Ridgewood Premier Hotel Review – is it worth investing?

Ridgewood Premier Hotel in C5 Taguig offers a condotel concept that seems irresistible for real estate investors and OFWs who wants to earn passive income. Here’s the deal. Buy a condominium unit anywhere between P3.5m to P6.9m, enter a 20-year long-term lease agreement with Novel Residential Concepts, they run use your unit as part of their condotel and in return, they guarantee a 6% return on investment per annum.

You also get a variable booster income which ranges anywhere between 1% to 6% depending on the occupancy rate. If the hotel performs exceptionally well, your maximum ROI can be as high as 12% per annum – that’s money-back in as short as 8.33 years. To sweeten the deal even more, they offer a buyout or buyback option of the unit after 10, 15, or 20 years. They will pay you back your original investment +20% (10th year), +35% (15th year), or +50% (20th year). It’s totally up to you when you want to sell back your unit. This buyback option will shield your initial investment from inflation while you get the guaranteed 6%++ return as rental income. You do not need to look for possible buyers, no need to pay brokers, the hotel operators will buy back your unit.

The hotel will occupy 6 floors (14th to 19th) out of 31 floors of Ridgewood Premier Tower 4. This tower is the latest addition to the already existing 3 mid-end residential condominiums inside Ridgewood Square. The developer is C-5 Mansions Development Corporation (C5 Group) which is a boutique property developer, in collaboration with Novel Residential Concepts, who also happens to be the operators of Ramada by Wyndham Manila Central Hotel.

Contrary to previous press releases, the hotel will no longer use the “Aspen Hotel” brand but instead, use the “Ridgewood Premier Hotel” brand. It will be a 4-star hotel with its own lobby, an all-day restaurant, multipurpose function rooms, and shared amenities such as a lap pool, gym, kiddie playroom, sky garden, private theater, and a game room. The hotel will start operations by 2022.

This image was taken from Ridgewood Premier Hotel Marketing Materials

Why it’s a good investment

The location is simply fantastic. It sits just across the McKinley Hill, the Korean and British embassies, along the busy strip of C-5 road. It has close proximity with major landmarks including; SM Aura (900m), Market Market (1.4 km), Venice Grand Canal Mall (1.1 km), St. Luke’s Global City (4.3 km), Makati City (6.8 km), NAIA (8.7 km). Its target market includes the “expats” of BGC and tourists arriving from NAIA. With the opening of the C5 extension, it’s now very easy to go from Ridgewood Premier Hotel to NAIA and Cavitex.

Given its strategic and busy location coupled with the hotel operator’s experience, the occupancy rate will not be a problem for this property.

You get both passive rental income and price appreciation when you avail of this investment opportunity. You don’t need to find buyers yourself in the future. You are also shielded from the effects of inflation as they buy back the units at TCP +20%, +35%, and +50% as mentioned earlier. While all the rest of your friend’s condominium depreciate, yours actually appreciates!

Condominium properties tend to depreciate in value at 7 to 10 years after turnover.

In short, you get all the rental income of at least 6% per annum up to 12% plus 150% of your initial capital after 20 years. The only thing that is not clear at this point is who will shoulder the capital gains tax, doc stamp and transfer fees during the buyback process. Most likely the seller or the owner of the unit will shoulder capital gains tax which is 12%++ of the property price as this is considered an ordinary asset.

We also like the guaranteed income of 6% per annum with a significant upside of up to 12%. The Rental Yield is calculated by dividing the Annual Rental Income by the Total Property Price. According to an article by zipmatch, the average rental yield in the Philippines is 6-7% and top properties making up to 9-11% per annum. With this investment, you already get the average rental yield guaranteed, and with boosted income, you get the same yield as top properties in the Metro. No need for brokers and tenants, no need to haggle rental rates, no need to maintain the unit, no calls regarding problems in the unit, everything is handled by the hotel.

How much is it?

Studio units (24 sqm) are priced at P3.5m, 1-bedroom units (28.52 sqm including 3.72 sqm balcony) at P3.89m, and 2-bedroom units (55.72 sqm including 3.72 sqm balcony) at P6.92m. Transfer and fit-out fees are already included in the price.

You can take either their regular payment scheme where you pay 30% upon contract signing, 40% until 2022 turnover, and 30% upon turnover OR their lite payment scheme 10% upon contract signing, 35% amortization for 30 months, and 55% via bank financing. See the below illustration for the summary.

Risks

We see a limited risk from underachieving the target occupancy rate as the hotel sits on a prime location. It is very accessible to BGC, NAIA, even Makati. There is also no other hotel 4-star hotel along C5 road.

The only risk is its proximity to the fault line which is approximately 400-500 meters away. If you are the type of person who won’t risk investing in this property because of the fault line, then this property is not for you.

Taking it a step further

Did you know that you can earn even more with this property? If you reinvest all your rental earnings for the next 20 years at an interest rate of 5%, your total earnings including the buy-back option of 150% can reach P12,718,288. At this amount, the return is around 6.6% for 20 years but this computation did not consider the booster income of up to 6% per annum.

Invest P3.5m today and get P12m in 20 years, a good way to plan for your retirement. The computation below is not 100% guaranteed as a lot of factors can affect it. It considered a one-time payment of the total contract price at year zero and excluded the expenses for transferring the property at year 20.