Palm Beach Club is an iconic holiday resort right on the beach front in Playa de Las Americas, Tenerife. The building was completed in 1983 and until 2014 it was run as a full timeshare resort with RCI exchange systems. Since 2016 it has been possible to book a stay in the resort via various booking agents webpage’s. The resort operators had wanted to restructure the whole building from timeshare into freehold apartments in 2014, but were unable to do so. The plan was then to leave part of the building as a timeshare club, and to convert the rest into apartments.
However, rather than wait to finish the conversion and sell off the apartments, Silverpoint Vacations SL sold companies that in turn owned 52 timeshare weeks. Silverpoint promised that the title deeds would be delivered within 3 years. Investors typically paid from €145,000 for a studio apartment, to €350,000 plus for the penthouses. They definitely would not have paid these sums if they knew they would be left effectively owning 52 weeks of timeshare managed by the resort.
And so, investors in Palm Beach Club have been trapped. It looks unlikely that they will receive a title deed to an apartment anytime soon. Silverpoint, the company that initially sold the investment, is now in liquidation. It then seemed that Excel Hotels and Resorts SA, a related company, would deliver on the promises made by Silverpoint to finish the process of converting the weeks into apartments. However, Excel is now washing their hands of the matter and claiming that it is not their responsibility.
The problem has been compounded by the fact that many companies have as their “administrador único” (sole director), Excel Hotels & Resorts SA – the same company that manages the touristic exploitation of the resort. This is a clear conflict of interest. In fact, since the beginning of 2019 Excel has not paid any money into the bank accounts of many of the investment companies. Yet, in 2019 Excel generated a good income from Palm Beach Club - that year was an excellent one for the resort, with an occupancy rate in excess of 90%.
What can investors in Palm Beach Club do?
Investors have little chance of selling on this kind of investment and so have two options.
The first option is to go to court to seek compensation and have the original purchase declared null and void. The payment of the compensation depends on the outcome of the Silverpoint liquidation, which will be a long process. In a complicated liquidation like this, especially with delays caused by the pandemic, it will be some years before creditors are paid out. The court is investigating pursuing various former owners, directors and advisors for funds, following the company's collapse.
The second option is to retain ownership of the investment company, but remove Excel from the management. This route allows the investors to retain ownership of the weeks/apartments that they paid so much for in the first place.
A sizable group of investors are now being represented by Tenerife-based consultancy The Nordic Consulting. Ali Farhoud, CEO, explains that “whilst representing owners at the Annual General Meetings of their companies, we discovered that most companies own 52 weeks in one single apartment each. This was great news. We also discovered that these apartments have been generating a healthy income for Excel, but Excel hasn´t passed this on to the companies. That´s when we started to investigate taking control of the companies.”
Mr Farhoud explains that once Excel knew that they were being replaced as sole director of the companies, in some cases, they quickly signed a 10-year agreement between the company and themselves. However, he is confident that this contract can be cancelled through the courts.
“It has been hard work and has taken a lot of time, but we are making progress. We have created a new company - Riekki Opal Management SL – with the necessary legal and accounting resources to run the companies in Palm Beach Club. Now we manage 28 companies and hope that more investors will join the project.”
The objective is for owners to be able to use the weeks in the apartments they own, to sell them if they want, and also to investigate obtaining a license to rent the units out.
Investors in Palm Beach Club who require more information and advice can contact The Nordic Consulting on (+34) 822 684 556 or by email: info@nordicconsultingci.com
