Leaseback company called Transmontagne going bust?

I've seen a piece in the Sunday Business Post today about a leaseback company called Transmontagne going bust.

I have been looking at leaseback for some time and was under the impression it was a fairly safe way to invest in property.

This is making me think differently.

I was just wondering if anyone else had similar problems with leasebacks or is this an isolated incident?

Re: Transmontagne

Not heard of any going bust but they are possibly the worst form of investment, except perhaps for hotel rooms!

Re: Transmontagne

Thanks for the reply Ringledman, but could you expand on why you think they are the one of the worst forms of investment and why hotel rooms are apparently worse.

Thanks for all the information guys.

I would have thought that a leaseback company (and a big one at that) going to the wall would have been a cause for some concern considering the amount of the stuff Irish people apparently buy. But apparently not.

I have to say I'm somewhat bemused. There are people on the forum talking about buying land and property in the nether regions of the planet but nobody seems to be a bit concerned about the potential consequences after purchase. I find that very worrying.

Thanks for your input Ringledman but without any references to back it up it's not of much value.

If that the same company i have in mind, they went bust in July.
More info here

Yep, that's the one.

To me this is a very worrying development, I seem to be fairly alone in this opinion however.

I would have thought that Irish people who have property being managed by this company would be up in arms, but this doen't appear to be the case. If they are a big French leaseback company, surely they can't have no Irish clients.

Re: Transmontagne

Coss said:

Thanks for the reply Ringledman, but could you expand on why you think they are the one of the worst forms of investment and why hotel rooms are apparently worse.

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Hi Coss.

For me it comes down to control and simplicity.

With leasebacks and hotel rooms etc you are heavily reliant on others for the performance of your investment. What happens if you have a c*ap management team looking after it?The returns are likely to be a lot less than the promise sold to you. Add in the high management fees also.

I like to have control over my investments and be able to sell when it suits me. With the above two this may be difficult.

Guaranteed rental schemes are the same. Why pay for 3-10 years rental at day one when you may not want to hold it for that long or have to sell?

People seem to be drawn to so called 'sexy' investments and locations. 'Guaranteed rental', 'leaseback', 'aparthotel', 'ski & golf', 'exotic', etc...

The truth is simple wins everytime. It was the same with the stock market tech crash of 2000. Whilst Buffet was happy with his dull manufacturing and insurance stocks everyone got into the so called next big thing and got severely burnt. I wonder who had the last laugh there.

It's now the same with the boom in overseas property. I believe in investing in simple purchases in growing city centre locations in Eastern Europe that I understand and can control as I see fit.

May not be as exotic or as cool as all those Moroccan guaranteed rentals, Westminster hotel rooms or French leasebacks but I'm sure that the ROI will be far greater over the long term.

Fair play to you Ringledman, you accepted the gauntlet that was thrown down. From what I've read about French Leaseback both here and on a couple of other websites I've been convinced to steer clear.

The one thing I'm lacking now is where else I should focus my attention.

What cities do you feel have the best potential of those in which you're involved or have investigated?

Coss said:

Fair play to you Ringledman, you accepted the gauntlet that was thrown down. From what I've read about French Leaseback both here and on a couple of other websites I've been convinced to steer clear.

The one thing I'm lacking now is where else I should focus my attention.

What cities do you feel have the best potential of those in which you're involved or have investigated?

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I think most places in Poland or the Czech Rep.

Prague may be overdone. My next spot is Brno. The yields are pretty high 6-9% from what I hear. need to get out there to see the place.

Otherwise the second cities in Poland should be a good bet.

I think the Baltics - Latvia etc are heading downwards due to their excessive growth and high public debt.

Whatever you do don't go near Spain, Bulgaria (except maybe Sofia), Portugal, France, etc. Can't see them going anywhere.

Coss said:

What cities do you feel have the best potential?

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Investing in a Central European city without sufficient research is probably the worse mistake that smaller overseas property investors have made over the past few years. Many people believe that if they invest in any sort of property in a city, where prices are increasing, that they have made a good investment. However, it's much more difficult than that and finding a quality apartment, which will give good returns is not easy to find in any developing property market. The truth is that the vast majority of apartments in almost all CEE cities are not good investments.

From my own direct experience in the Budapest market and of research I've carried out in Prague, Bratislava, Krakow and Warsaw, I've seen investors rush towards the latest popular spot, purchase one of the first flats they come across (usually off-plan and out of the grasp of locals) and then two years later, wonder why their property hasn't increased in value.

Most cities in CEE have good economic potential for the future, but choosing the right property is paramount. Don't feel forced into it and take your time until you know you've found an investment, which suits you.

Budapest and Warsaw are generally predicted to be those with the most potential, with low debt levels, low unemployment and the highest FDI in the CEE region. Bp has better rental returns and higher spending power (you wouldn't think it at the minute due to the austerity programme!) but the Warsaw market is currently appreciating at a higher rate.

budapest said:

Investing in a Central European city without sufficient research is probably the worse mistake that smaller overseas property investors have made over the past few years. Many people believe that if they invest in any sort of property in a city, where prices are increasing, that they have made a good investment. However, it's much more difficult than that and finding a quality apartment, which will give good returns is not easy to find in any developing property market. The truth is that the vast majority of apartments in almost all CEE cities are not good investments.

From my own direct experience in the Budapest market and of research I've carried out in Prague, Bratislava, Krakow and Warsaw, I've seen investors rush towards the latest popular spot, purchase one of the first flats they come across (usually off-plan and out of the grasp of locals) and then two years later, wonder why their property hasn't increased in value.

Most cities in CEE have good economic potential for the future, but choosing the right property is paramount. Don't feel forced into it and take your time until you know you've found an investment, which suits you.

Budapest and Warsaw are generally predicted to be those with the most potential, with low debt levels, low unemployment and the highest FDI in the CEE region. Bp has better rental returns and higher spending power (you wouldn't think it at the minute due to the austerity programme!) but the Warsaw market is currently appreciating at a higher rate.

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The benefit of buying off-plan in a rising market is that if you have made a bad mistake (i.e. location) then at least you have a margin of error and can likely sell on completion for what you paid or so.

Making a poor purchase decision on an existing property in a low growth area (i.e. Budapest) leaves you with a liability if you cannot sell it on. You may have to hold in the hope of it rising in a few years.

Either way I agree that shed loads of research is the key. I wouldn't invest or rush into investing anywhere quickly. And don't believe a word that one of the large agent's tells you about rental or capital growth.

To me this is a very worrying development, I seem to be fairly alone in this opinion however.

I would have thought that Irish people who have property being managed by this company would be up in arms, but this doen't appear to be the case. If they are a big French leaseback company, surely they can't have no Irish clients.

I am an Irish investor in a Transmontagne development and yes, we are very worried. We have been on to our sales companies, who all seem to be fairly flummoxed and unsure about what to do. What they are all saying is that a new company will come along and replace Transmontagne. That probably will happen but the problem is that it is likely that they will offer us 20% or 30% below our current rent which, for an investment that was meant to almost cover itself, is financially crippling. We have been on to the papers and the French embassy but I feel that maybe it's not being publicised because too many people want the French leaseback market to carry on the way it is, there isnt the huge interest in it that we expected.
My advice is, if you consider a leaseback, be sure that you can pay for it fully if the situation arises, and then any rental income should be looked on as a bonus.
There is no point in asking a sales company what happens if they go bust, because the only true answer is that the sales companies dont know and they just hope it will never happen.

Oneworld, thank you so much for replying, I was beginning to think that no-one in Ireland had invested with this company.

I have looked at investing in leaseback property but have held off, to some extent based on replies I've received on this forum. Lots of people here seem to think it is not as rosy as it is often painted in the media.

It is good to see your post on this as I think this is a very serious issue but I don't see it getting much airplay anywhere else.

How will the outcome of this effect you personally? This is not meant to be a nosy question, I am just interested in the after-effects considering how much this is marketed as a real safe bet.

Just like you oneworld, I am also an Irish investor with the Transmontagne development.

The whole Transmontagne problem is a complete disaster. I have purchased an apartment in the Chamrousse region along with ~35 other Irish investors. There was an EGM in Chamrousse on last Saturday. I did not attend, but I have just received the minutes from the meeting - they make for extremely depressing reading to say the very least.

It seems from the meeting that Transmontagne has been in financial difficulty for some time. Surely, the sales companies were aware of this and if not, why in gods name not??? How come financial checks weren’t carried out? Someone has to be responsible somewhere along the line. I have no doubt that these sales companies made a pretty healthy profit from the transactions so why now should these companies sit on their profit while my life savings go down the drain??

Also, I paid our notary fees in France and is it not the job of a notary to ensure the financial stability of Transmontagne, to ensure the building is at the very least finished?? SOMEONE must be answerable, and I need to know who.

Does anybody know what happens when the management companies go in to liquidation?

jpf94 said:

It seems from the meeting that Transmontagne has been in financial difficulty for some time. Surely, the sales companies were aware of this and if not, why in gods name not??? How come financial checks weren’t carried out? Someone has to be responsible somewhere along the line.

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Surely it's primarily the buyer's own responsibility to check such things out independently rather than relying on a sales company (with a vested interest) to ensure that everything is OK!? Did you get your solicitor to check things out at the time? Do you have him/her on the case now? You did have a solicitor independent of the sales company I take it?

We all had independent advice. This was a big management company, with approx 7 resorts in France, also huge investments in chairlift maintenance all over France - but also they run the snowdome in Dubai, they have the contract for the development of Sochi in Russia where the 2014 Winter Olympics will be held, they have Bardonnechia in Italy, Nendaz in Switzerland, a resort in Slovakia..the list goes on. Yes we did do our homework. I went into this knowing the leaseback was only as good as the management company but regardless, the company and all it's developments are bust.
It depends on the individual how things will go. The reverberations of this are HUGE in France. For some reason the property pages in Ireland havent paid much attention which I think is strange. Maybe too many people involved in property dont want word of this to spread. Papers make a lot of money in advertising foreign property!
We dont yet know what will happen if no company takes over from TM. We might carry on quite happily with our mortgages and use our freehold properties for personal use which is actually an attractive idea. The one thing about this whole thing is that the apartments are actually really nice and the resort is a good place to be. However, the French govt may try to claw back the VAT that was deferred on the sale as it was a leaseback and that's where things could get nasty. Also, not everyone wants a freehold apt when they had originally planned on a leaseback.
So watch this space. But hold off if you're thinking of buying until we see how it all pans out. This can affect anyone buying a French leaseback and could be the start of a crash in the leaseback market.

See [broken link removed][broken link removed]

There are a lot more people there that share your concerns.

To be fair it did look like a large and reputable company with some serious French stakeholders.

oneworld said:

We all had independent advice.

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How can you purport to speak for others such as jpf94?

I am the Irish co-ordinator for investors in Transmontagne's largest development so therefore I am in contact with every Irish owner in the development and know the details of their purchases - who they dealt with in Ireland, the UK and France - as well as their legal advisors. I have communicated with jfp24 who is one of these investors, so yes I do purport to speak for them.
My reason for posting is to allow our experience to serve as a warning for others. I visited my property before the sale went through. I looked at other non-leasebacks for sale in the area. I investigated Transmontagne and I paid for my own lawyer. What I, and the other owners, did not investigate was the details around French law and French VAT. Surprisingly, now that we are doing our research, it appears that no-one - including the French Embassy, the sales companies in Ireland, UK and France, the builders who are also caught up in Transmontagne's problems, the local communities in France whose tourism is being hit, and to date, the French Ministry for Finance - is able to give a black and white answer to our requests for clarification on VAT. It appears that no-one really knows whether the investor is liable to repay the VAT if the leaseback ends through no fault of their own, ie management company liquidation.
Therefore, there is no point in posting offensively, Clubman. The guidelines of this site request civility and not causing offense. I DO speak for jfp24 and the other investors. I DID do my homework. I DID talk legal advice. A situation like this does not seem to have happened before. Certainly never on such a scale.
If additional affected investors contact me I will do my best to help them out. I am not involved in sales in any way and am not profiting from this, I am just an investor who is caught in a unique situation.

oneworld said:

I have communicated with jfp24 who is one of these investors, so yes I do purport to speak for them.

...

I DO speak for jfp24 and the other investors.

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That was not clear from the posts to date. Thanks for clarifying.

Therefore, there is no point in posting offensively, Clubman. The guidelines of this site request civility and not causing offense.

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Oh give it a rest would you - I did NOT post offensively but if you have a problem with posts from me or anybody else then report them using the Report Post feature . If a post of mine is reported then I leave it to other moderators to rule on it. And by the way - since you mention the posting guidelines you should note the one about making unsolicited contact with others and bear that in mind before sending me another PM.