PL28 – 4th August 2003.

Posted by admin in Property Letters | August 4th 2003

Dear All,

Apologies first to all owners who have already had some of what I am writing about today, but in greater detail. I have extracted bits from my recent Owners Letter because so much of the information is relevant to people who receive these letters and have not yet bought property but are considering doing so in the future.

We are busy shepherding a few new apartments through the process of transfer. It has to be said that it is sometimes tortuous and slow, but we get there eventually. And it is worth the wait. Our April to June trip to Cannes was wonderful. Vicky and I saw scores of apartments and those that we managed to buy are excellent. For position, quality and price (value) every one is a winner! We have more than 20 in the group now and the possibilities are expanding as the exercise grows. It just gets better!

For every owner of course the ability to earn a good return on his investment as soon as possible is paramount. Capital appreciation is good, but cash is needed too.

Our rental business has taken time and effort to get started. Lao and Katherine have their feet well under the table now, and boundless enthusiasm, ideas and commitment. It is moving forward at an unbelievable rate, and I believe that a year from now we will look back in wonder at the leaps we have taken forward, as we do now when we look back to this time last year when we were just beginning.

I love the little story of a shoe factory that sends two scouts to a region of Africa to study the prospects for expanding their business. One sends back a fax saying,
“Situation hopeless. No one wears shoes.”
The other faxes back excitedly,
“Fabulous business opportunity. They have no shoes.”

In Cannes believe it or not (and perhaps in much or all of France) there is no service! I see a fabulous business opportunity. They offer no service.

Last year my friend Ross and I were in Cannes briefly so we rented a large studio for a week for a lot of money! When we arrived it was closed and musty. The hot water was not turned on; there were no soap or loo rolls, let alone a welcoming bottle of wine in the fridge. The beds were not made and there were no sheets towels or dishcloths – but we were informed they would be delivered. We sat there and waited for fear that if we did not we would miss them until finally they arrived in a bag, dumped at the door, well after dark. Then we could make our own beds and go out for something to eat. Typical!

Lao and Katherine, who have just been joined by a couple of Kiwis for a few months to help out, are providing a fantastic service. Those of you who have been will know. They are providing a service to collect and deliver guests to and from the airport, car and scooter hire, clean sheets and towels, and the apartment immaculate on arrival of course, welcome packs of whatever the guest would like from simple bread, butter, jam, milk, tea, coffee and cold wine, to full grocery packs, flowers and champagne. Maps, brochures, events lists and restaurant guides, and they are on call 24 hours a day for emergencies.

The response they are getting is one of delight from holidaymakers and business people alike, and I have no doubt that word is spreading. They are going to be extremely successful in what they are doing because they are doing it well and that is exceptional in that market.

MARKETING.
We are in a tough year for tourism in France. There is no doubt about that. However we are realising that our greatest strength is in accommodation for conferences, festivals and seminars – being business accommodation.

Let me run you through our experience so far and where we see it going in the foreseeable future.

In spite of the war in Iraq and SARS, which did not help our cause at all, (as the fires and heat wave are not now), we were quite encouraged by the volume of bookings we managed to achieve in the early months of this year. We were thrilled with the responses from all of our guests to what we provided them with, and I would be surprised if all of them do not return to us next year, with their friends and business contacts in tow. That is the stated intention of almost all of them.

The “snowball” is at work and some of our conference delegate guests have already returned to us with girlfriends and family for a holiday, and some have recommended us to their friends. The fact of being known and providing the kind of exceptional service that we do leads to repeat visits, and word of mouth. It is happening.

Our website for those of you who have not been to it for a look is about the best in the business, and has been pretty prominent on the major search engines for two months now. It brings in enquiries every day from around the globe. Turning those enquiries into bookings is the difficult part, but increasingly it is happening – and as Lao says – “it’s a numbers game.” (For those interested in the numbers – We are logging 12 to 1500 hits a week, resulting in 15 to 20 enquiries. From those we are getting a few firm bookings, but the ratio of bookings from enquiries is steadily changing in our favour – the “numbers game”, the “snowball” at work.)

Every enquiry gets logged into our data base and we do and will continue to follow up. Many are corporate callers doing company research, testing the waters for future conferences and will return later with their requirements. Much of what we get is not quantifiable in terms of “results” in the short term, but as a whole it is working. Our investment in achieving exposure for our website on the search engines (Lao has built the site for free) has been tiny relative to what we could have spent on a telephone sales campaign, or brochures, or expensive marketing consultants. (No offence to marketing consultants out there – we could do with your expertise, but can’t afford you yet!)

Lao is not confining himself to waiting for the enquiries to come into his inbox each day obviously!

o We have established reciprocal relationships with other firms in Cannes, who offer slightly different products to ours (more luxurious) but receive enquiries for a smaller type of accommodation from time to time.
o We revisit every lead we can including people who have been before in any capacity, and those who have made enquiries or been in touch with us.
o We have established a commission based relationship with individuals and companies in U.K. and S.A. now, and are trying to finalise a big and promising one covering much of Europe, but centred in Netherlands, Germany and Scandinavia.
o We have established links with a couple of websites that may help us and them over time, and deliver enquiries that we can then follow up. We continue to forge alliances.
o We nag you all to help by promoting us, and goodness that has helped – we have had at least three good bookings through ‘friends of friends’. The network really works – you just don’t know and can not imagine where the next enquiry is coming from and it is always a surprise. Please continue to help if you can! If you need a flyer to send out to your mailing list, please ask Lao by e-mail and he will send you one – a single pager.

Our original aim and target has been to achieve occupancy of 28 weeks per year across the board for the apartments under our control. That is 56% and we are getting close to 50% now in spite of the poor season and our newness in the market. What that says to me is that we will achieve 56% and more very soon.

Summer has been dismal this year and everyone in the industry has suffered.
Some trends have emerged though: One bed roomed apartments are renting, and larger units than that. Studios are very difficult except for one or two very big ones. Studios that are renting are doing so because there are two together, and they are renting as a pair, and therefore helping each other. (We have two pairs in that category).

Conferences start again after the summer holiday season and go through to May, and the studios will catch up then. They are ideal for the businessman and delegate and will still perform very strongly in terms of return on a relatively smaller investment.

IMPROVEMENTS AND THEIR IMPACT ON RENTABILITY.
It is a tricky calculation. Some of us have paid more for our apartments and got more as a result. Some like me have gone for the most affordable units, and furnished and decorated them as carefully as possible so as not to over extend financially.

How does the quality and quantity of the improvements affect our ability to rent your apartment successfully?

It is an inescapable fact that the “wow” factor is a big seller especially as far as repeat visits is concerned.

Business people are asking if we have high speed internet connections (which we don’t but may need to install soon). Satellite TV is frequently requested – people want their sport and news in English whether they are on holiday or business. And air conditioning is often specified as essential by prospective clients.

Furnishing is also paramount. It does not pay to go for cheap beds, or blankets and towels that deposit fluff on guests’ clothes. Chairs and balcony furniture (where applicable) must be comfortable and look inviting. The kitchen and bathroom must be immaculate.

We have recently had 3 baths resurfaced as they were looking too well used (1970’s models). One or two apartments have not had washing machines – they are essential. Dish washers are not essential in small apartments where washing up is normally for two people or a maximum of four.

We continue to watch and assess and learn, and make recommendations from time to time if we feel that there is something that will add value (and improvements do) or increase rentability for any of the owners specifically.

SELLING OR REINVESTING.
If your circumstances change, or you want to reinvest in a different property, what are the options and constraints? (Of course this only applies to those of you with a mortgage)

Firstly, you are entitled to settle your outstanding debt with the lending bank (in our case Entenial) anytime without penalty if you change your home address for professional reasons, meaning transfer to another town or country. Equally there is no penalty in the event of cessation of your business, or in the event of the death of either party in a co-borrowing situation.

Otherwise there is a 3% penalty on capital outstanding for a period of the first 5 years. From the 6th year there is no penalty.

You are entitled to increase the amount of your monthly repayment up to 30% without penalty if you wish, thereby shortening the period for repayment, and lowering costs.

You can sell to reinvest without any penalty or fee if you plan to reinvest with the help of a loan which is equal to or greater than the one you intend to pay off. In fact there is help if you wish to do it. You can buy your new investment immediately, and have 2 years in which to sell the one you are getting rid of. So you do not have to accept a price you are not happy with, or sell when you consider that the market is flat – you can choose when to sell. The first year is absolutely free except for the insurance which has to continue to be paid of course (a very small sum). The second year is free except for insurance and interest. Put differently:
Year one – no more repayments while you arrange to sell, no interest, no charges of any sort except the insurance premium.
Year two – the same but with interest also having to be paid on your outstanding loan balance.

I think it is pretty fair and helpful.

There is another option: Ask the bank for a revaluation, and use the property you have (and have decided to keep) as security against the purchase of another one once a year has elapsed, and once you are happy that your apartment is yielding well. It will take us all a little time to realise and to feel completely confident that the investment we have made is a good one that is demonstrably paying for itself and more, and that it has potential to take each of us much further. This is the start of really making your investment work for you. Wealth creation.

POSSIBILITY.
I have a cousin investing in property in the USA and doing very well. Friends are investing in property in the UK and SA and I think they are seeing good returns.

We happen to have caught the imagination of a wonderful group of people crazy enough to invest in France. I find it very exciting, and although no one really expects to get rich quickly, and we are not suggesting that you necessarily will, I believe the investment is sound. Over the years it should outperform alternative investment vehicles, and for many it is providing a most welcome and exciting interest abroad and real possibilities in a region previously unimagined.

The infectious enthusiasm of early investors has caused others to join in, and events have set in motion enough radiating possibility to overcome the gloom that has sometimes washed around the lives of many of us.

We are fully committed and enjoying the positivity and energy all around. I have lost none of my enthusiasm for property as an investment, or for Cannes as the right place in Europe to buy. My approach remains that we try to buy as investment, and not because a place is “cute”. Some of our best purchases so far have needed the most work, but having said that, every apartment we have bought in the last year is worth more than its cost, and is appreciating in value as I write. Each month a little more of it belongs to the buyer (in the case of those that have bought using credit), and the returns are just beginning to be felt. We are totally optimistic in spite of a difficult start, and getting stronger and more confident as we learn and grow.

Vicky and I return to Cannes on 7th September for another spell. We will again concentrate on locating the best value apartments we can for people who would like to invest, and concentrate also on the intricacies of establishing a new business in a new country. There is so much to do and so much to get right! And it doesn’t happen overnight.

Please make contact with us if you are interested in investing, or just in more information.
Please come and see us in Cannes and have a “look around the farm” with us. If we are not in Cannes when you are there, Lao and Katherine will show you around.
Please put others who may be interested in our scheme in touch with us.
Please. Please. Please spread the word among your friends and contacts that we are there for them in the South of France.

With kindest regards to all,

Guy.

P.S. A PROPERTY FOR SOMEONE PERHAPS?

During our trip in June we identified an apartment for sale in the block that three of us already have apartments in, in Palm Beach, right on the Place de l’Etang. Someone planned to buy it and their circumstances have since changed. We had signed an agreement, but were still able to extricate ourselves – so there were no losers. However the agreement I signed has expired.

The apartment is to the best of my knowledge still available. I copy below what I wrote about it, and whereas we had previously signed an agreement of sale for 120 000 euros, I would suggest now that if it is still available, we offer about 112 000. The bid might be successful, and there is no harm in trying.

Place de l’Etang is a 15 minute walk from the centre of Cannes, all the way along the beautifully gardened Croisette. It’s a lovely walk. It has a village atmosphere and as such it is where Vicky and I choose to live when we are in Cannes – in our flat in the same Residence La Brise.
We rent ours and the other apartment on the top (5th) floor out very well to conference delegates and holiday makers. We only only started in March and so far we are covering our mortgages, and we expect it to get better. The other apartment in our group is on the 4th floor and needed complete renovation (which this one doesn’t) and as such is not quite ready to rent.

Residence La Brise. 3rd Floor. The block is a small building overlooking the Place de l’Etang. The ground floor of the building is entirely taken up by the Brasserie – lovely and friendly/affordable restaurant. The remaining four floors comprise 3 flats on each floor, so there are only 12 in the building.
The flat is on the 3rd floor and looks West over the Place, but traverses the building so that the back balcony looks East over houses and across the sea (Gulf Juan) to Juan les Pins and Antibes. Lovely views front and back.
The flat is immaculate and very cleverly designed for optimal use of it’s 30 sq. m.
The large open and airy front balcony has been glassed in with wide sliding windows, and as such is counted as part of the ‘habitable’ space.
Starting from the front, this balcony has a delightful open plan, steel finished kitchenette with a table and 4 chairs.
The living room has sliding doors and shutters dividing it from the balcony/kitchen/dining area, and has two single sofa beds, small coffee table, TV etc. Comfortable and very cleverly furnished to optimise space.
The bathroom has been completely redone, and one has the feeling of being on a boat, with very clever use of space, and a brand new shower loo and basin. It has a fun feel about it.
There is another little room before the back balcony where there is a 3/4 sofa bed which stays up during the day. There is no space for anything else in this room, but it does provide a small separate bedroom.
The back balcony has a fitted narrow desk running the length of the wall, with shelving above it. It has a high quality polished finish and there is a large storage cupboard and a washing machine at the far end. It is from this room that you get the lovely view eastwards over the sea.

A Post script to PL28:
A PROPERTY FOR SOMEONE PERHAPS?

During our trip in June we identified an apartment for sale in the block that three of us already have apartments in, in Palm Beach, right on the Place de l’Etang. Someone planned to buy it and their circumstances have since changed. We had signed an agreement, but were still able to extricate ourselves – so there were no losers. However the agreement I signed has expired.

The apartment is to the best of my knowledge still available. I copy below what I wrote about it, and whereas we had previously signed an agreement of sale for 120 000 euros, I would suggest now that if it is still available, we offer about 112 000. The bid might be successful, and there is no harm in trying.

Place de l’Etang is a 15 minute walk from the centre of Cannes, all the way along the beautifully gardened Croisette. It’s a lovely walk. It has a village atmosphere and as such it is where Vicky and I choose to live when we are in Cannes – in our flat in the same Residence La Brise.
We rent ours and the other apartment on the top (5th) floor out very well to conference delegates and holiday makers. We only only started in March and so far we are covering our mortgages, and we expect it to get better. The other apartment in our group is on the 4th floor and needed complete renovation (which this one doesn’t) and as such is not quite ready to rent.

Residence La Brise 3rd Floor – The block is a small building overlooking the Place de l’Etang. The ground floor of the building is entirely taken up by the Brasserie – lovely and friendly/affordable restaurant. The remaining four floors comprise 3 flats on each floor, so there are only 12 in the building.

The flat is on the 3rd floor and looks West over the Place, but traverses the building so that the back balcony looks East over houses and across the sea (Gulf Juan) to Juan les Pins and Antibes. Lovely views front and back.

The flat is immaculate and very cleverly designed for optimal use of it’s 30 sq. m. The large open and airy front balcony has been glassed in with wide sliding windows, and as such is counted as part of the ‘habitable’ space.

Starting from the front, this balcony has a delightful open plan, steel finished kitchenette with a table and 4 chairs.

The living room has sliding doors and shutters dividing it from the balcony/kitchen/dining area, and has two single sofa beds, small coffee table, TV etc. Comfortable and very cleverly furnished to optimise space.

The bathroom has been completely redone, and one has the feeling of being on a boat, with very clever use of space, and a brand new shower loo and basin. It has a fun feel about it.

There is another little room before the back balcony where there is a 3/4 sofa bed which stays up during the day. There is no space for anything else in this room, but it does provide a small separate bedroom.

The back balcony has a fitted narrow desk running the length of the wall, with shelving above it. It has a high quality polished finish and there is a large storage cupboard and a washing machine at the far end. It is from this room that you get the lovely view eastwards over the sea.

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