PROPERTY LETTER NO. 18 – 13th January 2003

Posted by admin in Property Letters | January 13th 2003

Dear All

After a year when so much has changed in ways most of us could never have imagined, when many of our friends and family have spent the year surrounded by a mist of uncertainty, and an unwillingness to make decisions because of fear of unpredictable or unintended results, one thing is absolutely certain. That is that there will be just as much change and uncertainty in the year ahead. Most important decisions are made under conditions of uncertainty, and it is natural that they will cause us anxiety and concern, but our ability to act in spite of our fears will determine whether we succeed or fail.

General Ulysses S. Grant whose legend grew through his uncanny ability to turn certain defeat into victory, said in his memoirs after the American Civil War:
“A man must learn not to be anxious; to be always cool; to avoid confusion; to make appropriate decisions in the midst of confusion and chaos with as much composure as if he were perfectly at ease. The central task in leading competitive operations is maintaining flexibility, a task most difficult to perform well. To do so requires overcoming the confusion, obscurity, and uncertainty peculiar to competitive situations, and discovering the order, clarity and certainty in them; only thus can opportunities be realized. Naturally one would like to fulfill the initial plan…. but this is almost never possible. Therefore ensure that both plans and resources are flexible and adaptable to circumstances. Your plans should foresee and provide for a next step in case of success, failure, or partial success – which is the most common case. Your attitude and your organization structure should allow for exploitation of opportunity or adaptation to changing conditions in the shortest possible time. Activity provides information and generates opportunity. Carefully drawn plans should be executed with as little delay as possible. Benefiting from unforeseen opportunity is what cures problems and makes fortunes. Learn to profit from the immediate circumstances.”

I will personally carry those words into 2003 with me, and try to remember them when I need to.


Having started talking to you about the opportunity that property ownership and rental offered in France in about April, we finished the year with a solid base of properties in our group. We have had delays, particularly in that the bureaucracy for which the French are famous, and which they say protects all parties in the end, has slowed transfer of the properties we have secured. The renovations have also been slower and I am afraid a little more costly than we originally estimated they would be. (Both the timeliness and cost of renovations where they are needed is something we continue to look into and see if we can improve on.)

I am absolutely sure that every property that we have bought is worth more now than it was when we bought it, and that those on which improvements have been made are worth far more now than the sum of the price of purchase and the cost of the renovations. Every one of our apartments has been bought at a price that is below the market price, and is charming in its own way, quiet and well positioned. Vicky and I have chosen every one personally, have looked at hundreds, and selected for value and rentability.

Steve and Avril Pratt joined us in October to try living in France, and to manage our apartments for us, as well as plan and control the renovations, furnishing and decoration of the apartments that needed it. After a couple of months their children who work in the UK joined them for Christmas, and the family together decided that Steve and Avril would go to England and try to settle there. I respect their decision, and thank them for the work they have done, and the contributions they have made to our business in France in their short time there. And most importantly, on behalf of all of us I wish them absolutely everything of the best, and success in the years ahead. They have been the most loyal and trusted friends of the farming community in Zimbabwe for many years, and they deserve to find peace, happiness and security now.

Go well Steve and Avril. You will be missed, and I hope you return often to France to visit, to holiday and to paint.

CANNES 2003.

Vicky and I fly to Cannes on 27th January, to take over from Steve and Avril who will leave there on about 10th February.
We plan to return to Cape Town on 6th March, but I may stay on if the situation requires me to.
After Easter, in the latter half of April, we return to France for the whole of May and June.
That’s as far forward as we can see for now, and we will make our plans according to need thereafter.

Our website is up now, and we will work on it some more as soon as we get to France, with another four apartments completed and ready to add. Lao in London is doing the technical work on the site, but Vicky and I have the digital camera with us and will do the photos soonest. Please take the time to visit the site on if you haven’t already. Comments help or suggestions would be valued.

We are delighted to have our first firm bookings in February – delegates from the UK to the GSM congress – two apartments have been booked and we are hoping that we can get the other three that are going to be available booked too. We haven’t had the apartments available until now due to the delays I referred to, but as they come on stream, and they are doing so steadily, the snowball starts to roll. Accommodation in Cannes is a premium commodity, and the GSM delegates report that they have had to commute from Nice before due to non availability of accommodation in Cannes!
Let me remind you how Cannes plans its year:

Jan – May is the main conference season, culminating in the film festival and the Monaco Grand Prix.
June – August is peak holiday season.
September – October is ‘shoulder’ season and fairly busy with conferences and holidaymakers.
Nov – Dec is the trough.

Of course there is a blurring of the lines, but roughly that is it.
The best time for you to visit is April – June, and Sept – Oct.


Vicky and I will arrive in Cannes in two weeks time. We will be there as much as is required of us, and certainly for most of the first half of the year.
But how will we structure ourselves now?

Firstly we are not immediately looking to replace Steve and Avril. We feel we need to get our own feet under the table, set up the systems and liaisons, and develop a staffing structure as we go, and according to need.

Before I left Cannes in November I had a couple of meetings with people we have already been working with, with a view to positioning ourselves in their existing organization, with their experience and an established clientele. Steve and Avril were with me for the main meeting, but Vicky was already back home in SA. What we for our part bring to the table is a very attractive portfolio of quality apartments. They were very positive meetings, and if we can confirm and cement it on our return, it will look like this (I am not going to use names at the moment):

A very well respected real estate agency who have 20 years of experience and offices in Cannes, Paris, St. Tropez and Geneva is owned and managed by a very effective, straight and honest family who we were fortunate to have a personal introduction to. They have found us most of the apartments we have bought, so we are already their ‘valued clients’. They have for years owned and managed about 5 luxury villas on the Cote d’Azur, which they rent out at exorbitant rates in summer. They have formed a liaison with an English lady who has lived and worked in property on our coast for the last 17 years. She has a superb reputation, runs about 25 villas of supreme quality for clients, and together they have opened an office in Mougins, just outside Cannes, pooling their experience and clientele to everyone’s advantage. It opened on 2nd January (just over a week ago). They approached me to suggest that their clients often require accommodation in Cannes for quick business trips, conferences, and in many instances whilst in town for a week or two, to view and purchase bigger properties. Would we be interested in operating our apartments under their umbrella, as an ‘apartment division’ of their existing business? As they were only opening their offices formally in January, we agreed to take it forward into the new year. I think it is going to be the way for us to progress, and we will in time need to employ someone to look after the apartments, under their umbrella. The English lady did stress that she would need to personally check all of our apartments for quality before she could refer her clients to them – so it introduced an element of increased attention to our finishes, and attention to the quality and comfort that is going to be required if we are to work closely with them.

I hope it is the way forward for us. Their experience and guidance will be invaluable, the pressure on us to perform to a very high standard will do us no harm, and I am feeling somewhat honoured to have been approached, and reassured by their approach of the quality of the apartments we have invested in. I do not want to count our chickens, but if it works out as it should do, I see it as a very major breakthrough. I am excited about the possibilities, as these are serious, successful, long term players in the market. We have everything to learn from them, and obviously what we have to offer is attractive enough to them to make it worth their while approaching us.

That is now “PLAN A”. We will keep you posted.


Entenial Bank have been frustrating us with their inability to make decisions on time, and their stop/start approach to each application we put before them. However, they have had only one person dealing with the whole specter of English speaking clients, including ourselves, she is very helpful and sympathetic, but has been overstretched. The solution has I think been implemented now, in the form of a very energetic assistant (Mr. Farry), to help Sandrine Faivre, with another man whose name I don’t yet know having started last week. They needed to address the problem, and it appears that they have, and things are moving again.

Last week finally we received an absolute directive from their head office in Paris. No loans are possible for the purchase of private properties to any company or trust. That ruling (they say) is common to all lending institutions in France, and I gather stems from a general move in banking in Europe to tighten up security after 9/11, and to more effectively control money laundering. I am sorry that this has happened because two of our group were pursuing finance in the names of European based companies and are now faced with returning to the drawing board. My sincere apologies that it has taken so long for us to get absolute clarity on this one.

The only two alternatives are:
i. to seek finance in the name of an individual or a group of individuals.
ii. to purchase property in the name of whatever company you like, without seeking finance.


For interest sake, I have copied and pasted below some of the questions that a potential investor asked me in an e-mail the other day. I replied to him that I would have to do some research in order to answer him properly, and this I will do as soon as I get to France. When I answer his questions, I will mail you all with the answers because they are good questions, and it is better that we all have a proper answer to them. The answer to No. 6 is definitely “yes”. Exactly how we set it all up will be the subject of discussions with the real estate agency owners and the English lady when I am there. All your questions are so helpful because they cause us to look ever more thoroughly at what we are doing, so please ask.
1. Who does the income tax returns for the French authorities?
2. What are the costs of preparing the income tax returns?
3. Who does the accounts and at what cost or is this in the management fee?
4. Who does the accounts for the SCI & LL Co. to send to the French Authorities?
5. How much is the tax on interest and capital gains and death duties?
6. Now that your Zimbabwean management couple have left, will all the services that you had listed for the management fee of 15% still happen.
What happens if there is war in Iraq? Local opinion that I canvassed before I left in November was that it may cause Europeans to tend to stay more in Europe, and could in fact increase the pressure on Mediterranean destinations, as fewer Europeans venture abroad.


As I said earlier in this letter, we have under estimated some of the costs which you are likely to incur, especially as regards building and renovations. The cost of simply furnishing a studio apartment from scratch, without any structural, renovation or repair work remains at about 3000 – 3500 Euros, which is what we thought. For a one bed roomed apartment, work on 5000 – 6000 Euros for furnishing. The builder’s costs though are higher than we estimated. For example, Vicky and I bought two adjoining apartments for ourselves, and they needed quite a lot of work. We estimated that it would cost us 18500 Euros to renovate the two, and it has cost us 27000 Euros to complete. I apologize but have learned that there is a difference between doing a casual assessment, and getting the contractor in and finding all the defects which had been covered over or were not initially evident. We also chose to do it properly, and not on the cheap. I must say though that although Vicky and I have yet to see the two apartments in question in their finished state, and are very excited to do so in a couple of weeks time, the final cost of them completed, fresh and ready to rent makes them incredibly good value, and the difference between what they were when we bought them and what they are now is phenomenal. I suspect that the “wow” factor and improvements will have increased their value by 30%. It is definitely an exciting business, and without over capitalizing, which would be difficult to do on small apartments, what you put in you get back with interest.


Quite a number of our group of investors and potential investors have been to Cannes to have a look now. Four couples from Zimbabwe and SA now I think. And more are planning visits in the months ahead. Please do, and if you can coordinate your visit for when Vicky and I are there, it is a wonderful opportunity to meet, and to show you around.

You can fly from London (Luton or Stanstead) to Nice on Easyjet, Ryan Air, or Go Airlines for about 30 pounds or less.


For people whose income derives from Zimbabwe, you can get a 50% mortgage, at currently 3.9% interest.
South Africans will get a 60% mortgage.
Europeans will get a 70% mortgage.
The apartments we have bought have ranged in price from 70 000€ to 200 000€.

Some people choose to buy the apartments outright, some to seek finance, and some to share an apartment with friends or family members.

A typical investment looks like this: Cost of apartment – 100 000€ (always includes agent’s fee)

Deposit (50%) 50 000
Transfer Duty (+/_ 6.5%) 6 500
Notary’s fee (+/_ 7%) 7 000
Finders fee (to Guy & Vicky) (2.5%) 2 500
Some renovations (not always required) 5 000
Furnishing 3 500
Total investment 74 500

That’s about 48 000 sterling or 80 000 US.


If you have any interest in investing, or in coming over to have a look, please let us know. To start with I was cautious about expanding beyond 8 or 10 apartments too quickly, but now I see that our credibility as serious suppliers of accommodation in Cannes, our negotiating power, and economies of scale are beginning to benefit us all. I also have a growing confidence in the concept – property in France is a good investment, and we can compete very well in a dynamic property rental business in one of Europe’s main centers.

I do not want to be guilty of sending unwanted mail. Many of you have asked to be kept in the information loop even if you are unable or unwilling to invest right now. However, if you want me to remove your name from our mailing list, please let me know.
I have added a few of you to the mailing list for the first time, and hope that you enjoy receiving our letters.

With our very best wishes for 2003.

Guy and Vicky.

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