing over the next few years. The Team will work effortlessly to revisit their strategy and get the hotel fully operational as we hopefully return to traveling post COVID-19 in the upcoming months.
What does it mean for you as a Futureneers Investor? -
Peace of mind - your investment will accrue a 6% p.a. pre-tax gross yield from hotel operations from the date of transfer of ownership (estimated later this year) and the 24 months thereafter. From the date you made your investment until the transfer of ownership, your investment is already earning interest at the prevailing call rates of Mercantile Bank.
The above yields are beating our original investment estimate of 5% yield in the first two years of operations and combined with your upfront Section 12J tax benefit we are on track to achieve our 20%+ IRR on the investment over a 5 year period. COVID-19 however has had a massive impact on the local and international travel industry. It will take time to recover and changes in strategy and the way hotels operate will change significantly going forward. The great news is that the Mantis Team has taken a long-term view in revising their strategies to relaunch and build the Pearl Valley Hotel by Mantis back to one of South Africa's most prestigious hospitality offerings. Our two year guaranteed yield means that you as an investor will not be subject in the next 24 months to expected lower occupancy rates, and, we firmly believe that the Mantis team will be able to introduce and implement their new strategy within the next 24 months. Any experienced investor and businessman will echo that in business and investments, your partners are as important as the assets you are investing in - "Partnerships are everything". Let's all work together to rebuild the South African hospitality industry!
Don't miss out - Book a Zoom cession
During COVID-19, Futureneers are setting up one-on-one Zoom calls with their 100+ investors to provide feedback on their investments, high-level investment strategies and most importantly new and exciting investment opportunities being developed as a result of COVID-19 and 12J opportunities focused on essential South African industries - such as energy, agri (food) and medical. Should you wish to schedule a Zoom Call with Jaco and Deon, please click the link below.