Grand Medina Resort

Grand Medina Nature Reserve & Beach Resort

https://www.owngrandmedina.com/

Are your intrigued by The Grand Medina Nature Reserve and Beach Resort investment opportunity, which is being billed as “THE FIRST MUSLIM FAMILY-FRIENDLY RESORT IN THE AMERICAS”?

We evaluated it as primarily an investment and secondly as to Islamic values, and our opinions can be broadly categorized into the following four themes:

1. What constitutes Muslim family friendly
2. How halal is the investment opportunity
3. Are there really “No additional costs such as maintenance, property or insurance fees” for the first 1200 purchasers.
4. Is this a good investment

In summary, while we may visit the Grand Medina Resort, we would not be investors. Given the additional costs we uncovered, and the capped return versus the development risk, we personally did not find that this investment fit our requirements.

To those at Grand Medina Resort, if you find any error in our evaluation, please do comment and provide supporting documents by email.

What constitutes Muslim family friendly

After reviewing the marketing materials and the purchase documents shared with a prospective buyer, we found that in the marketing materials there is mention of a women’s only area, halal food and drink and prayer areas; we did not find a guarantee to the same in the purchase documents nor did we come across any governance model that would address ‘what is halal’.  Given the cultural breadth of the Muslim community, who will determine what is acceptable e.g. what can be worn at the in common areas, dinning areas and on the beach?

How Halal is the Investment Opportunity

In the financial structure of the development nothing led us to believe this project is interest (riba) free.  We looked at the backgrounds of participants and their business interests and found there was no assurance this development was or would be riba free despite the association in marketing material to brands such as ISNA.  If we where to rely solely on the background and past projects of participants, we would conclude that this will be a riba based project – not halal.

In summary, while your money may be halal, we cannot affirm that the development dollars to construct will be nor if the ongoing operations will meet one’s personal expectations let alone Quranic.

“No additional costs such as maintenance, property or insurance fees”

The resort is promoted as not being a timeshare and with no additional costs.  Here is what it says in the legal documents:

1. “III. HOTEL OWNER and SERVICE PROVIDER have entered into … certain units designated for timeshare use …”
2. “4. ALL‐INCLUSIVE PLAN. … PURCHASER and PURCHASER’S GUESTS must pay the mandatory All‐Inclusive Daily Fees …”

Conclusion, according to the contract this is a timeshare and there are fees payable upon use.  The All-Inclusive Daily Fees are not stated but reference is made to a 20% discount to Unit purchasers off the Rack Rate.

We discovered the Rack Rate is currently US$150 or US$120 per person after discount, and we did not see any reference to these fees being capped or indexed to inflation.  For a purchaser of the Partners Club Unit, a couple would pay US$300 per night or US$1680 per week between November to April before flights and transportation.

While it may not have the maintenance fees of a timeshare, it is a timeshare without the benefits of a timeshare (e.g. points that can be used at other resorts) and does have fees that are applicable on each booking.

Is this a good investment

We would describe these Units as perpetual unsecured debt (one that never has to be redeemed by Grand Medina Resorts and without any physical assets securing their value) with a maximum annual return of 10% in a development that is a start-up with no revenue.  From the time of your investment till building is completed and profits are generated an investor is not assured any return on their investment i.e. you could be lending money with no return for several years. A debt instrument with nor minimum return, a capped return, and no security against the land and buildings is not something that interests us.

In Table 1, we show the cost of a 7-day vacation under several scenarios in both high and low season for a couple and a family of four with two children under 12 years of age (eligible for 50% discount).  The numbers in red represent additional payments in US$ that would need to be paid by Partners Club members – 80% of combinations would require additional payments. In addition to the All-inclusive fee, transportation to and from the resort must be added including air fare and taxi.  

If you found the idea of an investment that paid for your vacation compelling, keep reading.  As always, consult your adviser as this is a hypothetical example.

In Table 2 we picked some regulated industries, without regard to sharia compliance, in which we see a possibility for future dividend and capital appreciation.  All trade in US$ on the US exchange and payout dividends in US$ that can be used towards a US$ vacation. As the table shows, a 5% current rate of return can be had as of December 2018, with less risk than a development project as these are all heavily government regulated companies domiciled in Canada (remember they came out of the 2007/08 financial crisis healthy), and with capital and dividend appreciation opportunity. This may well be a safer route to building a vacation fund that provides for us a better risk-reward outcome.

We have come across halal vacations in which a resort is rented out exclusively to a Muslim tour operator, thus the novelty of the Grand Medina model is being duplicated at some level today without the investment requirement.  We expect to see additional Muslim only destinations spring up across the Caribbean as additional tour operators start catering to the growing Muslim market. For us, keeping our money invested in a diversified portfolio of dividend producing equities backed with assets and with the potential for uncapped returns is the better investment option.  With our returns we can always visit Grand Medina and other resorts.

If you have an investment you would like for us to evaluate, please email us at HalalJihadist@gmail.com