FW: Rio
glug
On 20/03/2011 18:23, "James Palumbo (MSHK)" < wrote:
OK, let's run the maths.
- What's the total project cost, with refurbishment costs laid out in >detail? (You need to pin down refurb costs before you buy) 2. What will >be the monthly interest payments assuming interest rate rise and >conversion risk?
- How do you propose to re-pay the capital net of tax? - remember >E1.5m net is about E3m gross because you have to gross up for tax 4. >Does your total income, less London living costs, less interest >payments, support capital repayments?
- How long will it take to re-pay the capital, does this fit with HSBC >loan timescale?
You need to lay all these numbers out on a spread sheet, then fiddle >with some currency and other variables. Once you've done this you'll be >crystal clear about your commitment. My finance guy Richard, who I >think you know, can help you with the exercise if you'd like.
XXXXX
From: Peter Mandelson
Sent: 20 March 2011 20:28
To: James Palumbo (MSHK)
Subject: Rio
I am sure you are right to be cautious about economy. Question is >whether myincome will be seriously cut in bad scenario. I view Lazard >as secure - they want me/BWP/GC to do more for them eg in Russia. There >will be some sort of bonus at end of year. I can use this income to >make monthly interest payments and to pay down some capital if bonus is >reasonably substantial.
Double dip would reduce GC growth but not I think its general income as >we are not dependent on UK alone.
So I think my repayments would be very large but secure - I do not >reall= have other calls on my income in UK as I live cheaply.
There is an issue of repayment of capital but I am prepared to chance
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that against expectation of future income growth. And will discuss with >bank in meantime.
I don't much like borrowing more than 50%, makes me nervous. I have >savings in UK and Bxl (which amount to around 400k) which I would much >prefer to keep for emergencies but that is not a necessity. Ben has >told me to approach bank and secure 500k of loan against the money that >my personal company, Willbury, has from book, speeches etc. Otherwise >would be secured against London home (at present no mortgage).
The issue for me is whether I want to sacrifice almost every other >income use in order to do Rio (including annual taxes, upkeep etc). >There are two answers to this. One, what else is there to do with my >income ? Of course I would like a bigger home in London but this is not >vital. I would like somewhere in country but again this is not vital, >and I would prob only use it once or twice a month at most because of >work and travel (and I can use Jacob's estate home that is already available to me).
Second, most important, in addition to wanting Rio base for R (we are a >partnership) I really like the place more than I expected. Sea, shops, >variety, services, exercise, people, weather, surrounding mountains all >positive for me. Language is handicap but not a disqualifier. Through >GC and Lazard I should be able to generate some Brazilian income which >helps on currency (Real over valued and costly for me).
Then there is the prospective property itself. It's not perfect and >needs lot doing including removal of walls, re-config of rooms etc. But >it has 40s charm, it is not new build synthetic/plastic, it is well >located and I feel warm every time I return to it (woman owner gave us >keys for weekend). Only 4 flats in building, one owned by architect who >would supervise project. It has rare , large outside terrace space. >Rio property prices are rising fast with football and Olympics >approaching plus general economic expansion. There is constraint on >supply: Ipanema etc lies between the mountains and sea so no room to expand.
So, many reasons to be negative andcautious, but others to be hopeful >and optimistic.
Also, you are looking at economics - always uncertain - but you are no= >factoring the emotional - the enjoyment, contrast, peace of mind, >generosity (as in your own Cat property purchase). The project would be >expensive but also fun. x
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