Colliers Thailand sees big deals behind scenes

NPA sales picking up but quietly

A decade after the 1997 economic meltdown, Thai banks still have a massive amount of non-performing assets (NPAs) on their books and many are now quietly emerging in the market, says Patima Jeerapaet, managing director of the newly reopened Colliers International property consultancy.

The value of the NPA properties that have lingered in the banking system over the past six years is approximately 170 billion baht and while some are in poor locations or in need of repair, there are good items that the banks are keeping in the hope of generating revenue or obtaining higher resale prices.

Although many auctions of NPAs have been held over the past eight years, Mr Patima noted that Thai banks had been unwilling to sell below the market price.

"These are old units and they have to be sold below the market value but banks could not accept this _ but now they are able to accept it."

Mr Patima says that investors are already talking to executives overseeing these NPA portfolios but most are wholesale buyers. "We have to accept that wholesalers have an advantage over retailers. ... People might question why they aren't selling to [ordinary] investors at lower prices but it is a fact that they are willing to buy big lots."

Those who are currently negotiating with the banks include local and international brokers as well as financial advisers but details of such big lots are rarely revealed in mainstream channels such as newspaper advertisements.

"Banks want to talk to real buyers who can prove that they have done this business before in other countries," Mr Patima explains.

This flow of NPAs means there are likely to be some good deals in the resale market. Mr Patima points to one large transaction that went through recently: a big plot of land in the Din Daeng area that a Thai bank sold after holding it for around nine years.

Foreigners continue to be interested in the Thai market despite the political upheaval and moves to amend the Foreign Business Act. The interest was apparent at Colliers International's recent meeting in Shanghai attended by 60 executives from 42 countries.

Colliers International is the local franchise of the international network that has changed hands, with its new owners and headquarters in Canada and not Australia.

The feedback in Shanghai was strongest from Colliers' Australia and Middle East branches with Australian investors interested in a variety of products and Australian construction companies looking for opportunities overseas.

Middle Eastern investors are keen on hotel and residential properties. The Thai office has just completed a feasibility study on a Sukhumvit project for one party. This potential project is worth two billion baht and is close to Bumrungrad Hospital, which Middle Easterners consider their part of town.

"There are still land plots in this area they are interested in, this is their community," says Mr Patima.

American investors too are interested in this part of the world with Mr Patima trying his best to draw them to Thailand in the face of competition from Vietnam and China. The Colliers office in Singapore is also referring high net-worth clients to Thailand. There will be a Colliers seminar around November with the Thailand office acting as the co-ordinator.

Regardless of whether investors are Thai or foreign, they are mostly shrewd enough to not invest in property or capital markets at their peaks and generally wait for opportunities when they slide. In Mr Patima's opinion, the current state of the Thai real estate market, which seems to be neither black nor white but a shade of grey, represents a good opportunity to invest.

Even though the market is slow, many real estate projects are being launched and some are quite successful, while other developers are holding back because they fear demand might disappear. Mr Patima explained that those that are successful are in the B+ bracket with demand disappearing in the B- grade.

In a grey-market situation there are still people willing to take a risk and invest because they understand that investing in property is a long-term venture, but there are others who are holding back, generally lower-income buyers.

Risky purchases in the recent past include those by speculators rushing to buy land around Suvarnabhumi Airport without adequate feasibility studies on noise pollution which led to their investments failing.

Another significant change in the central Bangkok property market foreseen by Mr Patima is the launch of small single-house projects in prime areas that are now occupied by ageing shophouses. This would cater to a segment of the population who do not like living in condominiums.

While these houses could be very pricey, those who want landed property have the choice of buying a house or townhouse near train stations, a notable example being the Soi LaSalle and Soi Baring area (Sukhumvit 105 and 107) where there are some interesting townhouse projects. Condominium developments too might reach this area soon.

"I think wherever there is a train station that will be the area that will really boom. For example three years ago people were just talking about Thong Lo but now we are seeing [condominium] developments reaching Onnuj."

Source: Bangkok Post