In the #FrenchLeaseback arena, Pierre et Vacances are huge players. They operate 280 Residence de Tourismes, with 50,000 properties, dealing with 23,000 owners!
Indeed, they have also moved into the Senior Residences investment area, since these have been given similar tax advantages to the Residence de Tourisme. These are the next investment ‘opportunity’ that could well bleed an investor dry. In fact it’s quite ironic, you could have your pension shrivelled and atrophied by investing in a ‘senior residence’, if the experience of purchasers of ‘residence de tourismes’ are any indication. However, such investments are not likely to appeal to Irish investors.
But are all of these owners happy with this big leader.
Not according to the website Proprietaires Pierre et Vacances, with it’s byline of ‘site for the defense of P&V owners’ interests‘.
Owners complaints about P&V do not seem to be as bad as with other operators – they do pay the rent. No, the problems with P&V seem to be when it comes to renewal. After your 9 or 11 years initial lease, many owners have had to take a dramatic reduction in rent. Again, they have little choice but to accept the reduced offer, as they are trapped in the VAT (TVA) demand from the French authorities if their property is no longer in the tourist rental market.
According to an article by French journalist, Jorge Carasso, in Le Figaro (via Google Translate):
The end of the commercial lease, after the first nine or twelve years, is often an opportunity for the operator to negotiate lower rents. Witness the recent operations of the number 1 sector Pierre & Vacances. Nearly half of maturing leases have been revised downwards, with haircuts of 10 to 70%, mainly because of the rise in indices, according to Dominique Menigault, deputy general manager of Pierre & Vacances Conseil Immobilier, interviewed by Le Monde.
and in another Le Figaro piece:
As proof, nearly 70% of expiring leases are not renewed under initial conditions, according to a survey by the National Union of Tourist Homes of 2015. The heavyweights in the sector are no exception to the rule. The Pierre et Vacances group, whose image is now significantly dented, has renewed downward half of the leases expiring in its residences, some up to 80%.
One of the main issues is that the properties are over-valued at the sales and marketing stage. It is hard to find owners who sell #FrenchLeaseback properties and regain what they paid for them. One P&V owner is currently selling her P&V apartment with at least a 20% loss, though this is significantly less than many other owners. And she considers herself lucky to get out at that.
We have seen in the Languedoc that properties purchased for €225k are being sold at court auction, after re-possession, for as little as €40k !
France TV2 Programme – Complément d’Enquéte
A special edition of the France TV2 tv programme “Complément d’enquête” in July 2017 exposed these issues with P&V. It describes how Gérard Brémond, the boss of Pierre & Vacances, made a fortune by offering the French to become owners of their holiday apartment to rent it later. This excerpt describes a familiar story to Irish leaseback owners:
Nine years later, at the end of the lease, bad news. The apartments are not filled, and the group offers a new contract: the “guaranteed minimum rent” increases from 5,500 euros to 2,740 euros. An income divided by two. Inconceivable for Ludivine, who wants to stop the rental and recover his housing. But it would lose its status as a tourist residence, and it should repay in the year the VAT it was exempted: 8,500 euros. “A kind of hostage situation,” she says.
But that’s not all. Pierre & Vacances sell its homes well above the market price. The two-bedroom that cost 90,000 euros is worth today … 30,000.
Another issue is the refurbishment costs. Many Irish owners who purchased these from P&V were never made aware of the potential demand for refurbishment costs at the end of the lease. For one owner this cost was almost €8k. For many this can nearly wipe out rental gains they have received over the years. This cost, and more particularly the scale of the cost, was never made clear to them at the buying stage.
For many Irish purchasers of these #FrenchLeaseback properties, they bought a property which, due to French law, resulted in them having no control over it whatsoever, and effectively giving it to someone else to use to run a business, while paying them a ‘nominal’ rent, but making the owner pay many of the other costs of that business…
And, due to protection of French law, the owner is trapped !
It begs the question why is this ‘French law’ which protects large operators, and impacts so severely on individual consumers (who are the voting citizens of the country), not changed ?
It doesn’t sound like a ‘sound’ democracy does it ?
Thoughts @DGCCRF ??
All translations from Google Translate – apologies for any inaccuracies.