PL33 – 14th October 2003.

Posted by admin in Property Letters | October 14th 2003

Dear All,

We are back in Cape Town now after the most interesting and rewarding trip yet to Cannes.

One sets out on a course but the path ahead is never crystal clear; there are twists and turns one can not foresee, and forks in the road ahead which demand choices. So progress is an evolution rather than a straight trip from a. to b.

We have seen twists and turns, and made choices, and have evolved in unexpected ways.

As you will know from Property Letters 31 and 32 we saw scores of properties, some of them very interesting as investment options, and some of which are probably still on the market. I will summarise a few at the end of this letter in case anyone is interested.

MARKETING has been our biggest single challenge. We set rental targets and have struggled to meet them so far. It has been a diabolical year for the whole travel industry, and everyone we speak to laments that fact. The reasons are many and I will list some – The year started with the hellish scenarios of war in Iraq and the SARS scare. The world economy is still under pressure with some of the major economies in Europe failing to address their budget deficits, predicting 0% growth, and talking of how close they are to recession. The Americans had a major disagreement with France over Iraq (and anything else they have to try to agree on) and it has resulted in a government supported boycott of France by Americans. In fact Americans are not travelling much at all as they see themselves, probably quite correctly, as targets for hostility of one sort or another almost anywhere except in their own country.

Having said that let me tell you what we have achieved. Against our target of 54% occupancy we have filled 42% of available bed nights since we started in February 2003. There are factors behind the numbers though, and those are that we started from absolutely nothing, and added apartments as we went, from a very hard beginning. In June for example we hardly had a single guest! The figure also hides the fact that we have had to discount to achieve occupancy, on the basis that a lower return on a rental is better than no return.

Our marketing is however gearing up. We are starting to get repeat customers, and our website is bringing enquiries and bookings all the time. We have begun to experiment with advertising in the press – Daily Telegraph travel section last weekend and the Sunday Times next weekend, and we are making enquiries with various publications including “In Flight” magazines. We hope this will lead to better bookings but will closely monitor results to see if it is cost effective, and if it is where the bookings are coming from.

We continue to do our best.

BREAKTHROUGH. Last week we had our biggest break since we began in this business.
Starting from scratch in a new country is never easy (as so many of you know), and although we have established a French company, and done all that we could to comply, we were unable to get a “carte professionnelles” as we simply don’t have the background and the years of experience working in the industry in France that are required to get one. The result was that we were administratively restricted – making it not impossible but more difficult to operate efficiently. Also of course we and all new owners were seriously constrained financially and we were looking for a way to get ourselves established with an office and a shopfront in a prime area, without spending a fortune. (Until now we have worked out of Lao and Katherine’s apartment – not satisfactory.)

For a year and a half we have worked very closely and happily with a family owned Real Estate Company, and through the summer Lao collaborated with them a great deal on rentals. Their office is in a very good position and many of the rentals that we were able to achieve were passed on to us by them, and came from “walk ins” off the street. Still do.

Last week they approached me with a proposal that I buy into their company. It is a wonderful offer and it took Vicky and I in consultation with Lao and Katherine, less than 48 hours to decide on it. Effectively it means that in the next week Lao will move his office from home into the Real Estate office, and work closely with them to promote rentals. They have all sorts of contacts in Cannes and the Region that we were hitherto unable to access, and of course the necessary “carte professionnelle”. It will greatly improve things for our owners and our guests, will improve our administration, and broaden our base immeasurably. On the purchases and investment side, their interest of course is to channel all of our transactions through themselves, which will not in any way restrict my ability to shop far and wide for properties, as they have commission sharing agreements with other agents. It will cost our investors not one cent more, and if anything will allow for an improved service for them.

I will return to Cannes in November to sign the contracts, and finalise, and as of 1st January 2004 we will co-own the business. The joint rental operation and Lao’s move into the offices begins immediately.

PROPERTY VALUES. In spite of the poor performance of the economies of the Western world in recent years, or perhaps because of it (property being an attractive investment when markets are chaotic), the property market in the high value regions of Europe has continued strong. We believe and industry experts tell us that Cannes has seen an appreciation in value of 15 to 20% in the last year. Our own very small but real comparison gives us an appreciation figure of 16.29% from May 2002 to May 2003.

I sleep well at night, secure in the knowledge that everyone who has chosen to invest with us in Cannes has done well, some extremely well. Their properties were chosen with great care, and the price they paid in every case was below the bank valuation of the property. Some were pure ‘gifts’. We continue to deal on an ever closer basis with our lending bank and secure for each individual investor the best terms and conditions we can, and as our relationship and joint track record improve, so do the possibilities, including financing solutions for Zimbabwean investors.

Marketing remains the most difficult challenge at the moment, as we always knew it would be. However we work harder on it than on anything else, so it will grow, and it is growing. Inevitably we have had to get known – develop a reputation and significance in the market. We will get there and in the medium to long term I am even more confident than I was when we began – especially with our very exciting new development. We now have a professional card, a shop front and a stake in an established and respected French Real Estate Company and that was beyond my wildest dreams just a short while ago! The benefits for all of our investors will be real and almost immediate.

With my best regards to you all,

Guy.

This apartment was ‘sold’ in June although we did have one or two people interested in it. Now there have been financing problems and the ‘buyer’ has had to pull out so it’s on the market again. This is what I wrote about it at the time. It is a very good apartment:

Capri – Palm Beach.
Asking price 212 000 Euros.
One bedroom apartment. 60sq.m. with a balcony and sea view to the side. View ahead is a pleasant one of the suburb of Palm Beach.
It is on the 2nd floor of a 5 floor very good building.
The flat is very clean, very open, light and spacious.
It is very fully and comfortably furnished, and all the furniture except 4 antique dining room chairs goes with the apartment. All you need to do is buy 4 or 6 chairs to replace.
Floors throughout are light and clean large tiles.
Kitchen is bright and modern – has a dishwasher and washing machine, and needs a little touching up only (some paint peeling in one corner)
Very big sitting room, off very large hall (the two could one day be combined to make an even bigger open living area.)
Bedroom is big, bright and comfortable – very nicely furnished.
Bathroom also nice light and modern.
Excellent position in Palm Beach, adjacent to Pl.de l’Etang, and 100m. from the beach. Very rentable for holidays and congresses.
Offer – 175 000 and see what happens?
(I have looked at it again now – and firstly I would recommend a bit more work than I envisaged at the time. It needs nothing major but a good smartening up, and some investment in improving the furnishing. Secondly, you won’t get it for 175 000€ as I suggested – it would be an unrealistic offer)

BAS CALIFORNIE

This apartment is still a winner – and still not sold (as far as I know). The owner will take less than the asking price of 181 500€. I copy what I wrote about it before.
It is a beautifully finished apartment, and in a very rentable position. Having now seen a large number of alternatives this one stands out. At under 4000€ per sq.m for what it is – high quality finish and no work to do – it is good.

If you happen to have been sitting on the fence waiting for the right apartment, and this falls within your price range – Vicky, Lao and I would all recommend it. I can send photos to illustrate if required.

One bedroom apartment with excellent rentability close to the centre. We have five or six apartments in the immediate environs (within 200 meters) and are finding the area to be excellent for all categories of guest.

Habitable space – 47.5 M2
Terrace – reasonable
Asking price – 181 500€ (I suggest an offer of 170 000€)
Price per m2 – 3821€
Beautifully finished and equipped apartment.
Very well equipped kitchen – excellent design
Beautiful bathroom
No views but very quiet. Great position
Very smart apartment – ready to go

FRERES PRADIGNAC

A little studio apartment in the centre of Cannes. First floor. Very quiet as it opens onto a courtyard, which means it also has no view.

I love Rue Freres Pradignac and it is perfectly positioned for conference rentals. It is a very clean little apartment in a very clean building – good floors, clean white walls and ceiling, simple and adequate kitchen, nicely redone bathroom all tiled and bright. No balcony.

It comes simply and adequately furnished, and is eminently rentable immediately

Asking Price – 100 500€ (I suggest an offer of about 92 000€)
Living space – 26.63 m2
Price per m2 – 3773€

RUE MACE / LAFAYETTE

4th floor studio one block from the Croisette and right in the middle of town – great rentability. Modern building with very smart tiled corridors with inset lights etc.

The apartment has a good main room, with a very attractive small bathroom off it, and a small and nice/adequate kitchen.

The whole apartment has been redone, and it comes fully and well and tastefully furnished. Leading off the main room is a lovely little semi-circular balconette, just big enough for two chairs and a small table. It is nice and high with an attractive view over very old and well kept buildings, and down onto Rue d’Antibes a little way off. It is quiet and feels very open and airy – bright and surprisingly ‘secluded’. It’s a lovely part of town.

The apartment is completely double glazed – modern and high quality work

Asking Price – 137 204€ (I suggest an offer of about 120 000€)
Living space – 23.5 m2
Price per m2 – 5838€

There are others – and I have looked at some wonderful ‘prestige’ properties too. But you need to ask me if you are interested in a more expensive end of the market.

I will be back in Cannes for a far shorter stay on 16th November, and if I should be looking for something for you specifically, please let me know beforehand if you can – it helps.

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