Cape-based Lucid Ventures have introduced a secured minimum return to their Section 12J venture capital hotel fund. The fund is now offering, for the first time, a minimum return of 17% (after all taxes and fees) with a guaranteed exit after 5 years.
The Lucid Hotel Fund invests in boutique hotel brand Home* Suite Hotels, which was launched in May 2019. Their proof-of-concept hotel in Rosebank, Johannesburg, has outperformed initial targets since opening, achieving an unprecedented 60% occupation within the first 6 months of operation. The refreshing take on the traditional hotel offering has been well received in the travel market, confirming the group’s strategy of positioning their hotels between high-end AirBnB and 4-star international hotels.
With a limited capital raising target of R75M this year, Lucid has 6 additional hotels in the pipeline, with 3 currently under construction in Sea Point, De Waterkant and Sandton, and due to open this year.
Section 12 J has become the latest buzz-word on any investor’s radar, with as many as 174 approved venture capital funds touting for investment before SARS tax year return cut-off date of 29 February 2020.
Investment into a 12J fund offers investors an attractive tax rebate via an incentive introduced by SARS: investors are rewarded with a full tax deduction of their investment into qualifying funds. To date, about R6 billion has been raised.
Gidon Novick, Lucid Ventures founder, says the investment arena must remain mindful of the letter and spirit of Section12 J. “The legislation is a great opportunity to effect positive change and growth while delivering good returns to capital providers. We employ about 80 construction workers on each project and about 15 full-time staff in each new hotel. By the end of 2020, we will have six operating hotels. This means jobs and money in South Africa, which is the Government’s Section12J intention after all.”