Leaseback Property : Adagio Paris Tour Eiffel (rue du théâtre)
Adagio residences are operated by a company of the Pierre et Vacances group, PV CP CITY. The Adagio brand belongs to Pierre et Vacances and the ACCOR group.
A procedure initiated by 31 lessors
Pierre et Vacances (PV CP CITY) was ordered on March 22, 2023 by the Paris judicial court to pay 848,649 euros to 31 lessors (845,549 euros in unpaid rent and 3100 euros in article 700 CPC) of the Adagio Paris Tour Eiffel residence.
The case law of the Cour de Cassation (Supreme/High Court) of 2022
The 18th civil division of the judicial court dismissed Pierre et Vacances/PV CP CITY’s arguments in accordance with the case law of the Court of Cassation of June 2022.
Rejection of the exception of non-performance based on an alleged breach of the lessor’s obligation to deliver and force majeure
The exception of non-performance and force majeure were rightly rejected, in view of the positive law established by the Court of Cassation.
State guaranteed loans (PGE) and public subsidies for Pierre et Vacances
Finally, the court noted the significant public subsidies from which the group of leaseback properties benefited.
The operator favors its shareholders over its lessors, despite the public aid it receives:
“Rent expense is almost stable compared to the previous year (up 3 million) renewal of leases (20 million euros) being offset by rent savings in discussions with the Group’s lesser lessors than those recorded in the previous year (47 million euros in FY 2021 vs. nearly 70 million euros in FY 2020).
Rental savings in FY 2021 are in fact limited to :
– to net savings from the application of the endorsements signed by 59.3% of individual lessors as of September 30, 2021 (deductible equivalent to 7.5 months’ rent, including 5 months’ rent in respect of FY 2021, i.e. a saving for the Group of around €29 million over the year, largely offset by a charge of €28 million corresponding to the face value of the vouchers allocated to the signatories of the endorsement).
7 million relating to suspended rents to non-signatory lessors for periods of administrative closure during which the Group considers, on the legal basis of the exception of non-performance or on the basis of the provisions of Article 1722 of the Civil Code, that the rent debt is extinguished.
– net savings from the application of agreements with institutional lessors, representing an amount of approximately 39 million euro for FY 2021 (deductibles / rent variabilization with guaranteed minimums, net of provisioning of rents under financial recovery clauses).
The 2019/2020 fiscal year recorded rental savings of nearly 70 million euros (30 million euros for rents from individual lessors suspended during the administrative closure period and 40 million euros for agreements negotiated with institutional lessors).”
(Brochure_of_AGM March 31, 2022, page 8)
“The rental debt to non-signatory lessors relating to the administrative closure periods has been extinguished in the accounts of the lessee companies, the Group basing its assessment on the legal basis of the exception of non-performance and on the provisions of Article 1722 of the Civil Code. Accordingly, no liability has been recognized in this respect as of September 30, 2021.
This position has been validated by the Group’s auditors.
…
– What are the texts, decrees or administrative regulations referred to under the term “administrative closure” used on page 15 of the notice of meeting, in respect of the period considered “mid-March to end of May and November to mid-December 2020”?
The texts applicable to the period from “mid-March to the end of May and November to mid-December 2020” are the following
Ministerial orders of March 14 and 15, 2020 and decree n°2020-293 of March 23, 2020
– Decree n°2020-548 of May 11, 2020, modified by decree n°2020-604 of May 20, 2020
– Decree n°2020-1310 of October 29, 2020
Debts due in respect of all unpaid rents to non-signatory individual lessors for the period from January 1 to June 30, 2021 are recorded as liabilities (under trade payables in the Group’s parent company and consolidated financial statements) in an amount of approximately 32 million euros as of September 30, 2021.
As of today, these same liabilities represent only 16 million euro, the share of non-signatory lessors having been halved compared to September 30, 2021. The suspended rents for the other so-called interim periods (periods between administrative closures) have also been settled in full.
The Group, with the support of its legal advisors, considers that the rental debt relating to the administrative closure periods has been extinguished. The Group relies on the following legal bases:
– The exception of non-performance due to the breach of the obligation of peaceful enjoyment (articles 1219 and 1719 of the Civil Code); and
– The basis of the partial destruction (loss) of the premises (Article 1722 of the Civil Code).
Consequently, no provision has been recorded in the Group’s consolidated financial statements in this respect.
(Answers of the Board of Directors to written questions from shareholders, combined general meeting of March 31, 2022)
Statutory Auditors’ Report of September 30, 2021
The auditors’ report of September 30, 2021 specifies the existence of a debt-to-equity conversion in the amount of 551 million € and “maintenance of a portion of the EMP in the amount of 25 million“.
[learn_more caption=”PGE converted into capital”] The PIERRE ET VACANCES group will therefore not be forced to repay 215 million € of the 240 million € of the first state guaranteed loans [/learn_more].
The new and second state guaranteed loans of 34.5 million €
The PIERRE ET VACANCES group benefits from a new and second state guaranteed loans in the amount of 34.5 million euros.
(Statutory auditors’ report of September 30, 2021, pages 17, 19 and 43)
The “closing” aid
The operator obtained so-called “closure” aid from the State in the amount of 24 million € and “aimed at compensating for the uncovered fixed costs of companies whose business is particularly affected by the Covid 19 epidemic.”
(Auditors’ report of September 30, 2021, page 44)
Refusal to sign agreements unfavorable to lessors under the pressure of pseudo-conciliation before the commercial court
The operator intends to make lessors pay for its operating risks, although it is not sharing the booming profits from the record years of tourism in Paris in 2018 and 2019 with its “investors,” the individual lessors.
The operator tried to get the lessors to sign a rider acknowledging that they had breached their delivery obligation in exchange for non-existent concessions such as the payment of rent for subsequent quarters.
Lessors can congratulate themselves for not giving in to pressure and untruths.
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