Condo Investment (Bangkok)

With the political and economic climate looking more hopeful after the successful completion of the election, more foreign investment funds are expected to flow into Thailand, which will have a healthy knock-on effect for companies such as Grande Asset Development Plc.

The SET-listed hotel and condominium developer recently closed a 10.4- billion-baht financing package with an affiliate of the US investment bank Lehman Brothers. "That will probably be the most significant such transaction in quite some time," said Markland Blaiklock, Grande Asset's chief executive officer.

Previously Grande Asset's financing involved multiple financial institutions with varying terms.
The new consolidated three-year package represents a more efficient and cost-effective arrangement with a single institution.

Mr Blaiklock is confident that more offshore financing will flow in once an elected government takes the helm.
"With a different sentiment toward foreign investment, I think we can expect a lot more interest." he said. "The interest has always been there but as long as there is uncertainty relative to what you are getting into, that will cause investors to be cautious, and at the same time there are so many opportunities even within this region."
Grande Asset is counting on both large- and small-scale foreign investment picking up.
While it awaits fresh developments, it has stopped selling the remaining condominium units at The Regent Hotel and Residences, between Sukhumvit sois 11 and 13 and due for completion in 2009, and The Sails beachfront condominium in Pattaya.

There are two reasons for the decision, explains Mr Blaiklock. "One, to allow the construction process to move forward, and toward the completion of those projects it's deemed to be a better time to sell the remaining units. In addition, we feel that the market condition, certainly following the election, following different sentiment toward foreign investment, would create a better market."

While he admitted that the US sub-prime problem has led to a tightening of credit in general terms leading to reduced flows of money, it is expected to be a relatively short-term situation with less impact on places like Thailand.
Having been in Asia for 18 years and now more Asian than Canadian, Mr Blaiklock sees many positives for Thailand, notably its popularity as a tourist destination, good location, interesting culture and very service-oriented people.

All this helps the hotel market and Grande Asset. Aside from The Regent Bangkok now under construction, the company owns the Westin Grande Sukhumvit and the Sheraton Hua Hin Resort. Another hotel, the Crowne Plaza Sukhumvit, is due to be completed in 2009.

"You know, there have been different things that have been happening in recent years, we had the catastrophe in New York, 9/11, we had the Sars outbreak in 2003, and then we had at the end of 2004 and also affecting 2005 the tsunami - through all those events and even political change, Thailand has managed to maintain reasonable growth statistics, certainly on a cumulative basis, so that speaks more of the hotel situation.
"We are very bullish for the year ahead, following the election, following the establishment of greater confidence in the destination. In 2007 what was mostly been missing was corporate activity and also corporate meetings, and for hotels in Bangkok that is a big part of their bread and butter."

Overall Mr Blaiklock sees this as a good time to invest in condominiums though there might be a slight oversupply that will be absorbed over time. "Is now a good time to buy? I think it is because the market is a little bit soft right now and we have new supply coming in constantly, it is a good opportunity to make an investment at this point."

At The Regent Bangkok Hotel and Residences, the company's last realised price was about 120,000 baht a square metre and it sees an opportunity to reach 140,000 baht this year.
One pending development in Bangkok is targeting 200,000 baht a square metre, which in the
regional context is not an unrealistic figure, he says. "Certainly this market is commanding much higher prices than it did historically but it still remains very competitive with other major gateway cities in the region. If you compare with Singapore, it has gone through tremendous increases in the last 12-18 months, and Hong
Kong and Tokyo, the major gateway cities in the region, are all significantly higher."
Bangkok Post (January11, 2008)