It only took five years...

Considered building a dream house in the South of France? Read this first.

Le Chevre D'or in Eze Village was the first venue of the 1994 ADB annual meeting in Nice, France. Having a glass of champagne looking at a breathtaking view of the blue Mediterranean Sea over St. Jean Cap Ferrat, one could see the dramatic coast from St. Tropez to Monaco. Lunch the next day was at the opulent gardens of the Grand Hotel du Cap Ferrat near the Rothchild Estate (you know the one pictured in the ad for Hong Kong's Bel Air on the Peak - except this was the real thing). All this beauty with Italy only 30 minutes away, likewise with good food and wine, clean air, interesting places to explore, and a plethora of good entertainment - it all made the Cote D'azur seem like a good place to spend more time.

We had looked at property all over the world, but after annual trips back to France and Italy, we seriously began to look for a house or apartment in 1999 in the area between Cannes and the Italian border. The dollar was strong. Having spent 20 years in sub-tropical Hong Kong we are fairweather people who love a sea view and mountains. After a long search, we put in a bid on a house in the Castellet of Ville Franche (where Tina Turner would have been a neighbour), but lost it. We then visited a piece of vacant land that had a spectacular view where we could build a house.

A long Journey begins

Were we "nuts, crazy, fools"? We'd read Peter Mayles book A Year in Provence. However, the process seemed simple because a building permit was already approved, and an architectural design had been done. Later we found out this process alone had taken three years. With hardly any available land left, it provided a special opportunity. Our good friends, Penny and Alan Smith had the most poignant comment "You are brave!".

We met with lawyers, private bankers, accountants, and friends to decide best way to structure the investment.

There was never a straight answer, with contradictions galore on issues like French wealth tax, inheritance, and tax treaties with Hong Kong and China. We do not have children so estate tax had different issues. In the end we got legally married again in France. The financial and administrative aspect in fact took on a life of its own in parallel with the actual building of the home. Setting up accounts, transferring money, paying bills, approving plans - so many decisions our heads were spinning. Remember no house existed so you don't get a typical mortgage.

Enter our international private banking friends. After several meetings we decided to set up a portfolio to finance the project. I knew a little bit about bonds. There was a very steep yield curve, and a strong dollar at the time, and rates could still come down. We set up a euro-dominated bond portfolio. We conservatively leveraged this to arbitrage the difference in the yield curve and generate euro revenue now and for the future. Instead of a bond fund in euros (there weren't many at the time), we chose 8-10 bonds in varying maturities. I liked Asian names such as Petronas, HSBC, OCBC (in euros). As far as I could see they were better relative value than comparable European names. However, they did not have as high a loanable value. The dollar was trading in the high 80 cent to the euro, but the French franc had not converted to the euro, so we were looking at dollars to euros to francs.

The budget

A savvy real estate investor and friend told us to use a rule of thumb, double the time and double your proposed budget. Luckily we did and had gone long euro investments. We caught the dollar right as the euro plunged to 0.836 to the dollar in October 2000 from parity of 1.21 at outset. That was a good move. However, our budget (including VAT of 19.6% on new construction) headed well over 2.5 times the initial cost estimates.

It was necessary to have a French franc checking account, so finding a good local bank was essential. We were warned that overdrafts in France are a criminal offence, and it would be closed 'toute suite' if that happened!! Luckily our bank had a good internet and international department to make and monitor transfers. They caught a sophisticated fraud attempt on the account half-way through the project and stifled it with their 'call-back' system. We were from Hong Kong and building in France, so someone quite craftily tried to transfer funds into China Construction Bank with written instructions in French. The culprits were never identified, and our accounts have been carefully watched since.

The property is in Beaulieu Sur Mer which is around 20 minutes from the Nice airport and 30 minutes from the Italian border. It's nestled in front of the cliffs that run along the coast from the hilltop village of Eze all the way to Monaco. This gives it a special microclimate that makes it sunny all year round. It's proximity to sports, cultural events, and great restaurants add to the appeal. It's facing South directly overlooking Cap Ferrat. It has 19 Olive trees (which are legally protected and cannot be moved), and a variety of other fruit trees including fig, lemon and orange. It is also on three levels of terraced land which made it very complicated to build on. Costly retaining walls were not, unfortunately, planned in the budget.

Bids were put out for a contractor to build the main structure. The architect took the role of the major contractor to oversee all the work. Eventually we employed 40 enterprises from the electrician to the gardener to realise the final product. We had complications from the word go. The land was sloped and parts were unstable. We had to reinforce it - costly. We wanted some interesting architecture, but learned that nature and French bureaucracy were two forces to be reckoned with. With our permit, we could not change anything on the outside of the house which is supposed to be good for the architectural integrity of the area. The house could only have a plot ratio of 1 to 10 with the land. So we changed many aspects of the interior. We wanted interesting, yet practical architecture. For example we wanted arched windows and doors with wood on the inside for aesthetics, but aluminium outside for easy maintenance. We also wanted them to open out. We found a company who could do this in the US, but the French would not accept anything opening out because all French windows open in, with window sills on the outside. The architect refused to change this aspect of the architecture. We ended up with an Italian company who gave us the wood and aluminium but what a hassle it turned out to be.

We had regular meetings with all the contractors. My wife Karin Hansen (or "the general" as she is now known among her friends) whose French was much better than mine, took the lead on the entire project. In the process she learned a new French vocabulary. At the first meeting I attended, I was dressed very casually and was mistakenly introduced as the 'elevator man'. We found ourselves up to our eyeballs with detailed plan and measurements; such as how high we did we want the bathroom vanity, how far should the lights be from the mirrors, how big did we want the shower stall, etc. I found myself measuring everything in hotel rooms across Asia, pacing the distance in showers and between toilets, noting brands of fixtures, and finding out who had designed the rooms. If you need to know anything about hotel rooms in Asia give me a call.

We have enough crazy happenings to provide endless stories. We had carpenters who showed up with no saws, the painter with the wrong colour of paint, the wrong marble delivered, the electric lighting genius who went mad on us and walked out, the "Corsican giants" who cut all the rocks by hand for the retaining walls. But what makes it worse is if the marble layer can't complete his job in time, the window guy can't put in the arched windows. But the worst is the 35 hour work week and the different work ethics (or lack thereof) of those 40 or so enterprises. We were back living Peter Mayle's anthology with a bunch of friends in the background saying "I told you so".

Everytime we thought we had reached the end of the project, something else seemed to go wrong. There was a cultural divide in the method and attitude toward the work that nearly drove us mad. And three and a half years marched on - 3 1/2 years!!!

The maintenance expense of a house on an acre of terraced land with 19 olive trees, a pool, with complicated lighting system, that also happens to be in the South of France is a challenge. When you are used to the efficiencies of Hong Kong, household help, good service, and excellent public transportation, Europe does not compare. The increase of the value of the euro has certainly impacted the cost of living in France if you do not have euro income. And again thank goodness for those euro-denominated bonds.

Nearing the completion of the house, it feels like the day after Christmas. What to do now? Love it and live in it, rent it to make it pay for itself, or sell and leave it? My wife Karin's French is now great. We have met a lot of interesting people. I know a lot more about drinking good Italian and French wine. The house has a dual purpose now. An investment and a place we love. At this point in time we plan to enjoy the property and have told our friends they are welcome to visit the heart of the Cote D'azur and have some good food and wine anytime.

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