Palm Gardens Resort



The Palm Gardens Resort in Carvoiero on Portugal’s Algarve had been developed originally in the mid-1980’s by a Liechenstein-based entity known as Euroactividade, which was one of the early pioneer Developers of vacation ownership in Portugal. The Company grew rapidly and at one point in 1989 it was intending to develop a purpose-built resort on a site next to Sea World in Orlando, Florida but a dispute between several of its major shareholders [Swissair and a Danish corporation by the name of A.P.Moeller] resulted in litigation and the company being placed in liquidation in 1990.

Palm Gardens is located on a plateau overlooking the ocean, 200 meters from the access to the beach, near the town of Carvoeiro.


One of Scandinavia’s largest Banks had loaned to one of Euroactividade’s subsidiaries in Portugal, where the borrowings were secured upon unsold timeshare weeks within the Palm Gardens Resort.


After the liquidation of the parent company, the Bank retained the services of Dean & Associates to help rescue the resort and formulate a workout solution which would ensure that the resort could continue to operate going forward. The initial work undertaken covered the putting in place of suitable allocation agreements with Tour Operators within the Algarve’s main source markets, especially Germany, so as to generate rental income for those weeks held by the Bank as its security, so as to be able to offset the Bank’s obligation to pay annual maintenance fees on those weeks.


Thereafter, a significant amount of work was undertaken to analyze the Resort’s then existing legal structure and its tax status, given that Portugal had been the pioneer in southern Europe in enacting legislation for its domestic timeshare industry. From the initial analysis, it became clear that the Resort’s underlying structure was defective and that there were serious tax issues which had to be addressed. Local legal and taxation expertize was brought in to assist in the analysis, in order to develop an action plan which would address all the legal and tax issues and facilitate the establishment of a compliant product structure.


The Bank creditor wished to sell the inventory which represented its security for the original borrowings but would only consider dealing with an established Developer/Operator in Portugal who could demonstrate a solid track record in hospitality and resort management and mixed use resort operations.

In conjunction with the steps which were being taken to resolve all the identified legal and tax issues, whilst keeping the resort operational, dialogue was undertaken with several entities including a significant international Tour Operator and an international Hotel Developer/Operator both of which were interested in the property.

Following the convening of a Special General Meeting of the existing Owners, the various options being considered by the Bank were fully discussed and explained, so as to give the Bank the comfort that the solutions being put forward would be well received by the other timeshare owners.

Following the SGM and after receiving a number of expressions of interest, the Bank selected Pestana Hotels and Resorts as the preferred buyer for its inventory, where the inventory pricing agreed to by the Bank provided the Buyer with sufficient scope to undertake a major upgrade of the Resort and its facilities, much to the delight of the exiting timeshare owners. The acquisition was concluded by Pestana following the satisfactory resolution of the legal and tax issues previously mentioned and the property now operates very successfully as a mixed use resort.

Dean & Associates worked with experienced lawyers and tax advisors in Portugal to undertake the initial due diligence regarding the resort’s legal framework and its tax status, as well as examining its operating budgets and challenges. There was also a requirement to work with offshore Trustees who had created the original legal structure for the project.

The Tour Operator allocation arrangements helped generate revenues to offset the Bank’s ongoing liability for annual dues and provide much needed cash flow to keep day-to-day operations functioning. The Bank’s desire to ensure that the property and the interests of existing timeshare purchasers who had originally bought from Euroactividade, were properly safeguarded, were addressed through a sale to the most experienced Developer operating within Portugal at that time.

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Feasibility Analysis
Financial Analysis