The 147 units range from 52m one-bedroom suites selling at R1.45-million to four-bedroom presidential suites of 323m with 255m balconies selling for R17.1million.

Southern Sun has been contracted to manage the hotel.

Buyers become members of the hotels Platinum Club with access to a health spa, library and many other facilities. They will also be able to use the hotel at a discount from the hotels rack rate of at least 50%.

And Phelan is guaranteeing buyers a 6% net return on their properties for the first two years Claridges will operate - 2005/6 and 2006/7. This means that the owner of a one-bed unit will be guaranteed R85000 annually in net income.

Phelan projects a gross room rate of 2135 a day in 2008, which, after allowing for 67% occupancy, will give Southern Sun R552073/year and the unit owner R104415, about 19% of that. Assuming a 70% bond at 10%, the investor will pay R101430 in bond instalments, giving him a small profit for that year.

But isnt R28000/m too expensive? After all, it is on noisy Main Road in Green Point, site of the unlamented and latterly tawdry holiday hotel of the same name. Seafront units at Mouille Point are selling at R20000/m.

Its too early to tell, says PGPs Laurie Wener, who launched it in Cape Town last week. But there seems to be strong interest. Weve signed up 35 units already. She points out that these are investments rather than property purchases.

The prices do look a bit ambitious, says Cape Town developer Stuart Chait, CEO of Property Partners. But units are selling at the V&A Waterfront down the road for R42000/m and Claridges does have the same view as them.

Chait was one of the developers of trendy Victoria Junction Hotel down the road that has about 15 sectional title lofts. The last known sale of a 62m unit was a year ago at R750000 or R12000/m. And that gave the buyer a 16% yield. Local agents Homenews say the current price is about R850000.

Sectional title hotels have not been wildly successful in South Africa, and Victoria Junction is a good example of what can go wrong. The hotel was launched when Cape Town was short of hotel rooms. But by the time it was built in 1997 there was a hotel over-supply and loft buyers struggled to survive for five years before occupancy improved.

Phelans projections on room rate seem suitably conservative; R2000 a day is what you pay for a suite in a good Cape Town hotel today and he is projecting that for 2008. But the 67% occupancy could be too ambitious. Hotel rooms might be short this year, but there are many plans for other new hotels and there could be an over-supply by 2006.

Sunday Times