Source: Bangkok Post

Narai Phand site to be redeveloped

The American property billionaire Donald Trump will join in the investment and development of a new luxury retail plaza with Gaysorn Group on the four-rai plot that used to house the Narai Phand handicraft centre in central Bangkok.

An industry source said Mr Trump flew to Bangkok last month to talk with a Gaysorn executive about the site while Charn Srivikorn, director of Gaysorn Holdings, just returned from the United States last week.

”It’s likely that Mr Trump will co-invest in this project. He will also co-design this new luxury shopping mall,” said the source, asking not to be named.

The project at the Ratchaprasong intersection, Bangkok’s prime retail site, is intended to compete with two direct rivals nearby, CentralWorld and Siam Paragon.

Mr Trump may buy shares in Gaysorn Land Asset Management Co Ltd (Glam), a joint venture between Gaysorn Group and the Hong Kong property firm Hong Kong Land, by buying stakes from the Hong Kong side.

In July 2008, Mr Trump’s eldest son Donald Trump Jr told the Dubai-based daily English-language newspaper Gulf News that ”the Middle East and Asia will provide opportunities for growth in future”.

The executive vice-president of the Trump Organisation viewed Bangkok as one of the emerging markets, saying ”We’re looking at a lot of the Pacific rim area. [In] Thailand, we’ve spent a lot of time looking in Bangkok.”

The portfolio of the Trump Organisation, renowned as an international developer of deluxe properties, includes office buildings, hotels, condominiums, casinos, golf courses and country clubs, mainly in major cities in the US.

It is developing Trump International Hotel & Tower at The Palm Jumeirah in Dubai, launched last year with an average price of US$2,450, equivalent to 905,000 baht per square metre.

According to the property consultant Colliers International Thailand, Gaysorn Group this year bought the Narai Phand site from Phahonyothin Group for a 30-year leasehold.

The company plans to develop three components: retail, serviced apartment with 178 six-star units managed by Starwood, and high-end residences with 30-year leasehold contracts.

Colliers managing director Patima Jeerapaet said the project was expected to be completed in 2010.

In the future, there would be an extension from Gaysorn to Amarin and CentralWorld to provide convenience for shoppers, who are equally divided between Thais and foreigners.

Late last year Gaysorn bought back Amarin Plaza, which had 7.5 years remaining on its leasehold, from Erawan Ratchaprasong Co Ltd at 300 million baht. The saleable area at Amarin Plaza is approximately 26,000 square metres with about 400 shops.

”Gaysorn wants to renovate Amarin Plaza and upgrade it to be a luxury complex,” Mr Patima said. ”Unfortunately 40% of the tenants still have the remaining lease of 7.5 years so the plan is still pending until the leases expire.”

Besides 26,000 sq m at Amarin Plaza, Gaysorn Group has Gaysorn Plaza, managed by a joint venture with Hong Kong Land, with 12,600 sq m, compared to lettable space of 400,000 sq m at CentralWorld and 250,000 sq m at Siam Paragon.

Gaysorn also plans to develop luxury villas for sale at Cape Paradise on Patong Beach in Phuket, comprising 20 villas priced at around 100 million baht each. The show unit will be finished by the end of the year.

Trump in venture with Gaysorn

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Source: Bangkok Post

Minor International Plc (MINT) expects its earnings in the second half of this year will grow by 20% thanks to stronger hotel revenues in the fourth quarter.

Falling oil and food costs, plus easing political tensions, should also support operations, said chief financial officer Pratana Manomaiphiboon.

She said the company was confident of achieving its target of 15% revenue growth and 20% net profit growth.

MINT reported a second-quarter net profit of 351 million baht, up from 230 million in the same period last year, on revenues of 3.8 billion baht, up from 3.1 billion. First-half net profit rose to 1.1 billion baht from 681 million a year earlier, and revenue rose to 8.2 billion baht from 6.8 billion.

The hospitality business contributed 815 million baht in profit, food services 198 million baht, and residential property the rest.

MINT has set a budget of 17.6 billion baht for investment plans in the next five years. The budget allocates 6.1 billion baht to restaurant businesses, 8.5 billion baht to hotels, and three billion baht to the residential segment.

”We still have five billion baht for new opportunities,” Mrs Pratana said.

In the food business, MINT expects its restaurant outlets in Thailand and abroad will increase to 1,700 in 2010, from 964 now. It aims to open between 50 and 70 new outlets in the rest of this year, including three new The Coffee Club outlets in Thailand. Recently, it signed a 10-year franchise agreement for The Pizza Company and Swensen’s in India.

”In the second quarter, The Pizza Company’s average same-store sales dropped 7.2% because promotion and pricing strategies didn’t work. This was the first-ever [decline] for the brand,” she said.

Mrs Pratana acknowledged that same-store sales continued to drop 2% year-on-year in July, but had turned around in August thanks to new promotions.

Same-store sales for all MINT restaurants, including Burger King, Dairy Queen and Sizzler, rose 6.2% in the first half, with total store sales up 18.4%.

In the hotel sector, MINT plans to add 657 new hotel rooms to its portfolio with a total investment budget of 8.5 billion baht in 2010. The company operates hotels under the Four Seasons, Anantara, Marriott and Naadhu brands.

By 2010, MINT’s hotel portfolio will rise to 4,296 rooms from 2,700 now, including rooms managed under contract. The company will open the Anantara Phuket within the next two months with 83 pool villas as well as a new hotel and residence in Bangkok under Anantara by the end of the year. The 80-villa Anantara at Baa Atoll in the Maldives will be opened in October 2009, increasing its Maldives properties to four.

”Luxury hotels have seen occupancy affected by new competition, but we have hotels both locally and abroad. This will offset the impact if one market is down,” Mrs Pratana said.

For the first half, occupancy rates across MINT’s hotels averaged 72.1%, down 0.4 percentage points from the same period last year but outpacing the 62.1% average for the industry. Average daily room rates for MINT’s hotels were up by a strong 18% year-on-year at 6,408 baht, compared with 5% growth to 1,540 baht for the Thai hotel industry.

MINT shares closed yesterday on the SET at 14 baht, down 20 satang, in trade worth 52.58 million baht.

Minor projects 20% H2 profit growth

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The listed developer Sansiri Plc (SIRI) plans to raise condominium prices by a range of 8% to 30% on Oct 1 as it has seen resale prices of the units it has already sold rise significantly, according to president Srettha Thavisin.

”It’s our chance to make higher margins. Demand is so strong and we don’t want to miss the market opportunity,” he said yesterday.

He added that the company would raise prices despite having locked in construction costs with contractors.

Sansiri plans price rises for 343 units at seven projects priced at an average of 86,000 baht per square metre in the first half of the year, while market prices have been quoted at 90,000 baht.

”Higher inflation rates and fuel prices have pushed resale prices of condominium units to almost double in some locations,” he said. ”New condominiums cannot sell at our prices due to higher construction costs _ so if we sell at the same prices, we will lose the benefits.”

Mr Srettha added that resale prices at some Sansiri projects had risen to between 140,000 and 150,000 baht per sq m from a 90,000-baht launch price, as the units could be rented at 60,000 baht per month or 1,000 baht per sq m a month _ a yield of 8% to owners.

The seven projects included five in Bangkok: Prive{aac} on Wireless Road with 14 units remaining, Preen on Sukhumvit Road with 17 units, Siri on Eight on Sukhumvit Soi 8 with 3 units, Hive Taksin with 139 units and Hive Sukhumvit 65 with 32 units. The other two projects are in Hua Hin: Baan Nub Kluen with 67 units available and Baan San Suk with 71 units.

Price increases will depend on unit sizes, with penthouse units seeing the highest rise.

By the end of the year, Sansiri also plans to launch two condominium projects with a combined value of eight billion baht in the central business district, as well as seven low-rise projects with almost 1,000 units worth a total of six billion baht in locations including include Bang Na Km 8, Rarm Intra, Prachachuen and Ratchapruek-Chaeng Watthana in the Pak Kret area.

Although in the first half of the year Sansiri lost expected revenue of around four billion baht from its subsidiary Plus Property due to its condominium construction exceeding the legal height limit, the company has not altered its revenue target for the year of 17 billion baht, as it expects this sum be recorded in the second half.

Sansiri last week reported a first-half net profit of 364 million baht, an increase of 208% from 118 million baht in the same period last year, on sales up 6% to 5.87 billion baht. Second-quarter net profit rose 290% year-on-year to 179 million baht, on sales up 15.4% to 3.32 billion baht.

SIRI shares closed yesterday on the Stock Exchange of Thailand at 2.58 baht, down four satang, in thin trade worth 615,000 baht.

Sansiri lifting prices on Oct 1

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Source: Bangkok Post

The listed developer Supalai Plc plans to launch 10 projects worth 7.6 billion baht in the second half of this year, according to deputy managing director Atip Bijanonda.

The 10 projects are seven low-rise residential units worth 3.93 billion baht and three high-rise projects worth 3.67 billion baht.

Next week, Mr Atip said, the company would launch a condominium on a five-rai plot on Ramkhamhaeng Road, its first phase consisting of 500 units sized from 29 square metres and up and priced from 1.2 million baht.

A 1.88-billion-baht condominium in the Tiwanon area will offer units at prices starting from 1.3 million baht. The third high-rise is the new phase of Casa Riva, worth 610 million baht and offering units starting from 2.4 million baht.

Supalai’s seven low-rise projects will be outside Bangkok at locations including Phuket, Pathum Thani, Rattanathibet in Nonthaburi and Prakasa in Samut Prakan.

As of June 30 the company had a sales backlog of 13.4 billion baht, of which 2.16 billion baht will be transferred in the second half of this year, 4.48 billion next year, 5.2 billion in 2010 and 1.55 billion in 2011.

The company now has 23 ongoing projects with units worth 13.39 billion baht _ 1.81 billion baht worth of townhouses, 4.62 billion baht worth of single houses and 6.95 billion baht worth of condominium units.

Mr Atip said that this year the company also was earning revenue from renting its office building on Rama III Road, but could not achieve the target occupancy rate due to the unfavourable sentiment.

Supalai reported a first-half net profit of 649.3 million baht, an increase of 68% from 386.8 million in the same period last year, on sales up 36% to 3.26 billion baht. Second-quarter net profit rose 160% year-on-year to 476.3 million baht, on sales up 96% to 2.21 billion baht.

Supalai shares (SPALI) closed yesterday on the Stock Exchange of Thailand at 2.88 baht, down six satang, in trade worth 7.57 million baht.

Source: Bangkok Post

Raimon Land Plc is seeking Thai buyers for its unsold condominiums at two sites as the 49% quota for foreign buyers is full.

Henri Young, sales and marketing director, said foreign buyers had taken up their quota at The Lofts Yennakart in Bangkok and North Point in Pattaya. The former has 40 units left while Northpoint is 70% sold.

He said the company had drawn interest from Thais by showing them that the rental yield at The Lofts Yennakart was between 6.3% and 8%. It offers three units under a rent-to-buy programme. At Northpoint, rental yields are up to 11%.

Foreign quotas full – Raimon Land woos Thais

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Source: Bangkok Post

Investment not linked to SC Asset

The Shinawatra family plans to develop a luxury residential project comprising a hotel, condominium and villas for sale priced at $2-3 million each on a 160-rai plot on Mai Khao beach in Phuket next year.

An industry source said the development was not linked to the family’s property arm, SET-listed SC Asset Corporation Plc.

”If SC were to have resort developments in tourist destinations outside Bangkok, it would be over the next few years, not in the next year. This may be the family’s own investment,” said SC vice-president Kree Dejchai.

The property consultant Colliers International estimated the project would require an investment of at least 10 billion baht, excluding land cost. The market price for land plots on Mai Khao beach is 10-12 million baht per rai.

Mai Khao is emerging as an attractive area to local and overseas investors as land prices are lower than for other beachfront locations on the island. Patong beach, for example, can command 30-40 million baht per rai and available plots for new development are scarce.

Mai Khao is only a 10-minute drive from the airport and most of the land is still held by local people who do not want to wait for price appreciation.

In the past decade, there was no new development on Mai Khao except for the JW Marriott Hotel. Minor International Plc, which owns the JW Marriott, plans to launch the luxury villa Anantara at rates of 20,000 baht per night next month. By the end of the year, it will develop a four-storey building housing a Villa Market supermarket and high-end restaurants to support its guests.

The family of former Prime Minister Thaksin Shinawatra, who fled to England last week claiming his pending court trials in Thailand would not be fair, bought the Phuket plots through its representatives late last year.

A Dubai-based group also spent US$60 million to acquire 180 rai on Mai Khao from Thai owners and it plans to invest another $250 million to develop a Venice-style hotel.

As well, a Hong Hong-based investor is taking up 380 rai, and a joint venture between local and foreign investors is taking another 100 rai to develop a five- to six-star hotel and luxury villas.

SC Asset, meanwhile, will be sticking to its core business of mid-market residential development in Bangkok for now, according to Mr Kree.

This year the company plans to launch five new projects worth 2.1 billion baht, comprising two single-house projects and three townhouse estates.

After launching Vista Park Vibhavadi 2 early this month, only seven of 37 units remain for sale. The prices of three-storey townhouses range between 5.9 million and 6.9 million baht each. The company plans a similar project in the Chaeng Watthana area to tap rising demand from people working at the new government centre.

SC Asset reported a first-half net profit of 280 million baht, down 10% year-on-year, on sales of 1.91 billion baht, up 17%. Last year, its recorded high profits because of it had extra earnings from investments in three subsidiaries.

SC’s net profit in the second quarter 129 million baht, up 21%, on revenue of 958 million baht, up 34%. Revenue in the second quarter included 757 million baht from sales of units and 199 million baht from rentals.

The company plans to launch a resale service for its customers in order add value for its products.

SC shares closed on Friday on the Stock Exchange of Thailand at 8.00 baht, up five satang, in trade worth 8.73 million baht.

Shinawatra family plans luxury project in Phuket

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Source: The Nation

A widening bid-ask spread has emerged in major real estate markets across Asia, as property owners, supported by solid market fundamentals, remain reluctant to lower their asking prices, according to CB Richard Ellis’ Asia Pacific Investment Market Report for the second quarter of 2008.

Although Asian markets have been affected by slowing economic growth and unsettled capital markets, financiallysound institutional investors, including pension and sovereign wealth funds, remain active across major cities in Asia, and direct commercial property transactions in Asia were up moderately yearonyear in the first half of 2008, according to the company.

A number of large transactions were completed in Thailand, with the focus squarely on hospitality properties and the country’s major resort markets, where investment sentiment remained robust on the back of sustained growth in the hospitality and tourism sector. Numerous hotels in Phuket changed hands, with some to be renovated and rebranded. Land transactions included the sale of a freehold plot for around Bt1 billion on Koh Siray, and CB Richard Ellis expects this trend to continue as some investors realise sizeable capital gains from holding properties for the past two to three years.

Investment activity in the Bangkok property market, in comparison, was highlighted by the acquisition of a plot of land in Sathorn for Bt1.4 billion by AIA, demonstrating that investors retain confidence in the sector’s prospects. Other notable transactions in the capital included the sale of multiple hotels and commercial properties.

Regionally, Japan continued to attract the most investor interest, accounting for over 30 per cent of Asia’s major investment transactions.

Banks and financial institutions have been curbing lending activities this year in Japan. Highly leveraged investors therefore sought to reduce debt by bringing assets to the market and this resulted in a repricing of residential, suburban retail and fringe offices properties.

However, asset pricing for the best located and highest quality properties remained relatively firm.

Singapore’s investment market turned quieter compared with the preceding year.

However, financially sound investors remained fairly active and a total of Bt321.6 billion worth of investment transactions were recorded in the first half of 2008. Slower global economic growth and a volatile equity market served to cool sentiment in the Hong Kong property market, as overall investment activity was subdued during the first half of 2008.

Owners wary of lowering prices for properties

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Source” Bangkok Post

Negative real rates promote new options

The Bank of Thailand has warned that current interest and inflation rates, resulting in negative real interest rates, might cause speculation in real estate if the situation is prolonged.

Titanun Mallikamas, director for the central bank’s Domestic Economy Department, said the current inflation rate at 8.9% was even higher than the prime lending interest rate of 7.25% at the country’s largest banks.

”Low interest rates for deposits promote alternative investments. But be careful of speculation in real estate,” he said yesterday at a seminar about building quality houses in the age of high oil prices, organised by the Home Builders Association.

Fundamentally, he said, Thailand’s economy and financial sector remained strong but so did risks, including constantly rising energy costs and a food crisis with negative impact worldwide.

”Generally, these two factors [oil and food crises] did not emerge at the same time. But now they have pushed inflation rates higher and reduced confidence among the private sector. We don’t know when they will end,” said Mr Titanun.

The increase in inflation this year was different from in the past few years when inflation rose for a short period. But the annual inflation rate this year has continued to climb each month.

He said Thailand’s interest rate was quite low, compared with those overseas. Other countries have increased interest rates to tame inflation while Thailand’s key has remained at 3.25% since June last year. ”We should strike a balance between deposit and loan interest rates.”

The central bank’s Monetary Policy Committee will meet next Wednesday, when most observers expect a quarter-point rate increase.

Besides the negative impact on the cost of property development, a possible rise in interest rates would also affect homebuyers as there are many risks including stricter rules for housing loan approvals.

Also at the seminar, Tananit Ratananane, director of distribution channel management of the Siam Cement subsidiary SCG Distribution Co, suggested that homebuilders co-operate with strategic suppliers in the industry to control costs of construction materials.

He said builders should design new housing styles and create new materials as consumers consider economic and functional value. Builders should also offer more choices ranged by price and functions to respond to demand.

”Installation convenience is a key to saving. If it’s difficult, it’s a cost,” he added.

Prasong Tharachai, president of the Engineering Institute of Thailand, suggested applying lean concepts to production management with an emphasis on total system flow. For example, controlling costs in the design stage would save on overall cost and reduce possible losses during construction.

”You should know how to build with safety, saving and sufficiency,” he suggested. ”You should consider function and cost ratio and not select only low-cost materials that may not match customers’ demands.”

Thailand Property – Situation ripe for speculation

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Source: The Nation

Construction companies have expressed an intention to increase their prices between 8 per cent and 10 per cent by the second quarter of this year consequent to the rise in prices of raw materials. Prices have risen between 10 per cent and 20 per cent since last year.

According to a survey conducted by The Nation, construction companies have had to carry the rising cost of construction.

For example, the price of steel rods has risen from Bt28 per kilogram to Bt35 per kg, excluding the transportation cost. When combined with the transportation cost, steel rods cost Bt40 per kg. Cement prices have risen from Bt3,000 per ton to Bt3,250 per ton, while, the price of ready-mix concrete has risen from Bt1,600 per cubic metre to Bt1,700 per cubic metre.

Transportation cost has also shot up following the oil-price rise and now constitutes about 10 per cent of the construction cost.

However, construction companies cannot charge more because most construction contracts were signed in 2006. As a result, construction companies have been incurring losses.

Thailand’s largest construction company Italian-Thai Development’s managing director Premchai Karnasuta said the company has had to shoulder the higher construction cost of about 10 per cent for existing projects valued at Bt66 billion. As a result, the company will generate profits of only 7 per cent – below the expected 10 per cent – last year.

However, the company believes it will generate enough profits to achieve the target of about 10 per cent this year after it adjusts the construction price when it signs new contracts, for which bidding will start in the second quarter.

Meanwhile, the company has also made efforts to improve its construction process to reduce costs. This too will help the profit outlook and it expects to do better this year, he said.

“Project owners must know that they will face higher construction cost when new contracts are signed. Our new prices will be reasonable and will create a win-win situation for both parties,” Premchai said.

Bouyges Thai’s deputy managing director Suphot Sonsuwan said, the company had earlier tried to negotiate with project owners to adjust the construction price when raw-material prices rose. However, some project owners did not accept the new prices. Thus, the company had to complete construction under the existing contracts. However, the company will adjust its construction price for new contracts, especially for new high-rise buildings which is expected to rise between 8 per cent and 10 per cent.

The company has also put in efforts to improve the speed of its construction process and help project owners reduce their cost even though they have to pay a higher price as per the new contracts.

“We accepted losses last year because we could not modify contracts. Now, we will adjust our prices by up to 10 per cent,” Suphot said.

Construction firms set to charge more

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Source: The Nation/Dr Teerachon Manomaiphibul

Real estate is one of the most regulated industries in Thailand.

Although strict regulation makes a lot of sense for an industry that has a direct impact on people’s lives, excessively strict regulations can hurt its growth and prosperity.

Strict zoning regulations, issued in 2006, have made the development of new projects costlier and more time-consuming. These regulations cover floor area ratio; gross building area per land area ratio; open space ratio; and open space per gross building area ratio.

Meanwhile, the Environmental Investigation Agency has become stricter. This change in stance is affecting many residential projects because the Environment Impact Assessment (EIA) approval process is time-consuming. This can cause a significant reduction in the internal rate of return for the project.

If the developers are to retain the required return, the increased cost will eventually be transferred to the customers.

The Natural Resources and Environment Committee also revised the laws for the Environmental Investigation Agency. The key differences are:

- The new EIA criteria applies to any building covering more than 2,000 square metres.

- The new criteria is applicable to projects covering more than 10,000 sq m.

- Projects with 250 subplots or more, or area over 100 rais are also covered in the EIA.

We recommend setting up a one-stop service to reduce the time in which a permit can be issued, and having one ageancy where the EIA submission can take place. These measures will make the process more convenient and reduce the cost of construction. There is already a proven example of one-stop service within Thailand with the Industrial Estate Authority of Thailand.

Stricter laws could stifle real-estate boom

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