Youāre given a deed to the property. Therefore you own something tangible. If Mercan blows up then you lose the buyback and you own a piece of something that may or may not be completed and may or may not be operational, but you own something.
You can think of the entire deal as a corp bond secured by the real estate. I left a much larger writeup somewhere in some thread. Mercan is a pretty large company thatās been doing this in multiple countries for 20 years so the likelihood of failure is IMO low.
Ok, so if Mercan Blows up there could be a half finished hotel in Porto, that quite likely would be taken over by some other company? I wonder how often projects like this dont get completed. It seems like in the centre of a popular city with a big company like Marriot, then surely they donāt leave much to chance. But I have no experience in this area at all
Of course if the hotel did get abandoned then owning a deed to the property isnāt going to be worth much
I would like to see your much longer write up, if you could find it easily in your account. But dont worry If not
I gave this scenario a lot of thought and asked a lot of questions to Mercan about this. The odds of any construction project failing increase when the developers use leverage and construction loans etc. In Mercanās case, the funding is provided by GV investors on a 0% interest rate until the hotel is operational, only then does the 3% return start. This significantly reduces the odds of failure for the project.
I think they proceed anyway. The project is not entirely funded by GV; they have a capital interest in the project as well. They just hope to sell off the shares. Fundamentally though they are in the construction business and thereās profit to be had in building and selling off properties. Just that itās even more profitable if they can get free float from a bunch of GV investors.
If the project fails, you own a part of a hotel in Porto. You and all the other owners will have to get together and figure out what to do.
I was on a call with Mercan and if I recall correctly, he said the Porto project is funded and will go ahead with construction regardless if they have all GV investors.
But it was only after the call I realized I shouldāve asked āthen why do you need GV investors?ā. Perhaps for new projects?!
That would be a nightmare scenario having to get together with everyone who owned a bit of a hotel and work out what to do. Iām guessing it could be half finished also?
Or would they be legally required to buy back our shares if the project was only half finished?
If the hotel is only half finished it would probably be due to a serious problem that would also prevent them from being able to buy back your investment!
You canāt sit there and wait for enough GV investors to start the project, if you want to get anything done. (There are projects you see where that is whatās happening. GV investors get frustrated because they commit to this project, then wait years while waiting for the other shares to sellā¦) However, GV capital is cheap if you can get it.
So you borrow the money you need to get the project going. Call it a bridge loan or construction loan. Then you sell the shares. As GV investors come in, you pay back the loan. If you donāt get quite enough GV investors, then you have to keep borrowing the money to finish the project, yeah, but by now Iām sure they have good models for how many people are likely to buy into any given project and when.
Iām quite sure that Mercan could just go build the projects without the investors. What the investors do is make the affair profitable - the dif between having to pay 5-10% for 6 years to borrow the money or paying the 0-3% for the GV money. But whether you have 20 GV investors or 18 isnāt going to make or break the affair.
And yes if Mercan folds then you have a nightmare scenario and it might be finished or unfinished or a smoking hole in the ground. Just part of the risks. But frankly I just donāt see how thereās any real risk in the Mercan projects at this point. Theyāve done it for far too long far too successfully. But do your own research.
Has anyone here requested full project financials from Mercan? I.e., development costs and capital expenditures. Their business plan only includes projected financials from start of operation, which makes it impossible to assess the projectās overall return characteristics or the likelihood theyāll be able to return our investment as promised (esp under bearish scenarios).
Thank you, Aylin and others for sharing your experiences good or bad with La Vida GV! I had not seen many references to their services in these threads.
Weāre starting our conversation with Mercan and would appreciate any info about your experience so farā¦ Iām new to this forum and donāt know how to PM you. Maybe you need to allow that somehow?
Could you pls update me re your further experience with Mercan on the Evora project? Weāre interested in that one. Has construction finally started? Have you decided to go with them? Any other input wd be appreciated.
Has anyone looked at [cencored due to company repeatedly spamming the forum with shill accounts]? They have offerings similar to La Vida and Mercan.
You have to buy two units to qualify for GV but this location seems much more doable than some others I have seen if you had to keep one of them long term.
Freehold apartments
Guaranteed profitability of 7%
Optional buyback
No condominium and maintenance costs for 30 years
Offer of 14 nights of annual leave
The developer has a partnership with one of the worldās largest hotel chains
Located in front of one of the AlgarveĀ“s most touristic beaches