TRADE A HOUSE OF CARDS FOR A BEACH-FRONT VILLA

INVESTMENT IDEA IN THE CONTEXT OF CORONA CRISIS AND TECHNOLOGY HYPE.

As we all know, the Corona crisis has produced some winners and many losers. The winners are undoubtedly the technology companies, some of whose shares «went through the roof». The travel industry on the other hand, be it airlines, hotels, restaurants, or cruise lines, was obviously hit very hard.

Anyone who was already invested in tech stocks before the beginning of the Corona crisis did everything right but might be facing a luxury problem now. The portfolio has become too technology-heavy with an excessive equity allocation on top.

Now it would be time to realize some capital gains and rebalance the portfolio more sensibly. But what would be a smart thing to do with the gained liquidity? Which investment could replace a «sexy» investment in Tesla or Apple?

How about a foreign hotel property?

Sounds a bit bold at first glance, but there are some good reasons for it:

1. International real estate investments are underrepresented in most investment portfolios or not covered at all

2. Apartments and offices in prime locations of metropolitan areas (core real estate markets) are in great demand and are therefore already overpriced. But there are bargains in the commercial real estate sector in emerging markets

3. As a result of the Corona crisis, many currencies in these emerging countries were punished against hard currencies such as USD / EUR / CHF (safe haven) and therefore have great catch-up potential when the risk appetite of capital markets will increase again

4. Investing in the hospitality industry right now is a prime example of an anti-cyclical strategy. Precisely because the industry was hit hard, it also has the greatest potential to catch up and increase value

Speaking of «sexiness»: A beachfront villa within a boutique hotel at the best kite surfing spot in Brazil, with an exclusive design, high quality equipment, fully furnished, professionally managed and even with guaranteed rental income, can easily compete with Tesla or Apple stocks.

To stay with the example: Our 200m2 villa with private pool would be available for the equivalent of currently 900 Tesla shares (NASDAQ). At the beginning of this year these shares were worth just about USD 77’000.

Our advice: move away from the overvalued house of cards with high potential for collapse, towards an award-winning design villa with passive rental income and a high potential for future value appreciation.

"Anyone who finds our project exciting, but is not interested in directly owning real estate, could still join Prime Suites as a private equity or debt investor. A few additional Apple shares may then have to be sold."

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By Marc Sturzenegger

CEO and Founding Partner of Prime Suites Inc.