Property: Middlemen scuttle many large property deals

PHUKET: After 12 years in Thailand helping international investment funds and property groups to buy big-ticket real estate, particularly hotels and resorts, the founder of ThaiEstate Asia Group knows too well that it is the middlemen who have ruined many a good transaction.

Lars Lang chose his words carefully in voicing his frustration with middlemen and the way the market moves here, as he does not want to sound as though he is talking down to anyone, and in fact wants to alert people that they now have serious regional rivals, namely Malaysia and Vietnam.

“One of my challenges right now is that the countries near Thailand, such as Malaysia and Vietnam, have more friendly governments.

“My clients – they could be in the Middle East, sitting in Hong Kong or Singapore, wherever, and for them Thailand is not everything.

“I know when I talk to the Thai people they think Thailand is gold, and that Thailand is the best in the world. Maybe it is, but not for investors because there are too many risks here.”

Of course, Mr Lang’s foreign clients have an uncomplicated route, and that is to buy a large plot of land to build a resort on and go to the Board of Investment and get some privileges. The real challenge arises when they opt for existing hotels or resorts, particularly those owned by independent owners, not by international management groups.

“After I have convinced my clients that I have a structure in place to secure their money, I try to contact some interesting resorts.

“That is when the big system starts, because many middlemen jump in and everyone is hungry,” Mr Lang says.

A property with a value of about 100mn might end up getting turned up to 200mn baht by the time Mr Lang is able to contact the owner, and such a price is suddenly no longer attractive to potential investors as it’s unrealistic.

It seems Thai hotel and resort owners do not want to talk to anybody, and in between are a lot of agents who sometimes damage the owner’s interests, Mr Lang pointed out.

“Maybe the owner never finds out; this is what I have usually faced. Sometimes the owner is sitting in Bangkok and maybe doesn’t know what is going on. Or the owner will say give me a Letter of Intent or a 10 per cent deposit; only then will I talk to you.”

Coughing up that kind of money or such documents without even knowing how many keys the property has, how much land it comes with, or even how old the building is, is of course out of the question.

“How do they expect me to go to Hong Kong or Singapore and tell my clients, ‘I may have a resort, please put in 300 million baht, but actually I don’t know what you are going to get’.”

Mr Lang is currently engaged with a task from one overseas client within the listed Hospitality Group Sector – who already operates in the global luxury market with more than 12,000 keys – to provide the requested criteria for investment in various locations in Thailand, with a two-year strategic implementation plan and an initial budget of more than 10 billion baht.

The group, Mr Lang is always discreet and runs a strictly confidential operation, recently made a 3bn baht cash offer for an approved luxury resort in Thailand.

“However, due to various unfortunate circumstances, the deal fell through in due diligence,” Mr Lang explained.

Mr Lang believes that private, family-run hotel owners who are not used to working to international standards are going to start seeing their business fall apart, especially with the influx of mass tourism through the Chinese market.

The problem of being unable to circumvent the multitude of middlemen putting out their hands when an investment opportunity arrives does not just stop in the sale of hotels and resorts; it permeates the whole industry and lurks in other segments as well, such as the entertainment, retirement and healthcare fields.

— Nina Suebsukcharoen