Hello Pezz, last week’s report, part 1 of 2, where I went:
<<Is China really slowing down!?>>
... no, just taking a respite.
I was absent from Hong Kong for a few days earlier in the week. I visited a remote island in the Philippines supposedly to investigate a possible speculation but really just to catch up on three true friendships, some megabytes of readings, and laps of swimming.
We of the earlier Boracay Island league (circa 1989-1991, Philippines, post TianAnMen Incident) ...
... comprised of 2 Australians, 1 American, and 1 French Creole Hakka Chinese Trinidadian, now 240 months less foolish and twenty years more handsome, had gathered together this past week to discuss and ponder the opportunity on another wild island (“… just like Boracay once was 15-20 years ago”) ...
where the best resort on the beach is for sale by a rather serious but not yet sincere “don’t wanter”. The resort is actually more a private home than a resort, situated on 6 hectares (65,818 sq meters, or about 700,000 square feet) with a central infinity pool, master house, chef house, staff dorm, garages and support workshops, and twelve guest (steel, teak, marble, tile and glass) bungalows.
Our team had internalized and organic complement of skills: architecture, law, hospitality, Philippines political relationship development and management, security enforcement, currency barricade running, capital control circum-navigation, financial management, i.banking, and brochure writing.
The Swiss Architect-owner (age 65) and his Filipino wife have been troubled by too much bothers and were packing even as we toured. They had suffered from local unionization problems and do not know how to deal against wastrels. They have neither the wherewithal with private armies nor the inclination for bribes, and they do not have access to Supreme Court justices. They must de-camp. A mistake made in haste was that the couple fired all staff, hired security, and hot-stopped the resort operations, and thus forfeited “going-concern designation.
The infrastructure of the entire place was built like a precision Swiss watch with German bunker know-how, Japanese detailing, and Russian sense of scale. The cement work is laser sharp, roofs are made of huge pieces of well-treated hardwood, pipes are over-sized and of polyurethane material, fixtures are either stainless steel or brass, solar water heating technology is of the no-sediment accumulation sort, and swimming pool equipment are the sort that generated a bit of chlorine from filtered and diluted (10:1) sea water, and the water tower is as large and tall as needed for 60 bungalows. The seriously leak-proofed 3-stage septic process and huge rain water aggregation-storage system are good for 80 bungalows. The appliances and furniture are the best of the best, heavy duty and maintenance lite.
In a word, “incredible”.
The owner-operator imported his own French chef. The man was drawn to the place by his own tropical abode on the premises that featured an adjoining golf driving range.
The proprietor outsourced security, massage, and transport services and kept in-house food and beverage, and cleaning and landscape services.
The land was acquired for dirt 15 years ago, meant to be a private owner-occupied home, took four years to complete construction, and still, given the character and material selection, looks brand new. The cost of construction was about 3.5 million. The land is now valued at around 7.3 million (25% of the land @ peso 8k/sqmt, 50% @ peso 5k/sqmt, and 25% at peso 2k/sqmt, netting to usd 8m @ 45:1). As a hobby hotel, it was 95 % occupied year round, and generated about 500k of tax-free profit. The land and existing infrastructure (pool, kitchen, back office, staff quarters, …) can easily support an additional 50 bungalows.
Alternatively, the 110 meter long beach frontage can be divided into 3 equal stretches to be assigned to three fancy private homes, and the back lots can be either sold as bespoke building lots or just kept as a buffer against the riff raffs.
Or, the whole place can be re-configured to serve as a compound style home for 6 homes, all sharing a central facility, co-owned by friends and family seeking refuge from whatever is coming our way.
Given the Swiss owner’s work, we are already clear on who from where can do what for how much by when for whatever needs doing, and the global feeding network for my friend’s place on Boracay can be easily seconded to keep the new place at 95% occupancy whatever our final room / bungalow count.
The idea is that the place should turn into a mini version of Boracay w/i 10 years, with the land going to peso 80k/sqmt for the front (25%) and peso 20k for the back lots, netting to 73 million current usd.
We believe the place, all-in, due to dire eagerness to de-camp, lack of buyers, and large commitment required of the buyer, might be purchasable for 2,500 pieces of gold. Such an amount of capital can be raised amongst friends of like-mind in small dollops and large tranches; it is not as if anybody has any better ideas to do a 10x w/i 10 years or less, besides going all-in to gold.
The neighborhood had enough interesting beach restaurants and drew folks from all over the world (40% local Philippines, including expats, and 60% in-bound from the region and Europe/America, China, and Japan) and also attracts girls from all over the planet, not that this particular fact are important in any way what so ever.
I like. I want one. I am hungry.
But, given all the risks and plenty of hassles (believe the wastrel unionization effort can be pacified for 30k of carrots or 50k of sticks, or a mix of both, calibrated), I think we must either wait for the time when such good Philippine places can be exchanged for 500 gold pieces or seek same in other nearby domains featuring at least less visible risks.
You see, we must not fear deflation. We must ready ourselves to engage with and embrace it, and then we must wolf it down as one would a still-twitching lobster, sashimi style.
What do you think? |
