Foreign Investors: US Real Estate to Recover in Q2, 2010

Foreign real estate investors say they expect to see a recovery in the U.S. real estate market by the end of the second quarter of 2010, according to the results of a new survey released today by the Association of Foreign Investors in Real Estate (AFIRE). Completed in the past month among the association's nearly 200 members, the survey was conducted by The James A. Graaskamp Center for Real Estate, University of Wisconsin - Madison. This is the first mid-year survey to be conducted by AFIRE.

Respondents projected their investments for the remainder of 2009 will substantially out-strip investments completed year-to-date. On the debt side, survey respondents say they expect to invest three times more than current investment levels year-to-date; equity investors expect they will place seven times more than current year-to-date investments. Overall, three quarters of the survey respondents had not yet invested in 2009; however, more than two-thirds of them plan to invest some debt or equity in U.S. real estate before the end of the year.

Survey respondents continue to be optimistic in their investment projections. Thirty-one percent said they were more optimistic than at the beginning of the year; 16 percent said they were more pessimistic; and 53 percent said they felt about the same as at the beginning of the year.

In the 17th Annual Survey, released in January, respondents named Washington, D.C., New York, and San Francisco respectively as the top three cities for their investment dollars. "In this survey, respondents echoed those choices saying they expected the same three cities to lead the recovery," said James A. Fetgatter, chief executive of AFIRE. "However," he added, "The perception that Washington, D.C. will be the first to recover has risen dramatically since the Annual Survey. Twice as many respondents named Washington as their city of choice over second-place New York." Boston, which has not appeared among investors' top five cities since 2001, was selected as the fourth city and Los Angeles, fifth.

Survey respondents also said that the office sector would recover first, followed by the multi-family and industrial sectors. This is a shift in investor perception from the results of 17th Annual Survey in which investors expressed an interest for multi-family over office buildings as the preferred property type for their real estate investment dollars.

Source: MarketWatch.com 17 June 2009

FOREIGN BUYERS HAVE DISAPPEARED IN THAILAND

The uncertain political situation has continued to take a toll on Thailand's property market.

The dangerously unpredictable turns Thai politics has taken in recent months have scared off foreigners, who no longer seem interested in buying property in this country, says Fragrant Group president James Duan.

The Taiwanese developer of three condominiums _ Fragrant 71 in Sukhumvit Soi 71, Prime 11 in Sukhumvit Soi 11 and Circle on New Phetchaburi Road, Soi 36 _ said his company has not seen a single new foreign customer since the seizure of the capital's airports last December.

Foreigners who had previously bought units at Prime 11, which is due for completion in two months, and Circle, where construction is proceeding, have not dumped their contracts and walked away. However, Mr Duan said foreigners are worried about what might happen here.

Their worries do not centre on any difficulty they might face getting out of the country should the airports be seized again, but rather on the soundness of their investments. ''Although Thais too are worried, they are used to all this up to a point, but foreigners are extremely sensitive.''

However, Mr Duan feels sure the situation would improve if the dilemma is resolved satisfactorily because the country has faced other serious political problems over the past 30 years and has always eventually settled down.

Both Prime 11 and Circle have drawn European, US, Middle Eastern and Taiwanese buyers. Circle has attracted more Middle Eastern people, said Mr Duan, because it is just around the corner from Soi Nana, which has a heavy Middle Eastern influence. Neither project has drawn many people from mainland China, although there is expected to be a heavy Chinese influx in the next five years.

Mr Duan pointed out that one of Circle's selling points is that it is close to the soon-to-be-completed Makkasan rail link to Suvarnabhumi Airport. He said foreigners, and Fragrant Group as well, see Makkasan as the portal to Bangkok, but perplexingly Thais do not seem to think the rail link is of great significance.

Despite the unease over the shaky political situation and the difficulty in attracting foreign buyers, Fragrant Group is determined to continue developing property in Thailand, said Mr Duan. He is already scouting around for new land plots and hopefully the company will buy a a plot in one of the city's central business districts soon.

Fragrant's focus will remain on high-end condominiums. The company has no plans to shift gears to the middle or lower end of the market, mainly because it is banking on a resurgence of foreign clients, who mostly want to live in the heart of the city.

Mr Duan said the buyers the company targets may suffer from a lack of confidence in the Thai political scene at the moment, but they don't have financial problems, especially in taking transfers and getting bank loans.

To date, the Fragrant Group has invested 4.6 billion baht, with the value of its completed properties being 6 billion baht.

The Taiwanese developer is not too concerned about possible oversupply of condominiums in Bangkok because it feels that 3 million people out of the city's 10 million population can afford to buy a unit, while only around 100,000 units have been built so far.

However, there are other issues that will help propel the property market ahead. Among them is an anticipated rise in gross domestic product (GDP).

At the same time, bank lending is an issue, said Mr Duan.

''It's not that people don't want to buy _ they can't get bank loans.'' The reason Thailand is facing real estate problems now, he said, is that the banks don't release money easily because they are afraid of nonperforming loans.

''The finance industry here is not like America and other countries where people can just walk in and get cash.

''Being strict is good at one level, it leads to stability, but at the same time it slows growth.''

Mr Duan plans to use Thailand as a base for investment in other countries, especially India and China, whose drawing cards are their huge populations and economic growth.

He said there is a big difference in property prices between Thailand and some countries. For example, luxury condominiums in Taiwan cost around 300,000 to 400,000 baht a square metre, even in a bare-shell state.

''Condominiums in Hong Kong are five times more expensive than here, and in both Singapore and Taiwan they are three times steeper on average, but despite this the return on investment is better in Thailand.''

But there is no escaping the fact that these are extremely difficult times.

As Mr Duan sees it, the two segments of the Thai property market hardest hit by the lingering global crisis are at the extreme ends, one right on top and the other at the lowest rung.

The luxury end is battered by low demand because Thailand does not produce as many millionaires each year as does a country such as Taiwan.

Also, the millionaires in Thailand tend to prefer living in a house rather than in a condominium.

The low end is shaken by people being unable to borrow money to buy property because they have either lost their jobs or are in an insecure position.

However Mr Duan thinks the global economy seems to be improving because there is less bad news today than before, when the steady stream of negativity sapped global confidence.

He also expects Asia to see stronger economic growth than the West because he believes there is much more room for expansion here.

If the West is unable to obtain and market new technology, said Mr Duan, then Asia will be at the hub of future growth because Asia can expand rapidly for at least another 20 years without any problem.

Source: Bangkok Post 14 June 2009

Swedish developer joins posh condo units in Phuket

A Swedish developer has joined a list of luxurious condominium units along the premier vacation gateway Phuket in Thailand.

The Mandala Condominiums on Phuket´s west coast will soon be ready for occupancy among vacationers in Phuket.

Approximately 400 metres from popular Bang Tao Beach and next door to the five-star Laguna Phuket resort complex, golf course and facilities, Mandala Condominiums is the latest addition to this upmarket neighbourhood.

The developer of the property decided to invest in Phuket to offer reasonably priced, spacious condominiums in the Bang Tao area.

With a total area of 564.16 sqm, the Penthouses have a vast terrace area (265.84 sqm) offering a true ´outside-inside´ living environment, while all units have private swimming pools.

Only six months ago, many Phuket condominiums were being touted at prices well over 100,000THB/sqm. A number of these have sold well (and continue to sell well), while others are baring the brunt of the current economic crisis.

At Mandala Condominiums, the lowest priced unit is offered at 57,000THB/sqm (353 sqm.) while the Penthouses are only 58,000THB/sqm.

Source: www.news-realestatethailand.com 13 June 2009

CB Richard Ellis Surges on Plan to Help Repay Debt

CB Richard Ellis Group Inc., the commercial property broker with $2.4 billion in debt, surged 14 percent after announcing plans to raise up to $550 million selling shares and debt to the public and to investors including the U.S. hedge fund run by billionaire John Paulson.

The Los Angeles-based company will sell 13.4 million shares to Paulson & Co. for gross proceeds of $100 million, it said in a regulatory filing. It may raise another $50 million in a series of stock sales managed by JPMorgan Chase & Co. and also plans to sell by private placement $400 million in notes repayable in 2017, it said.

The broker has $310 million in debt due next year and $2.28 billion due in 2011, according to Bloomberg data, most of it tied to the 2006 purchase of Trammell Crow Co. Moody’s Investors Service assigned a Ba3 rating to CB Richard Ellis’s new senior subordinated debt and said the outlook is negative.

“CBRE’s real estate services business is highly correlated with real estate and economic cycles, especially its transactional businesses,” Moody’s analysts led by senior credit officer Karen Nickerson said in a statement. “Positively, Moody’s believes the company has adequate liquidity to fund its 2009 debt and operating obligations.”

CB Richard Ellis rose $1.11 to $9.25 in New York Stock Exchange composite trading.

Commercial real estate companies are losing revenue as lenders cut financing for building sales and employers slash jobs, reducing their need for office space. Both mean lower commissions for brokers.

Earlier Share Sale

Rival Jones Lang LaSalle Inc., based in Chicago and the world’s second-biggest publicly traded commercial property firm, said yesterday it plans to offer 5.5 million shares to repay debt and for general purposes.

CB Richard Ellis said in a separate filing that second- quarter earnings, excluding one-time items, may fall more than 50 percent from a year earlier.

Earnings per share will probably be less than 7 cents a share, compared with 16 cents a year earlier, the company said. That compares with the median estimate of 8.5 cents of six analysts surveyed by Bloomberg News.

In November, CB Richard Ellis abandoned plans to raise as much as $400 million in a private offering of convertible preferred stock and instead sold 50 million Class A common shares to the public.

The company paid $1.9 billion for Trammell Crow in 2006 in a bid to expand its building management business.

Quarterly Loss

The broker’s debt level “increases the possibility that we may be unable to generate cash sufficient to pay when due,” it said in its November prospectus. “We cannot be certain that our earnings will be sufficient to allow us to pay principal and interest on our debt and meet our other obligations.”

The broker reported a net loss of $36.7 million, or 14 cents a share, for the fiscal first quarter, compared with net income of $20.5 million, or 10 cents, a year earlier. It blamed “broad weakness in sales and leasing markets worldwide.”

Global property acquisitions fell 73 percent in the first quarter from a year earlier to $47 billion, or 1,014 properties, according to New York-based to Real Capital Analytics.

CB Richard Ellis earned about $77.8 million in revenue from property sales in the first quarter, down 66 percent from a year earlier, according to a presentation on its Web site. Leasing revenue dropped 32 percent to $267.1 million.

Source: Bloomberg 10 June 2009

Thai housing market still not out of woods: TRIS

BANGKOK, June 13 (TNA) – Thailand’s housing market is not yet out of the woods, nor will it be for the rest of this year, although the government has gradually introduced various measures to stimulate the economy, according to a leading Thai credit rating agency.

Bangkok-based TRIS Rating Co attributed the continued sluggishness of the housing demand to the overall decline in Thai consumer confidence and the lack of spending capacity on the part of prospective home buyers, the economic recession, the increasing numbers of the jobless, the stock market plunge, and continuing political conflict.

These factors had collectively undermined consumer confidence in Bangkok and elsewhere in Thailand.

The National Economic and Social Development Board (NESDB) forecasts that the Thai economy will shrink 2.5-3.5 per cent this year.

The firm said that the credit rating of housing developers in 2009 has been revised based on the competence of executives to adapt to the changing business environment, financial discipline, liquidity management capability, good connection with financial institutions, and strong support from parent companies.

TRIS said local housing developers will still face continued weakness in the market, particularly the single house and townhouse sections, for the remainder of this year, and at the same time, new condominium start-ups have begun to decline.

Consequently, it is expected that the number of new housing starts this year would drop from that of the previous year. (TNA)

Source: MCOT 13 June 2009

Mass transit the key for Bangkok investors

Buying a residential property as an investment is a practice requiring careful consideration of the type of residence, its price and its location, according to property experts.

Investors are currently being offered guaranteed returns of 6 per cent per year on some properties, but returns can be as high as 10 per cent if the location precisely matches demand from tenants or new buyers.

The CEO of property brokerage Bangkok City Smart, Pumipat Sinacharoen, said if home-buyers expected a return on their investment from rental or resale, they should put their money into a residence close to Bangkok's mass-transit system.

According to the company's database, the preconstruction value of condominium units around the mass-transit system can be expected to increase at least 10 per cent and sometimes more than 20 per cent when construction is complete and units are transferred to owners.

Investors who booked condominium units close to both the Skytrain and the subway in 2007, and whose projects have been completed this year, have seen the value of their properties rise more than 20 per cent, depending on the location.

If the projects are only 100 metres from a mass-transit station, investors will find if they wish to resell their properties, the value will be more than 20 per cent above the amount they paid at a preconstruction stage, he said.

If investors are seeking long-term returns on investment by opening their condominium units for rent, the location principle is the same: units within 100 or 200 metres of a mass-transit station will generate returns on investment between 6 and 10 per cent per year.

A one-bedroom condominium unit in such a location would attract a monthly rent of between Bt10,000 and Bt15,000, Pumipat said.

However, if investors are interested in buying a detached house and letting it for rent, the best locations are near expressways or main roads providing easy access from outer suburbs to the city centre. These locations include Ram-Indra, Kaset-Nawamin and Rama V-Ratchapreuk.

Property Perfect CEO Chainid Ngow-sirimanee, whose company has residential projects in both the Rama V-Ratchaphruek and Ram-Indra areas, said a number of foreign tenants were interested in renting detached houses in these locations, offering rents between Bt30,000 and Bt50,000 per month, depending on the location.

"If people are interested in investing in a detached house, they should be very careful about selecting the location and the project environment. It needs to have more space and the design has to offer closeness with nature that will please foreign tenants. They prefer to live in detached houses rather than condominiums," he said.

However, investors may turn to one of several development projects in Bangkok that are now guaranteeing returns on investment of at least 6 per cent per year.

One such project is Eight Thonglor, by Pacific Star International (Thailand). Construction will be complete this month and the purchase price is Bt150,000 per square metre, up from a preconstruction value of Bt105,000 per square metre in 2007. The developer is not only offering a guaranteed annual return on investment of 6 per cent, but is also offering to manage the properties for rent.

Developers making such offers are at pains to point out the difference between the returns they guarantee and the current interest rate for bank deposits, which is lower than 1 per cent.

Villa Sikhara by Sikhara Kotobuki Property, a joint venture between Japanese-owned Siam Kotobuki and Thai investors, is offering to guarantee an annual investment yield of 6 per cent over five years for buyers of its condominium units in Soi Thonglor 25. The project will be completed within the first half of next year.

Source: The Nation 10 June 2009

For Sale in ... Thailand

THREE-BEDROOM THREE-BATH HOUSE IN PATTAYA, THAILAND

With views of a floating market from a private balcony; echoes of local design in the exterior; and stylish, warm interiors; this house, built to the current owner’s specifications in 2007, captures the unique appeal of life in this gulf-side resort.

The floors, cabinets and woodwork are made of Burmese golden teak, and the house has a traditional Thai peaked roof. Downstairs, the open-plan living area consists of a living room and dining room, and a kitchen with a black ceramic sink and marble countertops. There is also a guest bathroom on the ground floor. Upstairs, the master bedroom has an en-suite bath, and sliding glass doors lead to a balcony with a view of the Jomtien floating market, where locals sell vegetables and flowers from shallow-hulled wooden boats. Some of the windows upstairs also offer views of the ocean. There are two additional bedrooms and a bath upstairs, and a common room opening onto a covered patio area overlooking a private pool. The house has central air, and all the windows are framed with golden teak. The house is being sold fully furnished.

The property is landscaped with jasmine, palm trees, and fruit-bearing trees like mango, papaya and pomegranate. The pool area has an outdoor shower and a shaded area with lounge chairs.

The house is just off Sukhumvit Road, the main highway from Pattaya to Bangkok, about a two-hour drive away. The airport is about an hour away, and the beach is five minutes from the house.

MARKET OVERVIEW

The real estate market in Thailand’s beach resorts is fed mostly by foreign buyers, who make up more than 90 percent of the market share, according to Frank Khan, the director of Knight Frank Thailand’s residential department. Because of this dependence on incoming foreign money, which has become scarce because of the global economic crisis, the second-home market in Phuket and Pattaya has ground to a halt. Mr. Khan said the exception was the adjacent resort town of Hua Hin, which has remained a popular second-home destination for wealthy Thais, including the king of Thailand himself.

Mr. Khan says homes priced below 10 million baht (about $290,000) are selling, but the market above that threshold is stagnant, even in Hua Hin and Bangkok, where some investors are still buying at the lower end. The large expatriate community in Bangkok mostly revolves around the international businesses there, said David Gray, the director of East Coast Real Estate, based in Pattaya, and there is not much of a high-end second-home market in the city itself.

Currency fluctuations are also affecting the Thai second-home market, according to Mr. Gray. He said the baht’s relative strength against foreign currencies, including the ruble, the British pound and the Australian dollar, was motivating cash-strapped foreign second-home-owners to sell their Thai holdings. “A lot of people are cashing in on the exchange rate right now,” he said. “People can take much less for their homes and still not lose anything.”

Second homes in Phuket cost about twice as much as comparable homes in Pattaya, Mr. Gray said, because Phuket is an island and developable land is more limited. He is seeing more second-home-owners moving away from the beach resorts and into the countryside, many building retirement homes. North of Bangkok, for example, it is possible to find an acre for a couple of thousand dollars. “For Thailand, that’s cheap,” he said.

WHO BUYS IN PATTAYA

Thailand attracts buyers from all over the world, according to Mr. Gray. He has sold properties to Europeans, Americans and Australians, as well as people from other Asian countries. Until a few years ago, British and German buyers were the most prevalent, but interest from German as well as Russian buyers has decreased, he said. “Americans seem to be buying at the moment,” he added, “or whoever holds American dollars,” because the dollar is relatively strong.

Foreigners cannot own stand-alone houses in Thailand, but there are a number of common ways to work around that stricture. Mr. Gray says foreigners can set up a Thai company through which to buy property (though new regulations may soon make this method more difficult). It costs 30,000 to 50,000 baht (about $880 to $1,460) to set up a company for this purpose, Mr. Gray said, and running costs after that come to about 20,000 baht (about $590) per year for accounting fees and taxes.

Many foreigners buy property in the name of a Thai person they trust, according to Mr. Gray. They can then lease the property back from the official owner for up to 30 years. The lease can be renewed at the end of its term, Mr. Gray said.

Foreigners are permitted to own a condominium or apartment outright, as long as more than half the development is owned by a Thai entity. “Any building can be up to 49 percent foreign owned,” Mr. Gray said. “There has to be majority Thai ownership in the building.”

When property changes hands, the buyer pays transfer taxes, fees and stamp duties to the local land officials. Mr. Gray says these costs are normally 5 to 6 percent of the declared value of the property. (Declared value is determined by the government, and is usually 50 to 60 percent of market value.) But Mr. Gray also said that the government, in an attempt to stimulate the market, had reduced all taxes and fees to less than 1 percent of declared value until April 2010. The seller pays the real estate agent’s commission, which ranges from 3 to 5 percent of the sale price.

Source: New York Times 26 May 2009

Environmental care and energy saving in Thailand

Architects want simpler assessment approvals for 'friendlier' buildings

Environmental friendliness, energy saving and "green" principles are rapidly becoming major trends in Thailand's property market, involving both property developers and producers of construction materials.

The companies are dancing to a tune played by consumers, who are these days keenly attuned to environmental issues and prefer buildings designed to minimise energy use.

In a significant move, the Association of Siamese Architects under Royal Patronage (ASA) has proposed to the Office of Natural Resources and Environmental Policy and Planning (Onep) that building projects developed in accordance with environmental and energy-saving principles should face a simpler form of environmental-impact assessment (EIA).

The proposal comes at a time when Onep itself has been considering the EIA procedure and how it can speed up approvals.

A survey by The Nation last week found both property developers and producers of construction materials were eager to meet the green demands of modern home-buyers who want to buy environmentally friendly homes that save energy bills. Home-buyers believe this will save them money in the long term.

The Siam Cement Group (SCG) is one producer of construction materials that has spent more than Bt1 billion on researching and developing green materials for all of kinds of construction, in the belief that doing so not only meets customer demand, but is also environmentally responsible.

One subsidiary, Siam White Cement, has developed white plaster and marble-surface textures for walls and floors that do not need painting. Another, Siam CPAC Block, has developed cool-plus blocks that are claimed to reduce internal heat in a building by seven to 10 per cent, as well as specialised blocks for roof gardens.

SCG Cement marketing director Syamrath Suthanukul said the group had a target of launching an average of ten innovative products per year, most of them green products developed to meet customer demand.

Siam City Cement has also announced a "Green Innovation" policy, under which it will develop new products and production processes to serve the growing demand for environmental friendliness.

Property developers are not only incorporating green principles into their buildings, but they're also providing greater contact with nature on the ground.

Supalai CEO Prateep Tangmatitham said architects had to begin their job by considering prevailing wind directions and the path of the sun from sunrise to sunset. Then, they not only had to select raw materials appropriate to the building's design, but also according to their ability to save energy.

Residential projects also have to incorporate larger green areas, in the form of parks and gardens, to suit modern lifestyles in which customers want to feel closer to nature, he said.

A new concept in energy self-sufficient housing is expected to arrive on the Thai market in the fourth quarter of this year.

LPN Development is planning a residential development whose main concept is care for the environment and energy saving. Managing director Opas Sripayak said his company believed the concept would generate greater long-term benefits for its customers.

"When home-owners live in a green building they will save on their electricity bills and living in a green area will give them a better quality of life," he said.

He said there would be clear environmental benefits if Onep accepted the ASA's proposal, because property developers would be encouraged to design and build green buildings.

Meanwhile, property agency Jones Lang LaSalle has taken the lead in a US project that may pave the way for similar energy sustainability projects around the world.

The agency is programme manager of a "highly collaborative team" that plans to take New York's iconic Empire State Building and reduce its energy use and greenhouse gas emissions by up to 38 per cent.

Once completed, the building is expected to achieve an Energy Star score of 90, placing it in the top 10 per cent of efficiency for class-A buildings - a major feat for a pre-war property. As well, it will seek certification as a Leadership in Energy and Environmental Design Green Building.

The New York project will make the first comprehensive approach to modelling steps for the reduction of energy consumption, in the hope that the process will be followed in buildings around the world.

The programme is aimed at providing an economically sound path for owners of existing buildings to pursue responsible energy management profitably.

Source: The Nation 3 June 2009

Dusit Thani Laguna Phuket Awarded for Staying Green

EIA awards Dusit Thani Laguna Phuket for the 6th time with the EIA Monitoring Award

Dusit Thani Laguna Phuket has received the Environmental Impact Assessment (EIA) Monitoring Award for 2008 in recognition of its consistent effort in management of the environment in and around the property.

EIA Monitoring Awards aim to encourage enterprises to be aware of their responsibility towards environmental impact, to support the enterprises in developing their EIA management and be a role model to others. The award, which has been won by the resort since 2000, was presented last month by Mr. Suwit Kunkitti, Minister of Natural Resources and Environment, during a ceremony at the Miracle Grand Convention Hotel, Bangkok.

“Environmental management has long been a key policy for the resort and that all departments of the hotel ensure this is one of their main concerns since our hotel was opened in 1987. All our staff are required to be friendly with the environment, and we aim to ensure that this is taken forward to our guests through our various campaigns and programmes,” said Mr. Peter Komposch, General Manager of Dusit Thani Laguna Phuket

In 1992 Dusit Thani Laguna Phuket received the prestigious International Hotel Association Environmental Award. Over the years there have been many campaigns implemented by the hotel to raise awareness of environmental concerns for both staff and guests, such as the Love Tree Planting Ceremony conducted after wedding ceremonies, nature bike tours, and the Water Day slogan contest.

Additionally, Dusit Thani Laguna Phuket has required the Green Leaf certification from the Green Leaf Foundation since 1998. The certification is presented to the resort to certify that it has contributed to the betterment of Thailand’s environment through the improvement of the hotel’s performance and efficiency.

The resort has also won other notable environment related awards, including the Tourism for Tomorrow Award from British Airways in 1996, the Environmental Champion award from TUI Deutschland in 2004 and the Excellence Award from TAT Tourism Award in 2008.

Source: www.etravelblackboardasia.com 1 June 2009

Bangkok - Home prices at city's heart

Prices here deemed 'a challenge to investors' by agency

The average price being paid for a condominium unit in the Central Lumpini area is now Bt112,765 per square metre, ranking higher than other popular locations in central Bangkok, according to real-estate firm CB Richard Ellis Thailand.

This is followed by units in the Sukhumvit area, which are presently averaging Bt100,549 per square metre, and those near Silom and Sathorn roads, which are selling for an average of Bt95,311 per square metre.

These are still substantially below the record of Bt370,000 per square metre set in the second quarter of last year by The Sukhothai Residences on Sathorn Road. The price was reached when the developer had sold 70 per cent of the presales target, so sales were temporarily closed in June 2008.

CB Richard Ellis (Thailand), the project's property agency, said sales would reopen nearer to the project's completion.

Q Langsuan on Rajdamri/Rama IV is currently the city's most expensive residential project, recording prices between Bt180,000 and Bt280,000 per square metre. About 30 per cent of the project, which has a market value of Bt3.4 billion, has now been sold, said Risinee Sarikaputra, research and advisory director at Colliers International Thailand.

Although Q Langsuan has recorded higher prices than other residential projects in Bangkok's central business district, they are still considerably lower than prices for residences in other central business locations in Asia, such as Hong Kong and Singapore, Risinee said.

According to a survey by Colliers International Thailand, the highest price being paid for a luxury residence in Hong Kong is 31,819 Hong Kong dollars (Bt140,000) per square foot (or Bt1.51 million per square metre) for the Gough Hill Residences, located in The Peak area. This price has fallen 8 per cent from last year.

The average price for residences in Hong Kong's central business district is about $16,103 per square foot (or Bt767,000 per square metre). This price has fallen about 30 per cent since the final quarter of 2008, following the onset of economic recession in Hong Kong. It is still more than six times higher than the average prices in the most popular parts of Bangkok's central business district.

The highest-priced luxury residences in Singapore are likely to be found at the Mercury project on Shanghai Road, where the current best offer is US$1,250 (Bt42,600) per square foot (or Bt461,000 per square metre). This price has dropped 13.8 per cent from last year's fourth quarter, when the global economic recession reached Singapore.

It is still four times higher than that for residences in Bangkok's central business district.

Demand for luxury residences in Bangkok has fallen significantly since the second half of last year, when the global economic downturn saw foreign buyers withdrawing their investments from the Thailand market, Risinee said.

However, when Bangkok's luxury residences are compared with those in Singapore and Hong Kong, those on offer in Bangkok represent an attractive challenge to investors looking for long-term arrangements, she said.

Last week, Israel's largest real-estate developer, Industrial Buildings, a subsidiary of the Fishman Group, announced a joint venture with local company Pace Development for the Bt18-billion Maha Nakhon project.

Fishman Group managing director Anat Menipaz-Fishman said her company had decided to enter Thailand's property market, because prices here were four times cheaper than those in Singapore and six times lower than those in Hong Kong.

The Maha Nakhon project will comprise luxury condominiums, hotels and retail space on a land plot of about 9 rai held on long lease on Narathiwat Road, near Chong Nonsi Skytrain Station.

Source: The Nation 2 June 2009

Israel's Fishman Group invests in Thai property project

Bangkok - Shrugging off political instability and recession, Israel's Fishman Group has chosen Thailand for its first major property investment in Asia, a 18-billion-baht (500-million-dollar) luxury property development in Bangkok, media reports said Thursday.

'We want to enter Asia and chose to do so in Thailand because we believe the country has good potential for long-term investment despite its politcal problems,' Anat Menipaz-Fishman, managing director of the Fishman Group, said.

'And it is cheaper than other Asian countries,' she added, in an interview with The Nation newspaper.

Fishman, through its publicly listed Industrial Building Corp, on Wednesday announced a joint venture with Thailand's Pace Development group to invest 18 billion baht in a luxury 'mixed-use' property project in Bangkok.

The project, on which construction is scheduled to begin in the third quarter 2009 and is expected to be completed in 2013, will include 200 Ritz-Carlton Residences, The Edition Bangkok boutique hotel and a 'luxury lifestyle' retail centre.

The investment comes at a time when the Thai economy has been suffering from more than a year of unprecedented political instability, caused by anti-government street protests, and has entered recession.

Thailand's gross domestic product (GDP) declined 7.1 per cent in the first quarter of 2009, after dipping 4.2 per cent in the last quarter of 2008.

Source: Business news 28 May 2009

Land purchase through Thai spouse forbidden: Land Dept

PHUKET CITY: The director general of the Land Department has reiterated that foreigners using Thai nominees to buy land anywhere in the country will have their land title deeds revoked if caught – even if the nominee in question is a lawfully wedded spouse.

Land Department Director Anuwat Meteewiboonwut made the comments during a recent stop in Phuket as part of a nationwide inspection tour of 30 provinces.

The tour is aimed at improving public services by land officials in three areas: dress, conduct when dealing with the public and working harder to eliminate a backlog of work.

Many members of the public have complained that it takes up to a year to complete a transaction that should only take one day, he said.

Mr Anuwat, a former governor of both Phang Nga and Samut Prakan provinces, said he was satisfied on the first two points, but rated the general level of success among land officials nationwide at speeding up their work rate at “only 30%”.

The next round of inspection tours will come in July, after which time personnel changes will be considered if service does not improve, he said.

“We have to keep pressure on them, otherwise the work will not get done,” he said.

As for foreigners seeking to buy homes in Phuket, they can do so through the Condominium Act, which allows foreign ownership of up to 49% of any project, he said.

Foreigners cannot use a Thai spouse as a nominee to buy property in Thailand, however.

“If the Thai spouse has enough money to buy the house that is fine, but if the Thai has no money and uses money given to him or her by a foreigner to acquire property, that is against the law. If we check and find out later that a Thai person has been using money from a foreigner to buy land anywhere in Thailand, we will revoke title deeds,” he said.

Mr Anuwat said the provisions of [Ministry of Interior] ministerial order 43 makes it difficult to issue land documents quickly, as it requires action from a number of different agencies. Desire for land on the island has also led to encroachment problems here, he said.

As a key market for property companies, Phuket is a constant source of problems and complaints to the director general’s office, he admitted.

“We will try to resolve these problems and develop our personnel continuously in order to provide high quality services. Fortunately the governor of Phuket used to work in the Land Department, so he understands the procedures and can help co-ordinate all the agencies involved,” he said.

Mr Anuwat was speaking of Phuket Governor Wichai Phraisa-ngop, who served as Land Office director in Nakhon Pathom in 1997 and as deputy director of the Land Department nationwide in 2003.

Source: Phuket Gazette 27 May 2009

Revenue from Phuket real estate deals plummets

PHUKET CITY: In an indication that the Phuket real estate market is not quite as robust as some like to suggest, statistics released by the Phuket Provincial Land Office reveal that income on land and property sales transactions was down over 70% year-on-year over the first four months of 2009.

There were a total of 1,945 transactions involving land title deeds for the period from January to April.

The total value of land transactions for the period was Bt883.24 billion baht, with the vast majority (Bt881.52bn) for land with pre-existing structures.

Income from transactions from January to April 2008 totaled Bt333.5 million baht.

Income for the same period this year was just Bt97.8m, down almost 71%.

Source: Phuket Gazzette 26 May 2009

The largest reduction was in business tax collection, which is normally paid for by the seller at a cost of 3.3% of appraised value. This figure fell from Bt132.0m to Bt18.2m year-on-year.

There was a similar downward trend in income from transfer fees, normally paid for by the buyer at 2% of registered value. These plummeted from Bt104.3m to Bt13.6m year-on-year.

Withholding tax, paid for by the seller at 1% of appraised value, fell from Bt85.7m to Bt58.6m year-on-year.

Stamp duty, paid for by the seller at 0.5% of registered value, fell from Bt11.6m to Bt7.5m.

Property analyst Bill Barnett of thephuketinsider.com told the Gazette that the figures reflect a "wait and see" attitude on the part of Thai investors, many of whom speculate by buying several units at a time without the intention of living in them.

Describing the figures as somewhat volatile, he cautioned that they are not a reliable yardstick for trends in the upscale villa market, where many sales are to foreigners on a leasehold basis or though offshore accounts, and thus not included in the Land Department figures.

Gloomy outlook for Phuket tourism industry

The Phuket Tourism Association has forecast that hotels in the province would see occupancy rates as low as 25-30 per cent, compared to 60 per cent in the low season last year, citing a number of negative factors.

Phurit Maswongsa, the association's vice president for marketing, said the spread of the type-A(H1N1)flu virus was one of the main problems hitting the industry.

"Phuket is already in the low [holiday] season, but occupancy rates will fall by about 30 per cent to remain at between 30-35 per cent," Phurit said.

He added revenues for operators in Phuket would be down 50 per cent compared to last year.

Only tourists from Australia, the Middle East and India are likely to be visiting the island.

He said promotional offers were not enough to tempt tourists back to Thailand as they were trying to avoid the possibility of catching the flu and were also concerned about political instability.

Moreover, occupancy rates in the high season are expected to be down 20 per cent, to between 50-60 per cent.

Laguna Resorts and Hotels forecasts the average occupancy rate at its Laguna Phuket property would be down 20-25 per cent in the second and third quarters of this year.

The average occupancy rate at the region's largest resort complex fell 27 per cent in the first quarter, to 65 per cent because people cancelled bookings to Phuket following the closure of Bangkok airport in November.

Thailand's political instability and the global economic crisis are key factors for the downturn and this has been exacerbated by the spread of the flu virus.

Debbie Dionysius, Laguna's assistant vice president for destination marketing, said it had offered 100,000 free rooms earlier this year so occupancy rates were pretty high in January to March. However, revenue was down.

Dionysius expected to see an improvement by the fourth quarter year as tourists should hopefully be returning to Thailand.

"We have seen some positive signs such as the economy picking up," she said.

Dusit Thani Laguna recorded the best performance in terms of revenue in 2007-2008 while Banyan Tree has recorded the highest occupancy rate over the last two years.

The hotel operator is trying to attract more tourists to the island by adding more activities and implementing new marketing strategies.

An upcoming event is the fourth Laguna Phuket International Marathon, which is scheduled for June 14. The event is expected to draw 4,000 runners from overseas and Thais. The event is also hoped to generate revenues of around Bt30 million for the province.

According to Dionysius, Laguna Phuket is working with international schools in Thailand, Hong Kong and Singapore to organise activities and camping trips. The scheme will run from June to September.

Moreover, the group will try to attract more customers from China where it has Banyan Tree offices in Beijing and Shanghai. Laguna expects visitors from China to increase from 5 per cent this year to 15-20 per cent over the next few years.

Source: The Nation 21 May 2009

Peaks and troughs

Bali has been little affected by the economic downturn

In Hong Kong, where real estate is an obsession, a recession is not taken seriously until property owners start slashing their asking prices. And, in the second half of last year, that happened. Across the territory the numbers on signs in real estate agency windows were crossed out and replaced with lower ones – usually in red ink. More recently such scribbling has given way to formal advertisements, with the bargains highlighted by downward-pointing red arrows.

On the Peak, Hong Kong’s most exclusive residential neighbourhood, this kind of salesmanship is considered unseemly; at the sales offices of realtors Midland and Centaline, both just a short walk from the upper terminus of the world-famous local tram, there is not a red arrow in sight. But, even if it’s not advertised, prices in this triangular enclave – bounded by Victoria Peak to the west, Mount Kellett to the south and Mount Gough to the east – also fell sharply late last year.

Bonnie Braidwood, an agent in Centaline’s “stately homes” division, is marketing a 3,200 sq ft, four-bedroom townhouse in the Strawberry Hill development on Plantation Road priced at HK$95m ($12.3m), or about 20 per cent less than it would have been 18 months ago. Savills meanwhile brokered four Peak transactions valued at HK$106m-HK$180m in the first quarter of this year, with two of the properties selling for 30 per cent below their original asking prices.

“We did well in the first quarter but for the coming quarter I don’t know,” says Savills’ Angel Law, who now has five detached homes on Rosmead Road with asking prices of more than HK$200m on her books. “After [the collapse of] Lehman Brothers [in September 2008] sellers were willing to adjust their prices [but now they are] conservative because they know it’s difficult to buy again. They will only sell at prices they know they won’t regret.”

Christina Brun, a dentist who runs a charity foundation, and her husband, Christian, a headhunter, timed their exit – and re-entry to – the Peak property market almost perfectly. With two children and another on the way, the couple bought a slightly “dark and dingy” flat on Peak Road in early 2007. “We wanted it as a home; particularly as an expat, the only way for me to settle down is to own the bricks I live in,” Brun says. But as prices soared through early 2008, “I became uncomfortable living there; those walls contained too much equity.”


The Peak in Hong Kong
They sold in August 2008 but were eventually tempted back into the market earlier this year thanks to the price falls. Their new townhouse on Mount Kellett Road has beautiful views over the island’s south side and it cost them just 15 per cent more than the amount they got for their first flat.
Such bargain-hunting is becoming increasingly common, says Victoria Allan at Habitat Property, who worked with the Bruns. And, buoyed by a 50 per cent rebound in the Hong Kong stock market since last October, Peak values are starting to recover – up 15-20 per cent over recent months. “The property market is remarkably active at the moment,” Allan says.

“The worst time was October-November last year,” Braidwood confirms. “At the moment it is relatively stable.”

For decades deep-pocketed developers and landlords have dominated the Peak market, with the latest census showing that only 40 per cent of the area’s 5,682 homes are now occupied by owners, compared with 56 per cent in the similarly exclusive Repulse and Deep Water Bay neighbourhoods. This helps explain why, for an area once synonymous with colonial grandeur, the architecture can be disappointingly graceless. Builders paying top dollar for sites ended up cramming as many “row houses” on to it as possible.

Yet, given the area’s exclusivity and the limited supply of housing, demand remained high. The peak of the Peak’s market probably came in July 2007, when Sun Hung Kai Property sold a townhouse at a record price of HK$41,100 per sq ft – following a December 2006 purchase of a lot on Mount Kellett Road for HK$1.8bn, or HK$42,200 per sq ft. But the ensuing economic turmoil has led to development and sales activity being slow ever since.

At 1 Barker Road, right next door to the US consul general’s residence, for example, realtors speculate that redevelopment work has been pushed back in an effort to coincide with the economic recovery. SHKP’s Mount Kellett Road development is meanwhile scheduled for completion, the company says, in “financial year 2011/12 and beyond”.

A four-hour flight away on the Indonesian island of Bali, a popular holiday-home destination for wealthy Hong Kong residents, the property market is surprisingly in much healthier condition. “Some foreigners here are in trouble and might be looking to get rid of their assets so, yes, we’ve got opportunities to pick up well-priced properties but it’s not like the market is crashing and everything is dropping in price,” says Dominique Gallmann, chief executive of Exotiq Real Estate in Bali.

“I’m quite staggered by the resilience of the market,” adds Matthew Georgeson, a former Hong Kong resident who set up a real estate company, Elite Havens, on the island. He recently heard of two “brilliant” properties, one worth more than Rp31.bn and the other just under Rp20.5bn, coming on to the market. “And offers of about 70 per cent of the asking price were rejected straight away”.

There are three reasons for the relative buoyancy in the market. The first is that it has always been virtually impossible for foreigners to obtain financing for a purchase on the island. “Because you’ve got to buy with cash you’re mostly talking about people who have the power to keep it,” explains one Hong Kong banker who recently spent more than $1m on land and the construction of a villa near Canggu, in the south-west.

The second is that Indonesia, with its non-export-oriented economy, has escaped the worst of the financial downturn and so most property owners are not feeling the pinch as much as people from other countries. Very few of the original Balinese landholders are in a hurry to sell and will wait until they get an offer that interests them.

The third reason is that while demand has dropped, it has not dried up. Bali is increasingly luring buyers away from Phuket in Thailand, despite the latter’s better beaches and infrastructure. “We had a very good January and February,” Gallmann says. “March and April were a bit slow but now the pipeline is filling up again.”

Having said all that, the market is not homogenous. While Georgeson says sales of $1m-plus properties are strong, the middle range of properties priced from $300,000 to $1m is suffering. “These [buyers] were spending bonuses [but now they are] more careful about job security,” he says.

Villa resales are also challenging, adds David Leadbetter of consultancy Hot Property. “There’s not much of a market unless the property’s relatively new or in an existing estate,” he says.

Yet land prices continue to show resilience. The cost of seafront property on the relatively undeveloped Bukit peninsula on Bali’s southern tip has doubled in the past three years to about Rp500m ($48,000) per are, the standard 100 sq metre unit of measurement on the island, while parcels in more developed Seminyak, considered the “Chelsea of Bali”, in reference to the upmarket London neighbourhood, are up by more than a third to Rp600m per are. And experts expect the trend to continue. “Prices might not rise at the rapid pre-crisis levels but they’re almost certainly going to keep rising,” Leadbetter says.

Most Bali owners are blissfully unaware of all this, motivated by the desire to maintain an island idyll not an investment. “I intend to keep my place indefinitely,” says Darren Fraser, an Australian who lives in Hong Kong but keeps a four-bedroom villa in Seminyak. “You wouldn’t buy here just for an investment because you’re unlikely to get more than 5 to 7 per cent return a year.”

Tony Carey, who works for Oakley eyewear in Hong Kong, bought a 40-acre cliff-front plot on the Bukit two years ago for Rp15.2bn and is planning his villa. “We used to do the Phuket thing but I prefer Bali in many ways,” he says. “It doesn’t have the sleaze in your face in the same way. I love Indonesian food. I prefer the culture, the surf.”

Source: FT.com 23 May 2009

Tom Mitchell is a reporter in the FT’s Hong Kong bureau. John Aglionby is the FT’s Jakarta correspondent

Phuket property under fire: Developer Lersuang revisited

Left: An artist's rendering of the stalled Infinity Heights project, high up over Bangtao Beach. Some say it's the altitude itself that may put the project at risk.

PHUKET: Earlier this month, Web blog thephuketinsider.com and the Phuket Gazette reported on an article in the UK’s Daily Mirror about the Phuket-based Lersuang Group. The Mirror story put Lersuang in the international limelight, saying that customers were demanding their money back but offering no comments from company management.

The Phuket Gazette promised to get comments from the companies involved and to compile a report on the holding company as well as the fate of several of its individual development projects.

Here is our report, based on comprehensive interviews with Lersuang CEO Errol Salih as well as property industry insiders, Lersuang customers and a new investor in one of the Group's key properties.

Background on the Holding Company

Lersuang Group Holdings Co Ltd was established with registered capital of 30 million baht (approx US$ 860,000) on July 19, 2005. Documents obtained from the Phuket Companies Registry office list five individuals as directors and shareholders: Selwyn Casey, Errol Salih, Viroj Chinpracha, Jumlong Sittichok and Maedta Vissesombat.

Mr Maedta is the only director not profiled on Lersuang’s website. However, buyers of units in Lersuang’s incomplete Tamarind Hills project are being told that “Dr Maedta” is now handling that project, according to Lersuang CEO Errol Salih.

Completed Projects in Phuket

Phuket residential projects successfully completed by Lersuang include Club Lersuang, comprising 56 apartments; Lersuang Apartments, 12 units; Lersuang Town Houses, with four free-standing villas plus six duplex homes; and Lersuang Apartments Phase 2, comprising six premium apartments. All five of these projects are located in the Bang Tao/Surin Beach area.

Owner Comments

According to a Lersuang property owner who, like most, was willing to speak to the Gazette only on condition of anonymity, early buyers of Lersuang properties are satisfied. “It’s the ones who came in later who are having problems,” he said.

Asked if he was happy with the quality of the construction and workmanship of his home, he said that he had been living there since its completion about three years ago and was satisfied with the construction standards. However, although he lives in the property, he and his neighbors are concerned that their assets might now be at risk.

“Nothing that I’ve paid for can be registered. The land that they [the project’s units] sit on is in question. We’re in limbo at the moment and we’re negotiating to get the matter settled,” he said.

The homeowner wouldn’t reveal which of the Lersuang developments he resides in but said that the issue he and his neighbors face is whether the units should have been built in the first place.

“I don’t think it’s a con,” the homeowner said. “There is a road that was laid around the property by the OrBorTor. It has drainage and electricity poles running along it but there’s an issue with the Land Department, who claim that the road is in the wrong place and should have been put somewhere else. Hopefully, there is no need to go to court over this issue and everything can be sorted out,” he said.

An Insider's View

A respected local property professional, who also insisted on anonymity and who claimed to have insider knowledge of the Lersuang Group’s operations, contacted the Gazette and said that the group began having difficulties with cash flow in November 2008. “They did do some small developments in the Bang Tao area which were completed and very successful. But the later ones were too big, way out of their league,” he added.

He went on to explain that the company stopped paying some of its staff and suppliers late last year. “I know they were having land issues. They didn’t exercise enough due diligence. I believe they were still trying to sell to customers while having the land issues,” the source said.

“On one of the projects, the access was not correct. It went across land belonging to a temple,” he added.

The source told the Gazette that he’d watched Lersuang attract a series of investors one after another from around the world. The company would use up the advance payments from their first buyer and then find a new buyer to cover their debts, he said.

“Eventually, the growth in debt outstripped the company’s ability to generate cash, and they couldn’t attract any more investors,” he added.

Asked if he thought Lersuang intended to run away from its debts, the source said ‘no’, that he knew the directors were still on the island and that they had been making efforts to pay the people they owed.

Stalled Projects – Phuket

About two years ago, Lersuang launched Turtle Cove. About a year later, Tamarind Hills was started in Layan. Both projects remain unfinished.

The group went on to launch Infinity Heights – two- and three-bedroom luxury apartments above Bangtao Beach, with prices starting at 13.4 million baht – again selling off plan. They also launched Lersuang Village, which comprises detached and semi-detached houses in Cherng Talay.

Lersuang Group CEO Errol Salih told the Gazette that Lersuang has a 50% share in the Infinity Heights project with the remaining 50% belonging to a company called A-Plan, which initially raised the capital to start the development.

Pressed for reasons behind the stalling of Infinity Heights, Mr Salih admitted that one of the issues, ironically, is the ‘height’ of the site.

He said that on the strength of advice from an early survey, his company initially believed the entire site was within Phuket’s legal height limit of 80 meters over sea level, but that it now appears that some parts of the land are higher than that. He adds, however, that there is still enough land below the 80-meter level to build ‘financially viable’ homes.

Mr Salih also blames construction delays on local political turmoil and global economic issues, adding, however, that buyers would eventually see their homes completed.

When asked to comment on Turtle Cove, he said that Lersuang originally owned 40% of the shares in that project, but that those shares had now been ‘given away’ to a private investor who is currently revamping the plans.

On Tamarind Hills, he said that Lersuang initially owned 1/3rd of the project, but had also ‘given away’ its shares – in this case, to Sepco Sustainable Energy Products – and that Mr Maedta Vissesombat was now running the operations and dealing with the project's customers.

Stalled Projects – Hua Hin

On its website (www.lersuang.com), Lersuang lists Infinity Heights, Lersuang Village, Turtle Cove and Sariya Kamala Villas as its current Phuket projects. Also listed are developments in Hua Hin, including the Hua Hin Country Club Apartments (123 luxury units with five penthouses) and the Black Mountain Golf Course.

Joe Cole, the Daily Mirror, and the Hua Hin Country Club Apartments

It was the Hua Hin Country Club Apartments that received attention in the Daily Mirror story, which focused on Chelsea Football Team celebrity Joe Cole’s association with that project as the result of his appearance in widespread publicity for it. It’s not clear precisely what the footballer’s deal was with the developer, and Mr Salih was not at liberty to elaborate, saying only that Lersuang’s association with the Hua Hin Country Club Apartments was “as a brand name only”.

“No one has lost any money there [Hua Hin]. There will be a project that is done there,” he insists.

Mr Salih went on to say that a “new partner” has agreed to take over the Hua Hin Country Club project.

“He’s got some other investors. He is going to build something that is maybe not as grand, but something that nobody will lose money [on]. Whatever money we have received is going back to do that development,” Mr Salih said.

“As far as I know, they [Joe Cole and the new Hua Hin partner] are on very amicable terms; nobody's going to lose money. Most sales were done prior to Joe Cole being involved. He has not lost any money and neither have the people there. Nobody has lost any money at all in any of our projects,” he said.

The new Hua Hin partner, who also required anonymity to speak with the Gazette, confirmed that he was one of the original investors in the Hua Hin Country Club project and that he is working on a “rescue package” to ensure that those who had invested in the development will eventually get something.

“The land in question covers 8.5 rai but we won’t need all that for what we have in mind. Nothing has been built so far. At the moment, I’ve got some drawings; I’ve got some ideas; and I’ve spoken to one or two of the buyers,” the partner said.

He confirmed that initial plans were for 123 condo units, but that the new plans are for something a lot smaller, a residential project that he expects to be finalized and underway by July this year.

“What I’m telling people at this end is that Errol and the guys down there [in Phuket] haven’t run away. If they were going to run away they would have run away with a couple hundred million baht a few years ago,” he said.

“The whole thing will be new. It will be a totally new name, new design, new prices – everything,” he enthused.

Asked if Lersuang would continue to be involved in the Hua Hin project, he said that it wouldn't carry the Lersuang name or have anything else to do with that company, but that if Lersuang wanted to help out with sales, they’d be “very welcome” to do so.

Cash Flow, Buyer Defaults, and the Crisis in Phuket

Back in Phuket, Mr Salih admitted that Lersuang has had “some cash flow problems”, and that some Lersuang customers were “understandably upset”.

“We could not manage Phuket and Hua Hin under the circumstances and the present political climate.

“Tamarind Hills was probably one of the most difficult ones for us and we really didn’t know how to cope with it. It’s complex,” he said.

Hong Kong-based companies and financial advisors were responsible for raising the initial capital to start Tamarind Hills, Mr Salih says. “They were looking after all the money in Hong Kong via lawyers’ accounts. They have had some internal problems,” he said.

“We were originally the minority shareholder... But we ended up having to take over the shares of various parties at Tamarind Hills to protect the original land owners. We had...no choice but to take that project, even though it was too big for us. We would never have done it on our own [in other circumstances],” he said.

Mr Salih gave several reasons for Lersuang’s cash flow problems, namely buyer defaults on progress payments; political instability; insufficient support from the banks; and taking on too many projects at the same time.

“After the army took out the government, our turnover went from 80-100 million baht per month to zero for seven months,” he said.

“If the political unrest hadn’t happened, none of these projects would have been that much affected. Our brand name would have been very valuable. And that’s what we were trying to achieve. For the future, our plan was to sell the [Lersuang] name, like a franchise,” Mr Salih explained.

“We had very little bank support. Any foreign company in Thailand finds it very difficult to obtain credit from the banks [here],” he said.

Asked why Lersuang took on too many projects at once, Mr Salih explained that following his company’s initial success, land owners began approaching Lersuang to help develop projects. “It wasn’t a plan; it just happened,” he said.

Predictably, he also blamed the global economic slowdown. “Many of the buyers cannot complete their purchases,” he said. “We’ve got one guy with two penthouses. He’s lost 22 million pounds [sterling] in the last year in England. He told us that he would lose all his money if we finished his house,” he complained.

“We have a lot of these cases. The people would rather go to court and delay a project because they couldn’t afford to pay if the project was finished. We’ve actually written letters to say that we wouldn’t enforce the contracts. We would actually do a resale and give them their money back,” Mr Salih explained.

Salih's Summary

Asked what else needs to be done to solve the issues, Mr Salih told the Gazette that, “Going to court is pointless because no one wins. It actually jeopardizes the project because it gets bad publicity,” he said.

In closing, he stressed that Lersuang wasn’t the only company experiencing financial difficulties in the current economic climate and pleaded for more support from the government and banks for property developers.

“Who wants to invest in a country where they are shooting each other in the streets? We are here. We promote the country and we love the country. It’s difficult, though, when the BBC is reporting Thailand as one of the top five most dangerous places in the world,” he said.

Source Phuket Gazzette 20 May 2009

Century 21 seeking local realty foothold in Thailand

Brokerage aiming for 30 franchisees in the Kingdom of Thailand

The local unit of the giant US real estate brokerage Century 21 plans to manage sales of at least 10 projects worth 20 billion baht and have 30 franchisees by the end of this year, says executive chairman Kitisak Jampathipphong.

"We will expand our network, build the brand and develop technology, aiming to be among the top three property service providers in Thailand," said the former executive vice-president of Harrison (Thailand).

Century 21 Realty Affiliates (Thailand) Co Ltd was established two months ago and is currently managing sales of six projects, including the three-billion-baht 340-unit Hua Hin Heritage condominium in Khao Tao, developed by Thai Factory Development Plc.

In June, it plans to begin sales of two condominiums near the Charoen Nakorn BTS station, developed by General Environmental Conservation Plc with 171 and 79 units respectively.

It will also manage sales of some freehold units of the Waterford condominium in Sukhumvit Soi 50, which would be leased for 15 years at prices of 30,000 baht per square metre, half of the freehold selling prices.

The developer Waterford Property also plans to sell 50 of the current 160 serviced apartment units at its Water Diamond project in Sukhumvit Soi 30/1 for leasehold with sales managed by Century 21 (Thailand).

The brokerage has also signed a contract to manage sales of a new 500-unit condominium worth 1.6 billion baht on New Phetchaburi Road near the Thong Lor junction, being developed by Pool Asset Co.

Besides property sales, Century 21 (Thailand) offers a broad range of services, including international sales, valuations, property management of condominiums and offices, and business affiliation opportunities or franchises.

Mr Kitisak said that after the company held talks with 20 property brokers, two had signed on as franchisees. Century 21 (Thailand) charges an upfront fee of 600,000 baht for five years, plus an additional 30,000-50,000 baht per month, which would be waived during a promotional launch.

By the end of the year, Century 21 aims to be managing 30 properties, rising to 80-100 next year.

This year it expects to have 20 franchisees nationwide to sell across its database and share commissions.

"Property developers can be our franchises as we have a worldwide network, including buyers and sellers," he said.

Thailand is the 68th country where Century 21 has opened operations. It has 8,800 offices worldwide.

"The US property market is alive now. The Thai market is also resuming, following China," said Donald Lawby, president of Century 21 Asia Pacific. "Despite the political unrest, we believe there's an opportunity here."

Source: Bangkok Post 22 May 2009

Century 21 seeking local realty foothold in Thailand

Brokerage aiming for 30 franchisees in the Kingdom of Thailand

The local unit of the giant US real estate brokerage Century 21 plans to manage sales of at least 10 projects worth 20 billion baht and have 30 franchisees by the end of this year, says executive chairman Kitisak Jampathipphong.

"We will expand our network, build the brand and develop technology, aiming to be among the top three property service providers in Thailand," said the former executive vice-president of Harrison (Thailand).

Century 21 Realty Affiliates (Thailand) Co Ltd was established two months ago and is currently managing sales of six projects, including the three-billion-baht 340-unit Hua Hin Heritage condominium in Khao Tao, developed by Thai Factory Development Plc.

In June, it plans to begin sales of two condominiums near the Charoen Nakorn BTS station, developed by General Environmental Conservation Plc with 171 and 79 units respectively.

It will also manage sales of some freehold units of the Waterford condominium in Sukhumvit Soi 50, which would be leased for 15 years at prices of 30,000 baht per square metre, half of the freehold selling prices.

The developer Waterford Property also plans to sell 50 of the current 160 serviced apartment units at its Water Diamond project in Sukhumvit Soi 30/1 for leasehold with sales managed by Century 21 (Thailand).

The brokerage has also signed a contract to manage sales of a new 500-unit condominium worth 1.6 billion baht on New Phetchaburi Road near the Thong Lor junction, being developed by Pool Asset Co.

Besides property sales, Century 21 (Thailand) offers a broad range of services, including international sales, valuations, property management of condominiums and offices, and business affiliation opportunities or franchises.

Mr Kitisak said that after the company held talks with 20 property brokers, two had signed on as franchisees. Century 21 (Thailand) charges an upfront fee of 600,000 baht for five years, plus an additional 30,000-50,000 baht per month, which would be waived during a promotional launch.

By the end of the year, Century 21 aims to be managing 30 properties, rising to 80-100 next year.

This year it expects to have 20 franchisees nationwide to sell across its database and share commissions.

"Property developers can be our franchises as we have a worldwide network, including buyers and sellers," he said.

Thailand is the 68th country where Century 21 has opened operations. It has 8,800 offices worldwide.

"The US property market is alive now. The Thai market is also resuming, following China," said Donald Lawby, president of Century 21 Asia Pacific. "Despite the political unrest, we believe there's an opportunity here."

Source: Bangkok Post 22 May 2009

Thailand - Local shift in investment

Local investors are likely to play a key role in the property market in the downturn, according to the latest investment report from international consulting firm Colliers International.

The report found that industry players expect the local market to prefer domestic assets because overseas markets may continue to carry a higher degree of uncertainty over the near term.

In the first quarter, local real estate continued to interest a broad range of investors, including property funds and major developers, as property in Thailand is still cheaper than in many Asian countries, said Colliers research.

A major transaction in the first quarter was SMC Motor Plc's purchase of 3,400 square metres of retail space on Ratchadaphisek-Tha Phra Road for B53m from Chaopraya Mahanakorn Co.

Foreign property funds with strong financial status have been waiting for the right entry level to acquire Thai real estate. Investors have been keenest on land plots, followed by hotels and offices. However, as prime condominium prices flatten, land prices based on the sector's future appreciation now look expensive.

The shutdown of Suvarnabhumi Airport has scared off many foreign investors and buyers. The local property market has seen fewer retail sales to foreigners, who often buy in a high season from December to February, as well as less institutional and corporate investment.

Over recent years, one of the major foreign investors in Thai property has been Lehman Brothers, which is now in Chapter 11 bankruptcy in the US and has no need to speed up the sale of its property projects to raise funds.

Lehman Brothers (Thailand) has accumulated investment in real estate in Thailand of 50 billion baht. Key assets include Pacific Place, Mercury Building, Ital-Thai Building and undeveloped land in Koh Samui, as well as shares in Grande Asset.

"While many investors are targeting these assets, the complications of ownership and equity structures may delay the final deals. It is also not clear whether investors will be able to achieve discounted prices on these assets in the near future," the report said.

Source: Bangkok Post 23 May 2009

Rash of low-rise projects - Bangkok suffers from a significant oversupply of condominiums

Switch in property demand

Demand in Thailand's property market has performed an about-turn, sending developers who last year were selling city condominiums scattering to launch low-rise projects offering townhouses, double houses and detached houses.

Demand for condominium units has fallen significantly, leaving property firms to launch low-rise projects to boost their chances of achieving revenue targets this year.

Preuksa Real Estate is one firm that has faced lower-than-expected sales at three condominium projects at Thonglor, Pinklao and Yaowarat. All were launched in the first quarter of this year. The company has now revised its business plan to focus on low-rise residential projects, especially townhouses. It has added five new townhouse projects to its portfolio this year and is now planning to launch 27 projects instead of 22.

Property Perfect is planning to launch seven or eight new residential projects this year, including detached houses, townhouses and a condominium project.

Darvid Property is planning to launch two new detached-house projects with a market value of Bt1 billion on Bang Na-Trat Road.

Asian Property Development plans to launch 12 new residential projects this year. Five of them will be low-rise projects and the rest condominiums.

Leading developer Land and Houses has also focused on townhouses and detached houses after seeing strong demand in this market.

Preuksa Real Estate director and chief operating officer Prasert Taedullayasatit said his company saw home-buyers' behaviour change from buying condominium units to townhouses or detached houses, particularly townhouses located near to the central business district. Consequently, Preuksa's new business plan will focus on townhouses, rather than condominiums.

However, the company will go ahead with the launch of its latest condominium on Sukhumvit 26, worth between Bt500 million and Bt600 million, in the current quarter. It will be a low-rise condominium with only eight storeys, he said.

Property Perfect CEO Chainid Ngow-sirimanee said his company planned to launch eight new residential projects, worth Bt8 billion, by the end of next month. This follows the nascent market recovery in the first quarter of this year, following the slump in the final quarter of 2008.

More than half of the new projects will be detached-house and townhouse projects. The company may also launch one or two condominium projects, he said.

"We are launching fewer condominium projects because we can see stronger demand for detached houses and townhouses than for condominiums," he said.

The Agency for Real Estate Affairs said there were 51 new residential projects launched in the first quarter. They are offering 10,451 units with a total market value of Bt35.41 billion.

Nearly 40 per cent of the new projects are condominiums, and the rest are low-rise projects like detached houses, townhouses and double houses.

The agency's research has found that the switch in demand from condominiums to detached houses and townhouses has left Bangkok with a significant oversupply of new condominium projects.

Source: The Nation May 20, 2009

Sansiri to overtake L&H as Thailand's biggest developer

Sansiri is poised to become Thailand’s largest real estate developer this year, overtaking Land & Houses (L&H) for the first time. In 2008, Sansiri recorded sales of Bt15.1 billion, just short of L&H´s Bt15.4 billion. L&H expects 2009 revenue to be flat from 2008 at Bt14.4 billion, but Sansiri is currently targeting Bt17 billion, said the company´s president Srettha Taveesin.

“The first quarter of 2009 was the second best quarter ever for us. After the first three months of this year, we were already at Bt12.5 billion,” said Srettha.

“This year we will overtake Land & Houses as the number one developer in Thailand.”

The high level of sales recorded since the beginning of the year is partly a reflection of pent up demand carried over from last year, according to Srettha.

“The end of last year was bad for everyone; buyers were reluctant to commit at that particular time because of the political crisis, but despite the bad conditions, people do still want to buy.”

The uptick in sales that was apparent in the first quarter has not, however, benefited all developers equally. Purchasers are becoming more cautious, and, wary of projects that may struggle to close sales and reach completion, they are increasingly favouring the big developers who can more easily obtain finance and maintain cash flow.

“The big players benefited the most, because the banks will still finance them. Brand is very important, and consumers are still confident in the major developers. So the market may have only shrunk a little, but the number of players to take a share of the cake has definitely become smaller,” explained Srettha.

“I am sure we will see some small and medium sized players disappear from the market, but at Sansiri, we are lucky in that we can still obtain finance with no problem at all.

“We announced 16 projects at the start of the year. For those we had already acquired the land, but we are now looking at launching three or four extra projects at the end of this year or the beginning of next year. At the moment we have about Bt2 billion in cash in the bank,” said Srettha.

While all the projects launched by Sansiri this year have been located in Bangkok, going beyond the capital will be an important factor in the company’s future growth, Srettha explained.

“We definitely plan to do more outside of Bangkok; we are already the biggest player in Hua Hin. We have done six or seven projects there in the past, and although we haven’t had any new launches there this year, we are certainly still looking. We will look at Phuket, Pattaya, Samui, probably the only place we won’t look at is Chiang Mai.”

Source: The Property Report 21 May 2009

Real estate investors see opportunities in Asian markets except Thailand

Global real estate investors are looking to tap on to growing opportunities in Asian markets.

Experts speaking at an industry event, Cityscape Asia 2009, in Singapore on Tuesday said China currently offers the most potential.

This is due to a number of good valuations available in the market, and the economy's positive growth outlook.

China's industrial property sector has been hit hard by the global economic downturn -- over 100,000 factories closed shop in 2008. But experts say these properties offer good value as they are now undervalued.

And once these properties get snapped up, re-employment will start to boost commercial and residential real estate sectors.

John Evans, Managing Director, Tractus Asia, said: "In the Asian region there are opportunities across most of the countries. However, if you look at what's happening with the economies, the only one that is showing significant growth is still China. And while that growth is nowhere near the sort of stated eight per cent that the government said, it is still a healthy three to four per cent.

“With the crisis here, you've seen a decrease in property prices and... a lot of investors are trying to get out of non-performing assets, so you are seeing a lot of opportunities in China. In the real estate sector (China) is one place I will recommend."

Duncan Owen, CEO, Invista Real Estate, said: "Many of our investors that followed us from the UK and into continental Europe are looking increasingly to diversify, and diversify into long-run growth markets. And the mature Asian markets potentially give us just that type of opportunity to deploy capital and get the long-run types of returns that investors are looking for."

But market watchers say not all markets are equally attractive and warn of potential risks in the region.

Despite growing global investor interest in opportunities in the Asian property market, experts say that investors should be wary of the Thai property market as further decreases are expected in the year ahead.

They say prices in the Bangkok residential property market could decrease by some 25 to 30 per cent in the coming year.

Mr Evans said: "One to steer clear right now is Thailand. It is pretty obvious with political and economic instability that property values will be going down. Foreign direct investment has basically dried up in Thailand.

“My personal opinion is that we are going to see some further political instability. The Thai market tends to lag behind the economy and political situation by at least a year if not 18 months. So I think we are going to see a big decrease, maybe even 25 to 30 per cent in residential property in Bangkok as there is an oversupply and more supply coming online."

But observers also do not rule out future opportunities in the Thai market if the global economy and the Thai political situation begin to stabilise.

Source: Channel News Asia 19 May 2009

Two Thailand hotels in Asia Top 10 luxury hotels

Asia has long lured travellers with its fair share of exotic locations and ancient cultures. US-based luxury travel firm Kipling & Clark have issued a list of their favourite hotels in the region.

This list, complied by the firm's founder and seasoned traveler Randy Lynch, is not endorsed by Reuters.

1. Tied: Tawaraya Ryokan and Hiiragiya ryokan - Kyoto, Japan

Two of the most famous ryokans, or Japanese inns in Kyoto are located directly across the alley way from each other. It's difficult to distinguish Tawaraya from Hiiragiya -- they both represent the highest levels of service. Both ryokans successfully integrate the finest Japanese traditions and wabi-sabi philosophy, which emphasizes simplicity and purity, with contemporary conveniences that seasoned travelers expect. An added once-in-a-lifetime experience is arranging for a private Geiko and Maiko geisha dinner at either ryokan.

2. Four Seasons - Chiang Mai, Thailand

Smaller in scale than the much more expansive Mandarin Oriental Dhara Dhevi in Chiang Mai, the Four Seasons projects a more understated sense of luxury, engendering an intimate, Zen-like feel. Similar to the Mandarin, the Four Seasons staff is truly sincere and kind. With the expansion of the Four Season's Kid's Club, the family luxury travel experience here is similar to the Mandarin's. The spa and cooking class are extraordinary.

3. Tied - Mandarin Oriental Hong Kong & Mandarin Oriental Bangkok

The Mandarin in Hong Kong truly represents understated luxury, a peaceful oasis from the noisy, frenetic city outside. A recent renovation has resulted in the Mandarin's former balconies being converted to lounge/study area extensions, with stunning Victoria Harbor views.

The Mandarin Oriental Bangkok boasts a 130 year history of tradition and the highest level of service, making it a truly unique luxury property. It's unpretentious, understated and attentive and may have the largest, most varied breakfast buffet in all of Asia.

4. Gora Kadan Ryokan - Hakone, Japan

A short 45-minute bullet train ride from Tokyo, the Gora Kadan is a quiet, Shinto-Buddhistique oasis from the big city, offering rejuvenating hot mineral springs. Proprietress Mikawako, the third generation of Fujimotos to run Gora Kadan, has blended traditional Japanese ryokan hospitality with modern Western design in creating a luxurious spa experience. The Gora Kadan's original building dates back to 300 years and was the summer home of the Kan'in-No-Miya imperial family.

5. Tied - Raffles Grand Hotel D'Angkor & Amansara - Siem Reap, Cambodia

Most hoteliers would describe the Raffles Grand Hotel D'Angkor as a luxury 5-star hotel/resort, while Amansara, part of the Aman Resorts, fits into the elite category.

The Grand Hotel D'Angkor boasts an early 20th Century French colonial style property while the Amansara is formerly the guesthouse of Cambodia's King Sihanouk. The friendly, airy Raffles offers guests many opportunities to mingle with others, while the Amansara may be better for couples and high-profile travelers wishing privacy.

6. Peninsula - Tokyo, Japan

The 24-story Peninsula has the best luxury hotel location in Tokyo, directly across from lovely Hibiya Park, Imperial grounds, and adjacent to the Ginza shopping district. Envisioned by architect Kuzukiyo Sato to look like a giant Japanese lantern, the Peninsula combines subtle, Japanese hospitality with the Peninsula tradition of understated luxury.

7. Four Seasons - Shanghai, China

There is no disputing the level of service here -- personal, friendly and focused on individual comfort. The corner executive suites even have an extra room for the kids.


Banyan Tree Lijiang
8. Tied - Banyan Tree Lijiang - Yunnan, China & Hotel of Modern Art (HOMA) - Guilin, China

Located just outside the UNESCO World Heritage Site of Lijiang, the Banyan Tree Lijiang has created the perfect harmony of the local matriarchal Naxi culture and Banyan Tree's predictably friendly customer service.

With all 55 of its villas looking out at Jade Dragon Snow Mountain, this place has a spiritual soul-searching feel. The spa offers wonderful massage service from their Thai staff

The Hotel of Modern Art was founded by a Taiwanese business entrepreneur in 1997 and represents a lovely balance of world class sculpture, architecture, and art set against the backdrop of the natural beauty of the lush grounds. Despite the somewhat limited English among the staff, the genuine kindness and warmth delivered here is truly heartwarming.

9. Sofitel Metropole - Hanoi, Vietnam

Conceived in 1901, the Metropole combines wonderful French colonial architecture and history with Vietnam's cultural traditions of hospitality and service. Although there are really no bad rooms at the Metropole, the Opera Suite is a treat.

10. Maison Souvannaphoum Hotel - Luang Prabang, Laos

Formerly the residence of Prince Souvannaphouma, the small, Maison Souvannaphoum is a boutique French-colonial inspired property that is the perfect place to immerse oneself in the local Laotian culture. The friendly, intimate service here is like staying with close relatives. An added bonus of staying here is that the Maison is located on the street for the daily early morning Buddhist monks' rice offerings.

Source: AsiaOne 17 May 2009

Politics hurts Club Med in Phuket Thailand

PHUKET : Vacances Siam (Club Med) Ltd expects the performance of Club Med Phuket will improve in the third quarter of this year if local political uncertainties ease.

Chavalin Rodsawaddi, the company's country marketing and sales manager, said the occupancy rate of Club Med Phuket has been around 50% since the Songkran riots, down from 80-90% in normal times. But this is still higher than the 20-30% rates of nearby hotels on Karon beach.

"Many international tourists have shifted from Club Med Phuket to Club Med Bali and the Maldives because they are very sensitive to political issues here," said Mr Chavalin.At least 100 Thais per month have made reservations with Club Med to go to either Bali or the Maldives.

Mr Chavalin expects reservations for Club Med Bali will increase at least 10% this year, while the Phuket property will contract from 80-90% last year, and the Maldives will have flat growth.

The turnover for properties in the region this year will be on par with last year, due mainly to the global economic recession. Tourism worldwide has been affected, not just in Asia Pacific, said Caroline Puechoultres, president & CEO for Asia Pacific Club Med.

"It is a good time to gain market share from rivals like luxury hotels because many customers are downgrading their accommodations and looking for value-for-money services," she said.

Ms Puechoultres believes that people still travel when the economy is bad but they spend less and shorten their stays.

According to Club Med, about 80% of its customers will not change their vacation plans and 61% feel that all-inclusive packages are more attractive in today's economic climate.

"Occupancy rates and reservations at five-star hotels in Asia will drop this year due to the downturn," she said.

The company plans to expand its business to new destinations including China, Vietnam, and Cambodia. It plans to add one project each in the Maldives and Japan. The investment plan will start when the global economy improves.

Initially, it plans to open two resorts in China - one each for ski and beach locations. The company sees high potential in China due to its rapid economic growth during the past few years.

Club Med now has 80 properties worldwide and 10 in Asia-Pacific.

Source: Bangkok Post 14 May 2009