Friday Asia Digest – Hotels, Casinos & Other Luxuries. Turkey is the New London

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5 months, 10 offers, and 68.5 million AUD – this is what it took to sell the world’s first 6-star, fashion branded designer hotel – The Palazzo Versace, on Australia’s Gold Coast. The trophy asset was sold to an undisclosed Hong-Kong based consortium, whose bid was the strongest out of the myriad of prospects who, according to the selling agent, have been jetting in with their respective entourages to inspect since the world-renown hotel was put on the market, in April this year. And while the parties involved in formulating the deal testified to spectacular expressions of interest and substantial offers from the USA, Europe, Singapore and China, it seems the hopeful price tag, initially set at $80 million, was a bit too much to stomach for potential buyers. The deal, due for settlement in November, was still conditional on approval from Australia’s Foreign Investment Review Board, the House of Versace and other parties.

In similar, but not quite matching luxurious splendor, this week has also seen the opening of The Oaks Bangkok Sathorn, a 115-unit business and leisure property based in the heart of Bangkok’s business and entertainment district. The luxurious property marks the debut of Oaks Hotels and Resorts anticipated entry into Asia. Oaks, which aims to develop several more properties in the continent, and it’s parent company Minor International, is also entertaining the option of similar ventures in China and the Middle-East. The Bangkok tower has one, two and three bedroom apartments on offer, with attractive introductory deals based on a minimum 2-night stay on offer as part of its unveiling. The complex includes a pool, spa, tennis courts, restaurant and pizzeria, and shares some facilities with neighboring Anantara Bangkok Sathorn, also owned by Minor.

Rolling the Dice

The shift in global wealth towards Asia is also fueling a huge casino building boom all over the region, kicked off in Macau, which has quickly snatched the world’s gambling resort crown from Las-Vegas, with similar plans now forging ahead not only in the Philippines, as mentioned in previous digests, but now also in South Korea, Russia and Vietnam – with the Asian casino frenzy even taking hold of traditionally conservative Japan, where business moguls and associated lawmakers are lobbying ever more successfully for an overhaul in national laws to allow the building of gambling centers. Cambodia, as well, where one casino already exists, will soon have an additional $369 million expansion including hotels and shopping centers. The operating company is hauling tourist to the premises in busses featuring massage seats, in an ever increasing effort to bring in not only the high rollers, but Asia’s swiftly expanding middle class as well.

The casino boom, while providing the basis for the further expansion, and simultaneously taking advantage of increasing Asian wealth, has of course also sparked a huge social, moral and financial debate regarding the dangers associated with addiction, loss of much needed income from low earning and welfare supported punters, as well as organized crime links. While Vietnam and Cambodia bar their own citizens from entering the establishments, other countries are taking their cues from Singapore, where tight curbs and governmental restrictions on associated middlemen and prostitution, as well as strictly enforced regulations forcing the gambling houses to charge local residents steep daily fees for entry, are believed to have alleviated many of the dangers. Regardless of such measures, however, reports by local volunteer addiction hotlines and charity organizations seem to suggest that problem gambling is still on the rise since the establishment of casinos in the city-state.

Turkey Thrives on the Fringe

* Strategically positioned in the fringe line between Europe and the Middle-East, Turkey, while so far seen as unstable by the majority of risk-averse European buyers, is drawing huge interest and investment funds from cash rich residents of Russia and the Arab world. With a rapidly expanding and thriving economy – with a rise in property prices second only to Brazil and Austria and already surpassing that of giants like Hong-Kong, the world’s most expensive market, as well as Russia – Istanbul, Turkey’s capital, is now seen by the Arab world as “a second London”, claims chief executive of Varyap, the developer of Varyap Meridian.

Low prices, coupled with the promise of soon to be relaxed foreign property ownership laws, which have so far allowed only investors from countries where turkish residents could themselves purchase property, are fast fueling the country’s real-estate market – financial forecasts predict that property sales to foreigners could nearly double to $4 billion in 2013, from $2.5 billion last year.

Global Gossip

* A stark reminder that the global financial crisis and associated banks and investment corps domino collapse is not quite over, could be found in the announcement this week that Aviva Investors, one of the UK’s largest fund managers, plans to close its desks in both London and New York. The proposals could result in the closure of the company’s Global REIT fund, as it has earlier announced plans to cut 160 jobs associated with the closures. A press release by the company admitted that its current global listed securities business has “insufficient scale” and cannot compete in the “pure alpha global strategies” space.

Myanmar* Myanmar, which has recently emerged into democracy and apparent peace abiding rule, has been flagged as potential for property development opportunities, following a decade of close to zero investment, resulting in extremely low supply, coupled with a new change in government and foreign investment law amendments which have caused a huge rise in demand. Various warning signs, however, are already being sounded, as hordes of speculative investors are already driving land prices up at levels that are seen as unsustainable by the fledgling economy. Frontier market specialists “Capitalist Exploits” have summarized the notion after attending the country’s first major financial conference, stating that “due to the present uncertain legislative environment, skills shortage and the amount of capital chasing the opportunities…smaller private equity-focused investors would be better served looking at the service industries, including: healthcare, education, travel and tourism”.

* A similar speculative effect seems to be plaguing Malaysia, until recently hailed as one of Asia’s rising stars. Property transactions facing a large, seemingly un-bridgable funding gap between official valuations and asking prices, which has slowed down transaction volumes in the first half of 2012, with no sign of change for the current period, anticipated to carry on into 2013. “The buying frenzy is over. In 2010 and 2011, some residential sectors saw an increase of about 30 per cent, which is way too high and moving towards a bubble”, Malaysian Institute of Estate Agents (MIEA) deputy president was quoted as saying this week.

Partial List of Sources – “ABC 9″, “Travel Weekly“, “Herald Sun“, “Money Marketing UK“, “Gulf News“, “Loan Safe“, “Asia One“, “Capitalist Exploits“)

(Pic 1 – The Palazzo Versace Pool / Steganography, Pic 2 – Temple in Myanmar / eGuide Travel

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About Author

Ziv Magen (G+) is an Australian, and has been living alternately in Japan and Australia for the past decade. "Born and bred" an IT project manager, he has made the transition to full-time real-estate investing several years ago, and subsequently opened a buyers' and proxy agency - assisting others in remotely capitalising on Asia's booming property market.

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