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6 ways to avoid being defrauded in a property investment

The Thaiger

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6 ways to avoid being defrauded in a property investment | The Thaiger

By Desmond Hughes

As today’s local Phuket property news is soured by the story of a development ‘scheme’ resulting in losses for investors and third parties, the perception of real estate may be besmirched with negativity, all the while honest families who have elected to take their own risk on the market by developing their land banks, working with architects, designers and contractors to try and provide good solid homes or investment properties, suffer the commercial shockwaves as the inevitable output of publicised property development failure.

I personally know very bright, educated successful businesspeople who have suffered fraud in property markets and I have as much respect for them as I do for people who have never lost on investments.

I have no feelings of ‘this could never happen to me’. Some frauds are seriously difficult to detect, cause embarrassment to the victims which perpetuates or extends the fraud, and unfortunately frauds are a natural result of the freedom available to those that conduct business in any market, regardless of the amount of regulation that exists.

Where there are rules, rules are broken. 

As a humble student of balance, subjective and objective criteria, theoretical analysis of legal systems and regulation, I believe in pre-emptive investment protection or to use a more common description ‘being cautious’.

Therefore, all those who are currently considering diverting all their monies away from property into the exciting world of blockchain and cryptocurrencies, kindly consider the following as guiding principle for navigating the property market with a certain degree of respect:

1. Winning the Last Game Doesn’t Mean You Win the Next Game

Anyone that understands sport will understand the heading. If a private developer has completed 1 or more projects prior, it does not mean that they will successfully complete the next project, or even start it. It is, however, natural to read into the credibility of a developer if they have completed a project well before. However, this should not be taken as any form of implied guarantee of future performance.

Developers can lose money by speculating on other businesses, diverting funds, get into trouble with moneylenders or even reputable but unsympathetic financial institutions. They can also die with no succession plan in place.

The very simple solution to this logical set of facts is to (a) consider buying something that is already built to limit risk or (b) when buying off the plan, demand better payment terms allocating a large percentage of payment to the final payment and review contract and risk carefully.

2. Choose Experienced Lawyers, not the Cheapest Lawyers

Here are some characterised liberally interpreted sound bites close to statements I have heard over and over again over the last 15 years. If you can’t see any issue with these statements, then as many a con artist has said – “you deserve to lose your money.”

“The agent who stands to make commission from the sale recommended the law firm and I chose that law firm without checking their credentials”

“I contacted three law firms and chose the fastest responder which was the cheapest”

“I used the same law firm that represented all of the other buyers before me”

“I used the same law firm that represents the developer”

“I used a law firm because they said they were ‘well connected’”

“I used a law firm because they had some foreigners”

“I used a law firm because they didn’t have any foreigners”

“My lawyer said he studied in my home country for 12 months and understood me”

“My lawyer was polite to my spouse / girlfriend / boyfriend so I felt comfortable with using them”

“The law firm I chose told me that all land is safe it is issued by a Government Department and can never be ‘taken back’”

“My law firm said not to worry that the developer has a huge mortgage or loan and that it is normal for developers to borrow money to develop property. He/She said there was no need to look at the loan agreement or ask the developer about the relationship with the bank as that would be considered ‘rude’”.

“I used a Bangkok Law firm because Bangkok is big. Bangkok is a city. People in Bangkok are cool. I like tall buildings in central business districts – better advice comes from there.”

“I used a Phuket law firm because the parties are based in Phuket.”

“I used a law firm that has the same logo as a law firm that has over 10,000 lawyers around the world, because surely all of the lawyers are good – like the burgers in a fast food chain are also always delicious wherever you buy them.”

I could go on for a few pages more…

3. After you Have Chosen Lawyers, Listen to Them

Let’s say you used a good set of criteria to appoint legal advisers. Then you obtained their advice and you didn’t like it. So you proceeded to ignore them. This is tantamount to choosing a car for its safety features and then disabling all of those safety features before braving the death-filled roads of Thailand.

4. Examine the Fundamental of the Project and Conduct a Real Strengths and Weaknesses Analysis

Think about the following…

  • Type of developer – public company listed on the Stock Exchange versus private developer
  • Private developer – financially sound, happy to disclose financial status, good sets of clean audited accounts, good reputation
  • Marketing strategy – style over substance or a mixture of both
  • Land legality – check the entire history of the land from when it first came into existence. 60 to 90 years or so of documents isn’t a long time in the history of the Universe. Check them all.
  • Understand what legal compliance actually means. Obtaining “EIA approval” just means approval to do something subject to complying with laws. It is the complying with laws part that needs to be checked, not the existence of the conditional approval. “EIA Approved” doesn’t mean “We are compliant with all the laws”. My wife approved me going out with friends for a late night, and she set some conditions such as getting home at a reasonable hour. Whether I met those conditions or not is a matter of review and inspection.
  • Don’t accept shoddy contracts. If the contracts aren’t good, it means there is poor judgment on the part of the developer as to which service provider to use. Similarly they may exercise poor judgment on the carpenters; plumbers; electricians; structural engineers and project management team. Try and look at the whole package.
  • Developers who don’t negotiate are either so good they don’t need to, or so bad they hide behind a wall of ‘no’. Some public companies can’t change their contracts – because they need Board of Director and committee approval to do so. However, some companies hide behind this and some private developers take an inflexible approach to negotiating changes. Choose changes to contracts carefully, only points you really need for comfort and security, but don’t take an off-the-shelf product with defects. Contracts also, like any product, can become aged and past their sell-by-date. Developers cutting and pasting contracts from 2005 aren’t confidence-inspiring organisations.

5. You Will be Punished for Arrogance

Most of my clients are far wealthier than me and I have no shame in that having risen from the metaphorical ashes of a working class family to make my own way in life aided by student grants and part time jobs before obtaining my qualifications and penetrating elite walls and ceilings on my own terms.

I am in a service business, and therefore I must serve those that can afford to pay for knowledge and know how they do not possess, or support for resource they cannot muster. Many such clients freely admit their wealth came from inheritance, from a healthy dose of luck in selling a business at the right time – dot.com boomers being a case in point, or from their own hard and constant graft.

However they came by their money, they do not deserve to be unfairly cheated out of it. Such people do not possess a Midas Touch. They are fallible. The smart ones admit that and behave accordingly.

I offer my respect to those that recognise their own successes and capacity for failure and catastrophe. Those people wearing sunglasses on a cloudy day who won’t make eye contact while they drop their children off at school because you clearly aren’t in their perceived ‘ life club’ are prime targets for life readjustment lessons but I still pity them when they lose, even financially. Life has a strange unfairness about it but many who think they are cheating life are rewarded exponentially in kind.

Don’t be arrogant. Don’t think people with less wealth than you know less. Such persons may have studied far harder than you and have read more books. Think about why they did that. Then pay to get some advice before you make a decision, not during the litigation or dispute process.

6. In Business, Timing is Everything

If a sales person is rushing you to make a decision, is it do you a favour? Is it because they are your “bestest bestest friend” and after two dinners with you and searching for aligned topics of interest suddenly you have ‘connected’ and therefore you must go along for the ride, at their pace and behest.

It does no harm to retain some cynicism about timing. Yes, if the market is hot and rising, being quick to buy makes sense. That is what commodities trading is all about and some have studied that which is different to property by a long stretch but still has some similar principles in terms of profit and leverage.

Unlike damaged grain, if your property target purchase is rushed, you might not be insured against the losses, you may wish you had taken more time to conduct a survey and there may be no ‘association of damaged property investors’ to call upon to help you out.

Contractors and Developers who need you to buy ‘now’ most likely need ‘cash now’ which isn’t a good sign. Yes, professional property developers and agents do not like dawdlers, time-wasters, tire kickers, property viewing tourists and the like – these people costs professionals a lot of wasted time and resource and hinder the effective mechanics of an efficient property market. However, these people exist in many  markets and there are strategies for uncovering the charlatan mystery shopper buyers.

Rushing someone to make a life decision isn’t a good idea.

Plan the timing of your transaction with your advisers, and don’t be swept along the road to a court case at a pace far faster than a court case would be conducted.

At wakes or funerals, it often isn’t appropriate to make jokes or be jolly, or to refer to certain topics that relate to living life when someone dear has passed away.

When property fraud hits the market, it often isn’t fashionable to remind people that there is not just bad in the property market, but a lot of good, for fear of being rebuked as a self-serving property professional. However, the truth of life and humanity is that the world is progressively becoming a better place, Thailand is becoming a better place to do business, and the property market does have more to offer than before. Issues will continue to arise, mistakes will continue to be made, and the bad actors in the market will continue to disrupt progress.

Please stay safe. Please be cautious.

6 ways to avoid being defrauded in a property investment | News by The Thaiger

Desmond Hughes FCIArb
Senior Partner
Bangkok | Phuket
hugheskrupica.com | +66 (0) 828 897 897
Bangkok: +66 (0) 22 872 173
Phuket: +66 (0) 76  608 468



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Bangkok

Bangkok luxury poised to push through the US$300 ceiling

Bill Barnett

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Bangkok luxury poised to push through the US$300 ceiling | The Thaiger

by Bill Barnett of c9hotelworks.com

PHOTOS: Rosewood Bangkok

For hotel owners and managers in South East Asia, one of the great mysteries of the past ten years has been the low rate profile of Bangkok’s luxury hotel set. Despite soaring and sustained tourism growth, rising airlift and a strong economy, rates at Bangkok’s top tier properties have remained fairly stagnant.

Have we reached the tipping point?

I had had the opportunity to visit the latest entry to the Bangkok luxury class a few days ago, the Rosewood. With 159 keys which includes a limited number of posh houses with private pools and terraces the property is seeing an exceptional response and already achieving high rates.

What’s impressive about the entry is a take on the design approach that sees hotel developers apply a non-uniform approach with AvroKO coming in to focus on the restaurants and bars, while the rooms and public areas were led by Celia Chu Design and Associates.

While the speakeasy Lennon’s has not be opened yet, the 6,000 record vinyl collection is impressive and the bar will clearly have a strong pull. Taking the approach to designing restaurants and not typical hotel outlets, the Chinese eatery Nan Bei is a breath of fresh air and limited seating provides a bespoke appeal.

Taking a step back, and looking at recent entries like the Waldorf Astoria, and upcoming 101 key Capella, what is clear is luxury properties are shifting in terms of key drivers of the segment of art, fashion, residential vibe, bar and restaurant offerings, wellness and events.

So, what about rates?

On a broad basis Bangkok’s top tier hotels have averaged rates of US$200-240 for the past few years. This set has seen longer serving properties such as the St. Regis, Kempinski, and Okura effectively flatline on rates, though newer entries have come up including the Park Hyatt. On the broader horizon is the return of the Four Seasons and Capella by the river and the Orient Express at the MahaNakhon skyscraper.

With the entry of Rosewood driving rates, my expectation is that a few of the set will follow and at the end of 2019 we will set limited number of hotels crash through the US$300 average room rate barrier and effectively smash the legacy glass ceiling of Bangkok’s luxury hotels.

As in any business there will be winners and losers. Smaller hotels with some rate leading premium key types will be able to push up average daily rates. Segmentation is another key and hotels on the river that lack substantial corporate numbers will remain challenged until transport links to the area improve.

Where in the world are Bangkok luxury hotels heading?

To sum up 2019, size and location matter, the shift on food and beverage and social events along with niches like wellness and  smaller meetings/weddings are the key to the future. As for the quantum leap in rates, it’s about time Bangkok hoteliers be confident and push rates towards a more global norm.

Bangkok luxury poised to push through the US$300 ceiling | News by The Thaiger

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Phuket

Reservations now open for ‘Twinpalms MontAzure’ with enticing promotions

The Thaiger

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Reservations now open for ‘Twinpalms MontAzure’ with enticing promotions | The Thaiger

Celebrate the grand opening of Phuket’s newest beachside hotel by booking now to snap up fantastic deals. Twinpalms MontAzure in Kamala is offering irresistible packages ideal for both short and long-haul getaways for those who book directly from their website.

Guests may choose to enjoy three nights and pay for just two and for those who are looking to book a longer holiday, stay for six nights and pay only three on all Penthouses and Suite types. Guests may book from now until November 30, 2019, for stays from July 1 to 19 December 2019.

The latest addition to the Twinpalms Hotels & Resorts portfolio is set directly on Kamala Beach, on Phuket’s popular west coast and will welcome its first guests in July 2019. A member of Small Luxury Hotels of the World, the boutique beach hotel offers beautifully appointed Penthouses and Private Pool Suites and a collection of stunning Suites.

Suites range in size from 70m2 to splendid Penthouses with private pools and sea views boasting large living spaces of up to 300m2. Guests will also enjoy using a lap pool or an infinity pool offering views of the Andaman sea.

Adding to the collection of fantastic places to be on Phuket, Twinpalms MontAzure will launch its beachside restaurant and lounge, ‘Shimmer’, with uninterrupted sea views. Shimmer restaurant will serve vibrant and tasty food with an Asian focus, delicious and creative cocktails, and a great wine list, all served with the customary gusto and flair expected from the Twinpalms brand.

Designed by Martin Palleros, following the original Twinpalms concept and style, of utilising Phuket’s beautiful landscape, Martin has allowed the design to maximise the sea views from most of the Suites and areas within the buildings, whilst also ensuring the preservation of the views of the mountainside from other perspectives.

Guests of Twinpalms MontAzure also have access by complimentary transport to the brand’s other dining and entertainment destinations, taking full advantage of the three beautiful beaches Twinpalms has a presence on.

HQ Beach Lounge, a few steps away on Kamala Beach, Catch Beach Club, Catch Junior and Palm Seaside, located on Bang Tao Beach and of course, the flagship resort, Twinpalms Phuket is just a few steps from Surin Beach.

Reservations now open for ‘Twinpalms MontAzure’ with enticing promotions | News by The Thaiger Reservations now open for ‘Twinpalms MontAzure’ with enticing promotions | News by The Thaiger

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Business

Phuket hotel watch – 3 months down, 9 to go in 2019

Bill Barnett

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Phuket hotel watch – 3 months down, 9 to go in 2019 | The Thaiger

by Bill Barnett of C9Hotelworks.com

At the beginning of the year Phuket’s tourism and hotel sector was cautiously optimistic after a strong first half of 2018 and humbling second half. Key terms that kept popping up were Mainland Chinese, Thai Baht Appreciation, Elections and Supply Concerns.

So today, with three months of performance under the belt in 2019 what are the key trends in hotel trading? These can best be compressed in the following points –

According to data from hotel benchmarking group STR, Thailand remains Southeast Asia’s leading destination for Mainland Chinese, but the gloss is being diminished by Vietnam’s meteoric rise, and strong numbers by the Philippines and Cambodia.

Market-wide RevPar shunk by 0.04% in 2018 and flat demand at the onset of the year is now shifting into negative territory moving into February and beyond. Turning back to last year, group demand is falling which is as key concern in a wholesale driven marketplace.

One stark positive is that RevPar is being propped up by rates and not occupancy. A key takeaway is that in peak and high season, Phuket hotels are able to drive rates up in key periods and continue to do so. This of course is a broad trend.  Good hotels tend to perform at higher levels, while poorly managed ones remain subpar.

Getting beyond the numbers, as I speak to hoteliers the expectation is that wholesalers remain a critical component of the island’s hotel industry and despite the expected shift with technology to more direct bookings, the reality is that wholesale models are sensitive to demand volatility and the result of this feeding frenzy most often will be either flat rates for the year or in some cases a retraction.

We expect the remainder of 2019 to be challenging. Some hotels will look at this as an opportunity to reposition, renovate or cut costs. While others will look at new segments, niche offerings or emerging markets like India to regain momentum.

As for the top critical issues facing Phuket hotels, in my opinion these can be distilled in the following Top 3 Things Keep Me Awake at Night…

• Mainland Chinese – If tourism players or hotels believe the damage to Brand Phuket is over, think again. Talking to key tour operators there remains a hangover from last year’s boat sinking incident and travellers remain keenly concerned over safety. Only time and more concentrated promotion will see a return of the numbers.

• Growing Supply and Demand Imbalance – The current pipeline is just over 8,000 keys in development on the island. What’s more concerning is that projects in planning are not represented in this metric, and by our estimate there are approximately 5,000 more keys in planning. While both the pipeline and planning numbers will see some wash, the sum total exceeds current and forecasted demand.

Moreso, the rise of unlicensed condominiums, apartments, houses and villas is continuing unabated and is further exacerbating supply issues. Every time you see a group of tourists renting a 3 or 4 bedroom villa, that’s three or four hotel rooms that lay empty. Government control of unlicensed properties is a key issue facing Phuket’s tourism industry.

• Diminished Natural Resources and Strained Infrastructure – Water tops the list and there is little doubt we are reaching the tipping point with mounting shortages and soaring demand. Electricity is another concern. Lastly is a rising number of vehicles on the road, a urbanising trajectory and slow development of roads and public transport.

To these point’s lets revisit the hotel development pipeline and reflect that a island long term master plan, zoning for new tourism expansion and requirements for developers to invest in public infrastructure to obtain operating licenses is sorely lacking. Something has to give on this front.

In conclusion am I pessimistic about Phuket’s tourism and hotel future in 2019 and beyond? Absolutely not, direct airlinks are growing and the island has a well-structured capacity for handling tourism, but I firmly believe looking into our problems, discussing and finding ways to resolve these are critical to a sustainable growth pattern.

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