He made a fortune in the UK from cordless phones, and now the multi-millionaire Gulu Lalvani has built a luxury marina project for super-yachts as a retirement hobby in Phuket. Here he talks to us about his Royal Phuket Marina project.
So you first went to Phuket in 1991?
My hobby used to be discovering new places to holiday. And in 1991 I heard about the Amanpuri opening in Phuket, and I had never been to Phuket before. So I took my wife and three kids for a week and fell in love with it. I then bought a villa in the Amanpuri. Eventually I decided I wanted to retire in Phuket. But I am a workaholic by nature, so I thought to myself that I wanted to do something while I was there rather than just sit on the beach.
When Thaksin Shinawatra got elected I decided that I liked his policies and invested in real estate. I also decided that I wanted to contribute something to Phuket - something that it needed and that I would enjoy. I am a boating person. I found boating in Phuket far better than the Caribbean.
But there were disincentives for yachts owners to bring their boats to Phuket. One is that import duties were very high - at one stage import duty on boats was 235%, although it got reduced to 47%.
After I bought the land I was introduced to Thaksin by the then governor of Phuket at a special dinner. The theme of the dinner was what could be done to improve Phuket. I told him that if they allowed yachts to be brought there duty free there would be a big incentive for people to come. I said that it would bring in affluent people, who would spend money in the local economy. In February this year the duty was reduced to zero. So that removed one disincentive.
The other disincentive is that though there were two marinas in Phuket, both were very shallow. The result was that good yachts would damage their propellers in low tide. I myself had faced this problem. It cost me $65,000 to get them fixed both times it happened.
So what I decided was to build a first class marina - so that people could bring their megayachts to Phuket.
But you may ask, what's in it for yacht owners?
Let me start with my first assumption and that is, people want to go to Phuket. The villa I own in the Amanpuri gets rented at $5000-6000 per day. When I bought it the rate was $1000 a day. The amount by which it has gone up, shows how much people want to go to Phuket in order to get this standard of luxury. Why? It's the beauty of Phuket and the islands around and the friendliness of the people that are the major attraction.
Now yachts. When you own a yacht you have three main costs: fuel, maintenance, and the crew. Not many people know that fuel costs per litre in Thailand are 75% less than Hong Kong. The cost of crew is 80% below Hong Kong. And mooring costs are less than half of Hong Kong's.
So one can enjoy the luxury of yachting at a very affordable price. So what I have done is created villas and condominiums where you can have a yacht right behind the back garden like they do in Fort Lauderdale in Florida.
Phuket also has so much to offer. Dulwich School is there, and there are very good hospitals and excellent food. Phuket will have four million arrivals this year versus 1.7 million in 1997.
We only just appointed a sales agent. But we already sold 30 properties without a sales agent. And that's out of 100 in the first phase.
The first phase will be ready by April. This will comprise 90 condominiums and 10 villas. And out of those 30 buyers, half are from Hong Kong - and it was all word of mouth.
The Amanpuri is still the most luxurious place in Phuket, but it lacked a marina. I feel that I have put the Amanpuri's luxury together with the marina concept. I have also priced it very reasonably because I am doing this as a hobby not as a business venture. The first phase is priced so reasonably that I believe by the time the second phase is completed, people will have doubled their money.
This project is being financed with my own money, and no debt. If I get an 8-10% return I will be happy. As I say this is more of a hobby for me, like golf for other people.
What is the price?
The most expensive are the villas at $1.7 million. A two bedroom waterfront apartment of 3000 square feet is $281,000. That is the best value. I didn't do this to make huge money but for the enjoyment.
So the same apartment in the second phase, you will start selling for around $500,000?
The second phase will start in April and will be at least 50% more.
What's the situation with financing? Do you have to pay cash?
This is a problem. Banks in Thailand are not keen to give mortgages to foreign individuals. Private banks like Coutts will lend, but will use a client's portfolio as collateral.
How did you find the site?
I found it about a year after I decided to do this. It is on the East coast and that makes it better for sailing. You can sail all year round. The site is only three minutes away from Dulwich College and 15 minutes from the nearest golf course.
We also own a private beach. Our original site didn't have sand, and so we bought a private beach. The beach is 10 minutes away by a shuttle speedboat or you can sail there in your own yacht.
The marina waterfront parade is 250 metres long, and will be full of restaurants and cafes. The marina will have a total capacity for 350 yachts. There will also be a topline Ayurvedic spa and a mall with upmarket shops.
The pools are shared by 15 condominiums, but there are private pools in the penthouses and villas.
What would be the biggest yacht you could keep at the marina?
The other issue with buying in Phuket are the complex foreign ownership laws. How have you dealt with these?
We have done a lot of assessment of this. Let me explain. Like me, all of the owners of villas in the Amanpuri are wealthy businessmen. The first people bought in 1990 and in total there are 30 Amanpuri villas. We all got 30 year leases and were told that after 30 years we could extend it twice up to 90 years. What happened was that two years ago the company that owned the land told the owners' committee that it was selling the land. It was a bit like blackmail. They said they were selling the land for $9.8 million and offered it to us. They said it was fine if we didn't buy it, as our lease would continue. But after 30 years the new owner of the land would have no obligation to renew the lease for two more terms. We thought this was a joke and consulted top lawyers such as Clifford Chance. And it turned out this was right. Only the company that sells it to you is obliged to renew the 30 year lease.
In the process I learned a lot. We, the 30 owners, had to pay for the land, which meant dividing the $9.8 million by 30. And Clifford Chance devised a very secure structure in which the 30 owners hold the shares of the company that owned the long leasehold. So we have devised a nice structure and we have followed the same Amanpuri advice with the Royal Phuket Marina. It took 18 months and a lot of expense to create the structure. It will be of interest to your readers that we have spent a lot of time and money getting the structure right. You can even write that the owners of the Amanpuri villas - like me - were blackmailed and that should open peoples' eyes. Others may have bought similar 30-30-30 leases and get blackmailed the same way by their landlord.