December 2011 saw the launch of the most ambitious and expensive Pattaya condo development since Ocean 1 (not yet complete): Centara Grand Residence.
To be developed by the Tulip Group, who were also developing the Waterfront (not yet complete), the building would eventually be managed by the Central Group’s hotel wing, Centara. The project was launched in Central World and at the end of the launch weekend the sales representatives, Richard Ellis proclaimed a “dramatic sales response“.
Five years on and the project is, wait for it, …….not yet complete, and a group of owners have started proceedings against the developer.
Leading the unhappy investors is former Miss Thailand, Khun Boom, who obtained a 15 million baht discount on a 35 million baht unit in exchange for acting as the face for the development. Unfortunately the developer wanted her to be more than just the public face; and after several unwanted advances, Khun Boom cancelled her role and asked for her money back. Some was returned but the remainder had been “invested in Singapore”. Presumably the other 156 people filing the suit have not had any of their deposits returned.
The Central Group have been quick to point out that the mess is nothing to do with them as they only agreed operate the building once complete and that this was made clear in all sales contracts. So buyers should not have assumed any Centara involvement in the project. Silly buyers.
The developer has sent a letter to investors explaining why the project failed. The reasons given are:
1. Delays in obtaining approvals. The EIA submission was made in July 2013 and approved in October of the same year; this seems quite speedy by local standards.
2. Negative market sentiment due to political uncertainty. This place has been politically uncertain forever.
3. Lots of long words explaining why there were fewer potential Russian and Chinese buyers. Foreigner can only purchase 49% of units. Sell half to Thais and you are in profit already.
4. Sudden fall in the price of oil impacting the world economy. Rather scraping the barrel here (geddit?). Lower oil prices means lower steel prices and cheaper logistics which would partially offset the hundreds of lost condo sales to oil rig workers.
5. A negative outlook on real estate making it harder to obtain loans. But surely they had Finance in place at the start?
Still, those are the reasons given and it seems clear that the project is doomed. But wait! The letter goes on to say that “negotiations with a potential new investor are at an advanced stage”.
So, in spite of all the listed reasons why the project has failed, someone is prepared to pick it up again! Hooray!
But wait, the letter has a page 2. Always beware of page 2. The second page contains more long words explaining why the company must now declare bankruptcy, without providing words of any length as to what this might mean for the investors receiving the letter.
It then goes on to complain that some investors have commenced legal action which is “severely depleting management time which could be better directed towards the company’s stated directives”. So please stop fighting to get your money back and join the queue with the other creditors owed some 911 million baht.
I remain cautiously optimistic.