Experience areas: data centre investment | land due diligence | major transaction risk review.
1. Understanding What the Client Was Being Asked to Take Over
A client planning to invest in a data centre in Thailand was considering a large site comprising several land parcels and covering hundreds of rai.
A key feature of the proposed transaction was that the party dealing with the client was not the registered landowner.
That company had already entered into a preliminary land sale and purchase agreement as the original buyer. It proposed that the client take over the project through a resale or an assignment of contractual rights.
The proposed transaction therefore involved two successive relationships:
Landowner → Original buyer under the preliminary agreement → Client considering taking over the project.
Whether the client could ultimately acquire the land depended first on the reliability of the earlier transaction. If the original buyer’s own contractual rights were uncertain, a new agreement with the client could leave those same obstacles unresolved.
Before deciding whether to sign or pay, the client instructed THAIHOUSING to investigate the transaction.
2. Tracing the Original Agreement Revealed Questions About Signing Authority
THAIHOUSING found that the preliminary land sale and purchase agreement named the landowner, but the signature page did not bear the owner’s signature. A court-appointed curator had signed on the owner’s behalf.
The available court documents established that person’s appointment, but did not show specific court approval for this land sale, its terms, receipt of payment or transfer of title.
Two separate matters therefore required verification: whether the person held the court-appointed role, and whether that person had sufficient authority to carry out this particular transaction.
By the report date, the firm had also been unable to verify the owner’s actual intention to sell or the circumstances of signing through a direct meeting.
The first central finding was therefore that the signing basis and conditions for performance of the agreement on which the original buyer relied for the proposed resale had not been sufficiently established.
Without resolving that issue, even a detailed resale agreement would not automatically remedy problems in the earlier transaction.
3. Land Records Showed Mortgages over All the Target Parcels
The land registration documents showed that all the target parcels were mortgaged, with different mortgagees involved.
This added another set of parties and rights to the transaction. Alongside the landowner and buyers, the mortgagees’ rights and the practical conditions for releasing the mortgages had to be addressed.
Although the original agreement set payment and transfer dates, those provisions did not establish that the mortgages could be released on schedule.
For the client, the matters requiring a workable arrangement included the treatment of the secured debts, release conditions, cooperation by the relevant parties, and the sequence of payment, mortgage release and title transfer.
If those arrangements remained unresolved, the client could face a situation in which money had been paid but an unencumbered transfer of the land could not be completed as agreed.
The firm therefore identified the mortgage position and release arrangements as material issues affecting whether the transaction could proceed.
4. Other Land Was Offered as Security, but That Security Also Needed Investigation
Parties involved in the transaction proposed other land as security for performance.
Additional security can appear reassuring in a high-value transaction. Further review by THAIHOUSING, however, found mortgages, co-ownership and other restrictions affecting the proposed security land, as well as relationships between the relevant companies.
The assessment therefore had to go beyond the amount of land offered. It required verification of which assets could validly be provided, what debts or burdens already affected them, and how much practical protection they could offer if a default occurred.
The firm also reviewed the original buyer’s corporate and financial information. It showed limited recent operating activity and continuing losses. The available records did not sufficiently demonstrate funding and performance capacity commensurate with the proposed high-value transaction.
The issues for the client were now concrete: the ability to acquire the land remained to be verified, the original buyer’s ability to perform needed further substantiation, and the proposed security could not simply be treated as adequate protection.
5. Establishing How Far the Data Centre Conditions Had Progressed
The client intended to use the land for a data centre. Due diligence therefore also examined planning use and progress on electricity supply.
The transaction counterparty’s description of the land use differed from the planning information obtained. At the same time, the firm obtained a letter from the competent authority providing positive planning confirmation for data centre use of the relevant land, subject to the applicable conditions.
The report presented both findings. The planning category had to be understood accurately, and the authority’s letter had to be read within the scope of what it actually confirmed. It could not be treated as confirmation that every condition for the project had been satisfied.
On electricity, a substantial power requirement had been submitted, but it remained under coordination and consideration at the report date. Formal electricity supply approval had not yet been established.
Final capacity, connection arrangements, responsibility for associated construction costs and the date when supply could begin remained key conditions to be settled.
For a data centre project, these matters directly affect subsequent investment arrangements and the construction timetable.
6. What the Due Diligence Established for the Client
THAIHOUSING cross-checked the agreements, court documents, land records, proposed security assets, company finances, planning opinions and power application materials. The firm assessed the project as high risk overall and delivered a written report to the client.
The report explained how the risks were connected:
- Authority to sign the original agreement affected the basis of the rights the client proposed to acquire.
- Mortgages and release arrangements affected whether title could subsequently be transferred smoothly.
- The original buyer’s performance capacity and the condition of the security assets affected practical protection if the transaction failed.
- Planning and electricity conditions affected whether the data centre project could proceed as intended after the land was acquired.
At the report date, the client had not signed binding transaction documents or made any transaction payments.
Before the client assumed substantial financial obligations, the due diligence clarified which conditions were in place, which statements had documentary support, and which issues remained unresolved. It provided a basis for deciding whether to continue, what further documents to request, and what transaction conditions to require.
To protect the client and other parties, the area, transaction value, parcel count, power requirement, location and identities have been generalised or anonymised. This account reflects the information available when the due diligence report was issued.