Bankruptcy auction of Chiang Mai resort hits snag over reserve price

[webfact]

Bankruptcy auction of Chiang Mai resort hits snag over reserve price

By The Nation

 

 

Plans to auction off the bankrupt Dhara Dhevi Hotel in Chiang Mai have been suspended after its operator opposed the Legal Execution Department's reserve price of Bt2.116 billion.

 

Inter Far East Energy Corporation (IFEC) chairman Thavich Taychanavakul said an independent assessor estimated the hotel was worth Bt3.728 billion, adding that Chiang Mai Provincial Court will investigate the case on March 15 this year.

 

Dhara Dhevi Hotel Chiang Mai opened its doors in 2002 as one of Thailand’s top luxury resorts. Boasting Lanna-style architecture, its 123 rooms sprawl across 153 rai (24.5 hectares) in the middle of the northern capital’s Muang district.

 

The hotel closed operations on November 18 last year after business was badly hit by the Covid-19 outbreak.

 

Source: https://www.nationthailand.com/news/30402154

 

 

-- © Copyright The Nation Thailand 2021-02-03

 

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[sammieuk1]

I would have put a Bt3.728 billion price tag on the whole of the north and expected change ????

[RichardColeman]

Something is only worth what someone will pay for it. If I had a £1 for every auction on ebay that did not sell due to a daft reserve price, I'd be richest guy on the planet, which would please the wife no end.

[pacovl46]

Well, the difference of 1.6 billion Baht is a huge sum.

[GeorgeCross]

any advance on $1?

 

anybody?

 

ok, going once.. twice..

[Poet]

I am impressed to see any sense of reality creep into Thai property pricing. The banks never seem to price repossesed homes correctly, apparently happy to keep thousands of neglected properties on their books for years.

In the case of Chiang Mai, especially that area, those 153 rai will probably be turned into another high-end gated community. My question is why anyone would buy a house anywhere in the north now that the air quality is ridiculously bad for at least half the year (and not so great the other half either).

Don't get me wrong, Chiang Mai is a lovely place to live, but the 2.5 pm pollution is an absolute dealbreaker for anyone with common sense.

 

[hotchilli]

3 hours ago, pacovl46 said:

Well, the difference of 1.6 billion Baht is a huge sum.

A reserve  price is usually just the starting price, if set at the true value no-one will bid, that's why it's being sold at auction.

However the value is as it stands empty, not what the newer once thought it was worth when open.

[Golden Oldie]

Just walk around the streets of Chiang Mai and see how many businesses once thought unassailable are now closed, and how many expensive new hotels, guest houses etc are either opening, or being mothballed before ever seeing a client. The city is finished as a tourist destination and will never, ever see the tourist numbers from pre-2019 again, which even then were down on the previous year, before Mr. Covid even showed his head. Much the same can be said about tourism in Thailand in general, which, given the percentage of GDP it created, can be said about Thailand.

 

[moe666]

1 hour ago, Golden Oldie said:

Just walk around the streets of Chiang Mai and see how many businesses once thought unassailable are now closed, and how many expensive new hotels, guest houses etc are either opening, or being mothballed before ever seeing a client. The city is finished as a tourist destination and will never, ever see the tourist numbers from pre-2019 again, which even then were down on the previous year, before Mr. Covid even showed his head. Much the same can be said about tourism in Thailand in general, which, given the percentage of GDP it created, can be said about Thailand.

 

Do you have a crystal ball about Thai tourism and what is to come, never ever is a bit over the top. It maybe awhile before tourist numbers increase but never ever.

[pacovl46]

4 hours ago, hotchilli said:

A reserve  price is usually just the starting price, if set at the true value no-one will bid, that's why it's being sold at auction.

However the value is as it stands empty, not what the newer once thought it was worth when open.

Yeah, but if there’s only one bidder it goes for the reserve...

[GrandPapillon]

11 hours ago, webfact said:

Bankruptcy auction of Chiang Mai resort hits snag over reserve price

By The Nation

 

 

Plans to auction off the bankrupt Dhara Dhevi Hotel in Chiang Mai have been suspended after its operator opposed the Legal Execution Department's reserve price of Bt2.116 billion.

 

Inter Far East Energy Corporation (IFEC) chairman Thavich Taychanavakul said an independent assessor estimated the hotel was worth Bt3.728 billion, adding that Chiang Mai Provincial Court will investigate the case on March 15 this year.

 

Dhara Dhevi Hotel Chiang Mai opened its doors in 2002 as one of Thailand’s top luxury resorts. Boasting Lanna-style architecture, its 123 rooms sprawl across 153 rai (24.5 hectares) in the middle of the northern capital’s Muang district.

 

The hotel closed operations on November 18 last year after business was badly hit by the Covid-19 outbreak.

 

Source: https://www.nationthailand.com/news/30402154

 

 

-- © Copyright The Nation Thailand 2021-02-03

 

- Whatever you're going through, the Samaritans are here for you

- Follow Thaivisa on LINE for breaking COVID-19 updates

interesting, IFEC is about to get delisted because they have been failing to report their F45 audited earnings report for at least the last 3 years.

 

Do they own that hotel? could explain why they are trying to scrap cash

 

https://www.set.or.th/set/companynews.do?symbol=IFEC&language=en&country=US

Edited February 3, 2021 by GrandPapillon

[Golden Oldie]

I'm new to this site so I don't know how to reply directly to a comment to my post by moe666. Perhaps someone can explain how to do that. 

 

However, in reply to his reply, I have lived in Chiang Mai for almost six years and have seen the levels of tourism decrease considerably over the last three years, especially in 2019, which obviously wasn't affected by the disaster of Covid. Vendors in shops and markets, and owners of bars and long-established hotels were saying how bad tourism numbers were. In January 2020 I interviewed the owner of one of the top hotels in the city, which had been open for over twenty-five years. He told me Chiang Mai was in a crisis, but most people hadn't realised yet, and it was going to get steadily worse.

 

In 2019 there was a decrease of 45% in the numbers of people visiting Thailand for the winter, an enormously important group of visitors to Chiang Mai, a figure which is now probably around .000something-or-other

 

I have been a travel writer for over twenty-five years, mainly in Spain, Morocco, Thailand and SE Asia. I saw what happened in Spain during the crash of 2008 and the desperate years that followed. The country has never fully recovered. 

 

I stand by my comment that Chiang Mai will never, ever recover tourism to the level of pre-2019, especially with this government in power. I think too much damage has been done to the image of Thailand at a time when peripheral countries are developing. 

Edited February 3, 2021 by Golden Oldie

[KC 71]

8 hours ago, moe666 said:

Do you have a crystal ball about Thai tourism and what is to come, never ever is a bit over the top. It maybe awhile before tourist numbers increase but never ever.

More Thais seem to be buying up properties or land in the North.

Not sure how the Islands and popular hotspots are doing ,but probably will be suffering too though i should imagine.

[thedemon]

2 hours ago, Golden Oldie said:

In 2019 there was a decrease of 45% in the numbers of people visiting Thailand for the winter

 

Where does that data come from?

[timendres]

7 hours ago, Golden Oldie said:

I stand by my comment that Chiang Mai will never, ever recover tourism to the level of pre-2019, especially with this government in power. I think too much damage has been done to the image of Thailand at a time when peripheral countries are developing. 

 

I think the problem is less about "the image of Thailand", and much more about "organic growth". Businesses start because tourists are there to support them. Tourists come because there are great businesses that cater to them. When you wipe out that industry, as COVID has, then there is nothing to draw the tourists. With no tourists, businesses are reluctant to open. It will take a long time for this organic growth to replace what was lost.

[hotchilli]

15 hours ago, pacovl46 said:

Yeah, but if there’s only one bidder it goes for the reserve...

Such is the lottery of being sold at auction.

[pacovl46]

27 minutes ago, hotchilli said:

Such is the lottery of being sold at auction.

Yeah, that’s why he called it off because we’re talking 44 million Euro in difference! 

Edited February 3, 2021 by pacovl46

[McTavish]

On 03/02/2021 at 7:32 PM, Golden Oldie said:

I'm new to this site so I don't know how to reply directly to a comment to my post by moe666. Perhaps someone can explain how to do that. 

 

However, in reply to his reply, I have lived in Chiang Mai for almost six years and have seen the levels of tourism decrease considerably over the last three years, especially in 2019, which obviously wasn't affected by the disaster of Covid. Vendors in shops and markets, and owners of bars and long-established hotels were saying how bad tourism numbers were. In January 2020 I interviewed the owner of one of the top hotels in the city, which had been open for over twenty-five years. He told me Chiang Mai was in a crisis, but most people hadn't realised yet, and it was going to get steadily worse.

 

In 2019 there was a decrease of 45% in the numbers of people visiting Thailand for the winter, an enormously important group of visitors to Chiang Mai, a figure which is now probably around .000something-or-other

 

I have been a travel writer for over twenty-five years, mainly in Spain, Morocco, Thailand and SE Asia. I saw what happened in Spain during the crash of 2008 and the desperate years that followed. The country has never fully recovered. 

 

I stand by my comment that Chiang Mai will never, ever recover tourism to the level of pre-2019, especially with this government in power. I think too much damage has been done to the image of Thailand at a time when peripheral countries are developing. 

Strength of tha Baht against many currencies, EUR, GBP, AUD etc impacted tourism in SEA and particularly Thailand, over the past 5 years.  If Thailand played a part in hospitality losses it was primarily due to greed and far too many new properties, including airBnB vying for reduced arrivals.  Stats may show a different trend but that's skewed with Cn tourists who put very little into the local economy.

 

If there's one good result to come from Covid it will be the clearance of sub standard tourist and hospitality operations.  

[jackdd]

On 2/4/2021 at 6:32 AM, pacovl46 said:

Yeah, that’s why he called it off because we’re talking 44 million Euro in difference! 

If it would be worth 3.7 billion, somebody would have bid close to this.

If nobody bids close to this, it's obviously not worth 3.7 billion.

I guess this is just a case of typical Thai mentality, they hold on to their property until they get their desired price, even if it may never happen. Lowering the price is not an option because it would mean losing face.

[pacovl46]

6 hours ago, jackdd said:

If it would be worth 3.7 billion, somebody would have bid close to this.

If nobody bids close to this, it's obviously not worth 3.7 billion.

I guess this is just a case of typical Thai mentality, they hold on to their property until they get their desired price, even if it may never happen. Lowering the price is not an option because it would mean losing face.

It didn’t go to auction because the reserve price was too low for the owner. The problem with the reserve is that you have to sell it for that price if you have just one bid. Right now no one knows how long it is going to take for Covid to go away and tourism to go back to normal. Forking out 3.7 billion Baht, or close to that, on a business you don’t know when will become lucrative again is a risky move. Also, I don’t think that there are too many people with that kind of money around who are into the hotel industry and willing to spend that much right now. 
 

People at auction usually want to buy as low as possible even when they fork out some serious cash for items that are either unique or rare the fact that they want to spend as little as possible doesn’t say anything about the value of the item! 
 

If you wanted to sell you car and you get only ridiculously low offers you don’t go and sell it for that ridiculously low price, unless you really needed the money or would you? Nothing wrong with holding onto his land because in real estate the prices will keep going up. Take Bangkok for example, despite Covid, prices for condos are essentially unchanged.

Edited February 6, 2021 by pacovl46

[dddave]

6 hours ago, jackdd said:

If it would be worth 3.7 billion, somebody would have bid close to this.

If nobody bids close to this, it's obviously not worth 3.7 billion.

I guess this is just a case of typical Thai mentality, they hold on to their property until they get their desired price, even if it may never happen. Lowering the price is not an option because it would mean losing face.

I don't' know if this still applies but during the years when Bangkok's skyline was littered with "Ghost Towers" there was a lot of discussion about Thai banking law making it difficult to purchase and re-develop distressed properties. 

It seems, to prevent collusion between loan originators and borrowers to intentionally bankrupt properties, then pick them up at auction for 10% of value, Thailand required that 75% of the outstanding loan value be recovered at sale or auction.  

I remember many 80% completed housing developments around Pattaya sitting abandoned.  Because of the 75% rule, it would have cost more to purchase and rehabilitate the properties than to start new from scratch.

I don't know if this requirement has been since amended.  Most of the "Ghost Buildings" were either finally completed or torn down after 2010.  

If that rule is still in place, that could be a reason why so many auction reserves seem unrealistically high.

Edited February 6, 2021 by dddave

[thaibook]

On 2/2/2021 at 11:58 PM, pacovl46 said:

Yeah, but if there’s only one bidder it goes for the reserve...

or it is not sold.  One does not have to bid eh reserve even if one is the only bidder.  The vendor than has the choice of agreeing to the offered price or paying the auctioneer and keep ing the liability.  Of course in Thailand the vendor will see it as an asset rather than a liability and so will probably increase teh reserve price as so much interest has been shown.

[Airalee]

There is no such thing as “selling under the value” for any asset (ehem..liability) unless there is some sort of collusion/corruption involved.  If it is an open, public auction,  (not a thieves auction) then the highest bid is the true market value.  If it was worth more, someone would have offered more.

 

It’s similar to all the homedebtors (they certainly weren’t homeowners) during the housing bubble of the 2000s who would go on and on about how much their house was worth.  My response was always...”sell it, and then tell me what it was worth”

 

The price always goes up...lol.   Until it doesn’t.  Value is based on cash flow for commercial RE.  Right now, and for a while into the unforseeable future...that cash flow is gonna be really really low....which, in turn, will make the value really really low.

 

Maybe it would be worth more if they parted it out.

 

If it can happen in Detroit...it can happen here in Thailand 

 

https://detroit.curbed.com/maps/mapping-the-ghosts-of-detroits-legendary-hotels

[pacovl46]

16 hours ago, thaibook said:

or it is not sold.  One does not have to bid eh reserve even if one is the only bidder.  The vendor than has the choice of agreeing to the offered price or paying the auctioneer and keep ing the liability.  Of course in Thailand the vendor will see it as an asset rather than a liability and so will probably increase teh reserve price as so much interest has been shown.

Yeah, the difference is that the owner doesn’t have to sell if the reserve isn’t met, but as soon as it is he must sell. To be honest, I wouldn’t take a loss of 44 million Euros either when there’s a good chance that you’ll get a much better price once Corona is over and tourism goes back to normal.