Charn Issara Development confident it can grow with Thailand
Charn Issara Development Plc (CI), founded in December 1989, is in the core business of developing residential housing and condominiums, residential resorts for sale, office and retail space for rent, hotels and property management services for two property funds and related companies. Chief executive Songkran Issara discusses the company’s strategy and outlook.
Songkran: Thailand has great potential
What is CI’s business model?
CI is a boutique real estate developer, looking for the best locations that stand out from the crowd and developing a more exciting product design. We have always aimed to provide top-quality construction and materials for our customers and so far it has been successful with our projects in Hua Hin and Cha-am, Phuket, Bangkok, Chiang Mai and now in Khao Yai.
Today our company has strong diversity in projects ranging from residential property to resort residential, hotels, offices and two property funds, which has given us a strong recurring income base from which to continue expanding.
How are current projects developing?
We have several projects ongoing in Bangkok, Phuket, Chiang Mai, Hua Hin/Cha-am and Khao Yai. In Bangkok, we are continuing to transfer units at Issara Ladprao, we have just completed the ISSI Condo Suksawat and we are launching the Issara Collection Sathorn. In Phuket, we are adding a new phase of Sri Panwa Residences and developing the Baba Beach Club Phuket. In Chiang Mai, we have The Issara Chiang Mai, and in Khao Yai we have Baan Siti Wan Khao Yai.
In Hua Hin/Cha-am, we are developing our seventh project called Thew Talay, covering 90 rai. Phase 1 is 80% sold and we will transfer units at the end of 2014. Phase 2 is under construction with 40% of the units sold, and phases 3 and 4 will be launched once political conditions have calmed down.
We will also have a hotel in the middle of the development.
CI currently has two property funds, SP-WPF and BKKCP, What are the plans for these vehicles?
One fund is for hotels and the other is for commercial properties. We will look to continue utilising our funds; for example, with the hotels in Phuket and Hua Hin, we can divest them to a property fund and continue to expand development of new hotels and projects.
What are your views on the property market in Bangkok and Thailand in general?
The general macro trend of urbanisation in Thailand is still very strong as it is still much lower than in other countries. In Thailand you have to apply a different strategy for each location.
For example, Chiang Mai has a population of 2 million but people in the surrounding region have to go to Chiang Mai for trade and education, which results in a potential population base of 5 million. Yet the hotel market in Chiang Mai is the worst in Thailand, while the residential property market has become one of the best opportunities.
In Phuket, there are only 200,000 local residents, but the people who work there bring the total to around 1 million. Even so, condominium developments are everywhere and the market is oversupplied. However, the hotel market in Phuket is still the best in Thailand.
Hua Hin and Cha-am are both growing and in terms of development scale they will follow Pattaya, but the weak point is still the airport, even though it is not far from Bangkok.
What impact will the Asean Economic Community have on your business?
It’s important as the AEC unifies Asean and makes it more noticeable. Technically, it will harmonise the region via free trade, a free flow of labour and tax minimisation. Some worry about foreign competition and losing market share, but in the Thai property business it is very difficult for new entrants to gain a foothold.
The market dynamics are very different between Singapore, Hong Kong and Thailand. For example, here we have to compete alone for a piece of land and you have to make the most of it or go bust. Thai property companies are very strong, stronger in terms of marketing and development. Sure, our capital bases are smaller than international players but having capital alone is not enough to be successful.
What are the biggest risks facing your business?
The weak point of Thailand has always been politics, but whatever the outcome, Thailand’s political system will improve. The past six months have been an intensive crash course for the 20-30 million people who vote. They understand their rights far more and the impact that their vote has.
For example, a farmer who in the past used to be afraid and thought like a debtor now realises that he is a creditor. So I believe that whoever is prime minister next will know that he or she has to act properly and will not just push their own agenda because protests will come. But the key strength of Thailand that has balanced the weak political system has been the country’s private entrepreneurs and businessmen.
Where do you see CI five years from now?
Our aim is to consistently have 5 billion baht worth of revenue a year with the proportion of resort residential at 44%, residential at 42% and recurring income at 14% from our hotels, resorts and offices as well as our property fund holdings.
We will continue to expand with property developments in the big cities in Thailand that contain the right ingredients for our projects to be successful.
We are confident we can achieve these goals because despite the issues that the country may face today, I see the potential that Thailand has and, more than any other country in the region, I still bet on Thailand.
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