Bad experience with Pierre&Vacances. All data and numbers here!

Our experience with Pierre & Vacances (P&V) leaseback (or ‘bail’ contract) has been extremely negative.

We summarize the main facts below, and believe anyone should think very well before engaging in this type of investment:

1. We purchased an apartment of about 41 m2 in the P&V residence of 'Paris Coté Seine' (currently belonging to the Adagio chain, and managed by Sogire, both part of the P&V group). 
2. Total investment was € 447.200(net of TVA, not due).
3. We entered into a 'bail' contract with P&V for a period of 9 years, with a guaranteed annuity of around € 21.000 € / year.
4. The contract did not provide for any direct use of the apartment.
5. The net income (net of French and Italian taxes) was about 20.000 € / year
6. Unfortunately, in 2013 new Italian tax rules were introduced, penalizing the ownership of real estate units abroad; the introduction of this new tax reduced significantly the net yearly income of our investment (down to around 17.000 €/year).
7. As the net benefit of the investment was below the average of our investment portfolio, in Jan. 2014 we decided to put the flat for sale (2.5 more years of ‘bail’ to go), giving P&V a mandate to find a buyer. The requested selling price (suggested by P&V) was 525k€ (gross of P&V fee of 37k€; net seller revenue  488€).
8. No purchase offers were made for the entire duration of the mandate to sell (12 months). We have therefore decided to reduce the price to € 499k€ (25k€ P&V fee on the resale price), and renewed the mandate to P & V for a further 12 months. Unfortunately, even in this case there was not one single offer, nor interest at all.
9. In the meanwhile, the expiration of the first 9 years bail was approaching (this may explain the absolute lack of interest from potential buyers-investors). 
10. In dec. 2016 (3 months after the expiration of the first 9 years ‘bail’ contract) P&V proposed to renew the 'bail' contract for a further 9 years, with a reduction of around 40% of the rental(down to 13.500 € / year, gross of French and Italian taxes).
11. Although the offer was clearly outrageous, we accepted the new ‘bail’ proposal (what realistic alternatives did we have?), and gave a third mandate to P&V to sell the property (this time, with a new 9 years ‘bail’ contract in place). 
12. It was crystal clear that we had to accept anet loss in the selling price to find a buyer, as the selling price of this kind of properties has actually nothing to do with their theoretical ‘commercial value’, being on the contrary directly proportional only to the yearly rent guaranteed by the managing company. On suggestion of P&V, the flat was then put on the market for 390k€(57k€ lower than our purchase price….).
13. Eventually, we received a proposal from a potential buyer for a net seller’s revenue 351.5k€,net of P&V selling commission of 18.5k€).
14. The sale contract was finally executed four months after our acceptance of the offer, at the end of march 2018. 

The numbers:

1. Total investment                                447.236 €
2. Gross ‘bail’ revenues (12 years)        247.491 €
3. Taxes, expenses                                   40.789 €
4. Net ‘bail’ revenues                             206.702 €
5. Net selling revenue                            351.500 €
6. Net cash flow                                    110.966 €
7. IRR of the investment                             2,26%

We leave to the reader to draw his conclusions.

We are extremely unhappy with our investment, and are only glad to have been able to exit, and achieving a low, but still > 0 IRR.

We would never accept - today - the conditions stipulated in the ‘bail’ contract with P&V (including the commitment to give to P&V the exclusive re-sale mandate, at an expensive fee…).

Finding a new owner has been an extremely lengthy and painful task, and we had to accept a significant net loss on the purchase-selling price.

The fact that P&V has total freedom in proposing new contract conditions after the initial 9 years period is definitely a too high risk. 

We were also extremely disappointed and unhappy with P&V management of our property…. But this would be a too long story to tell!

Thanks for reading, regards

Luciano (Milano, Italy)