Morocco Sadia (LJDF Propertyt Logic) - Bank Gurantees

[amoflaherty]

Hi,

I am new to this forum and wanted to get other views on the subject of bank gurantees. We reserved a villa with Property Logic on the Le Jardin De Fleur (VVT6 plot) in Sadia and it now comes the time to pay first 20% deposit with the next 20% due early 2008.

Our biggest concern is that unlike Fadesa , Property Logic will not provide any bank gurantees - my Moroccon solicitor has tried in vain to get this for me and he has advised this is very unusual. Thus we could lose 40% which is not a small sum given the avg villa is £250K!!

Checked out property logic website but its basically 3 guys (English/Dutch/Estonian) who formed the company in 2005 so this isn't very re-assuring at all as they could go bust by 2009/2010 when VVT6 is due to complete.They have also now ventured into the Brazil market.

Was wondering if anyone had any further info on Property Logic and if there are any insurance type products that you can buy to protect the 40% paid in case Property Logic default.

Thanks in advance.

 

[andyk2]

Hi Amo,

It seems that none of the other agents on this site want to impart their wisdom on you as you have already made your reservation (shame on you chaps). There really is no need to worry about bank guarantees on JDF, because Mediterrania Saidia is the flagship resort of the "Plan Azur", and even if Property Logic went "pear-shaped up", Fadesa would be obliged to step in and finish the job for you. Fadesa have the contract for delivering the resort, and do you believe that they are going to impart the wrath of the King? I think not.

If you believe your investment is a good one, don´t let the lack of a bank guarantee (in this instance) stop you from making the best of the opportunity.

A

 

[The Soup Dragon]

Amo

Lack of bank guarantee is certainly one of the risks you take if you invest in a LJDF product (or indeed any other product that doesn't have one.) I think it would be naive to assume that Fadesa would simply step in and finish the build (not to mention furnish and equip your property) should something happen to Property Logic. I think it is worth letting your agent know your concerns. He or she should be only to happy to gather what information they can to address your concern. If they can provide copies of documentation that you interpret to show Fadesa having obligation to finish off your properties (in event of Property Logic not being able to) then great.

I reserved my VVT8 property back in June last year. Lack of Bank Guarantee was one of my main concerns. My take then on this risk was that is was still a risk, just that probability of Property Logic going bust was lower than for other new companies* and that this being a Plan Azzur development reduced the probabilities of something going badly wrong.

*The Estonian memeber of the Property Logic team is incredibly wealthy. I'm not saying he would unconditionally ply his own money in if there was a cash flow problem (normal reason for new companies going bust.) However, if he can see that the returns were still going to be good he may decide to invest more of his own funds. Given the profit margins involved I think it is likely that the returns would still be attractive to him in event PL go over budget with the build or fail to bring in all staged payments in time. Of course, this is just an opinion! I do not have inside knowledge or access to more information than yourself. A further reason I'd expect PL to be more stable than other new companies is the deal struck with Neo. I assume that the sale of so many properties will result in large injections of cash at regular intervals.

 

[amoflaherty]

Hi Soup Dragon.

Thanks for reply. How much profit do you think there is. We thought it would be approx £100k per villa and so before PL have even laid a brick they have already got the profit with the 40% downpayment as our villa is £250k.

Did you look into any insurance type products to mitigate risk ?

We are not property investors but looking to buy a holiday home, hence our nervousness about PL and losing £100k.

Thanks.

 

[The Soup Dragon]

Hi Amo

I expect cost for villas in VVT8 will be no more than 30% to 40% of the average price and the same will probably hold for VVT6. While there's a large element of guess work in that estimate, I looked very closely at prices in other developments 12 to 18 months ago. Some of these will / are producing comparable end products, its just they don't have the same on site facilities. The prices for them lead me to believe PL could build and furnish VVT8 properties for well under 100k Sterling and probably near the 80k mark.

Fully understand your nervousness about putting 100k on the line and potentially losing it. You are doing the right thing to mitigate for the risks as much as you can. There's a long time between now and the build being complete, so if you can't become comfortable with the risks you would be better walking away. No point having kittens over it, there are plenty of opportunities out there that will provide you with a holiday home come investment.

I didn't look into insurance products. If you do look into these be careful to see exactly what is and isn't covered. For instance, two fully comp car insurances aren't neccessarily comparable in what they cover. Additionally, it would likely be preferable to take the insurance with a UK company that is regulated by the Financial Services Authority. That way you can approach the Financial Ombudsmen should you have any difficulties with the insurer.

 

[seannie1]

why

hi folks
Dont like the idea of handing out legal tender to someone whom the bank will not vouch for.Cant think of any other reason the havent negotiated the guarantee,it would be less trouble and worth its weight for a companys image.What company willfully chooses to be the only one not offering a guarantee,a strategy which surely increases the risk of needing one!!!

 

[seannie1]

por favor

hi folks
Dont like the idea of handing out legal tender to someone whom the bank will not vouch for.Cant think of any other reason the havent negotiated the guarantee,it would be less trouble and worth its weight for a companys image.What company willfully chooses to be the only one not offering a guarantee considering 100% of investors prefer one,a strategy which surely increases the risk of needing one i imagine!!!guidate amigos

 

[Investy]

There is clearly huge incentive for the developer to finish the job as most of the profit will be in the completion monies as the 40% tranche will surely largely consist of cost made up of wages, marketing, agents fees, architects, building costs etc.

Some LJDF builds are well advanced which at least gives more security than I had over 12 months ago when nothing but sand existed.

I too wrestled with the Bank guarantee issue for the reasons you outline. In the end I went ahead as firstly just 20% was my stake - not a sum I wanted to lose, but worth the risk, with the second 20% still not requested over a year later.

Secondly I felt the end prize to be so unique that I just had to persist, or forever kick myself for not having the vision to see it through when the entry price was attractive. Investments is sites like this just don't come along every day.

Lastly I was emboldened by the fact the King has a direct and highly visible interest, afterall this is the spearhead and first Plan Azure project. Failure just is'nt an option as this would blow a gaping whole in the credibility of Vision 2010 and the Plan Azure brand.
Obviosly we cant be certain the King would instigate a rescue remedy, but I would suggest there would be little alternative as he could not countenance failure at this late stage with so many Moroccan's set to benefit from the employment and other opportunities.

There is a fair argument for holding fire for those consdiering buying now, as I dont envisage much captial growth until the site is fully complete and being used. The only downsides being that you may end up with a narrow choice of property and or a possible price rise.