Siamphan invests B2bn in Sukhumvit

The contractor Siamphan Enterprise Plc plans to invest two billion baht to acquire a non-performing asset on Sukhumvit Soi 6 to develop into serviced apartments next year, according to managing director Teerapon Wangmontri. The investment will include the acquisition and renovation of the project, which will comprise 250 rooms with a room rate of about 3,800 to 4,000 baht per night. Operations will start in 2010 by the Singapore-based serviced apartment management firm Fraser.

"We've grown up from the construction business, but margins have decreased since oil prices have risen. Property development has more potential and we have our eye on serviced apartments that we can sell to a property fund," he says.

The company started developing property in 1997 for a project on Sukhumvit 15. Later in 2000, it acquired a leasehold non-performing asset (NPA) from the Tisco Group in the Lang Suan area with an investment of about 1.5 billion baht.

This leasehold asset, formerly owned and partly developed by Golden Land Property Development Plc, was developed as Urbana Lang Suan with a total of 283 units. Of the total, 135 units have been sold.

Meanwhile, the remaining 128 units with a total area of 10,523 square metres were operated as a serviced apartment by Fraser, which generated 60-70 million baht per year to the company.

Currently, Urbana Lang Suan has an average occupancy rate of 85% and an average room rate of 3,400 to 3,500 baht a night, or 80,000 baht a month.

Mr Teerapon said the 128 units of Urbana Lang Suan were sold to Urbana Property Fund (Lease Hold), or URBNPF, for 720 million baht. The fund will be a closed-end fund with leasehold rights of 28 years as the property is leased from the Crown Property Bureau. It has to pay 900,000 baht a month in rent and the rate will increase by 10% every three years.

The company yesterday signed a contract to appoint Siam City Asset Management as a property fund manager and Sicco Securities as an underwriter for URBNPF.

The company's subsidiary, Urbana Estate Co, which has registered capital of 400 million baht, will hold less than 33% in URBNPF, he said.

The fund will have no more than 75 million shares priced at 10 baht a piece. Dividends will be paid every quarter, while the minimum guaranteed returns per year for the first three years will be 8%, 9% and 10%, respectively, with an occupancy rate of 85%.

The company is also in talks with Siam City Asset Management to sell its Fraser Suite Sathorn with 170 units to a property fund. It invested 2.4 billion baht to develop the project, which has started operations in the past three months.

By the end of the year, the company expects to have a total of 520 million baht in revenue. About 400 million baht will be from the construction business and 120 million baht from recurring income and sales of some units at the Sathorn project.

Currently, Siamphan Enterprise has a construction job worth 600 million baht from the Bangkok Metropolitan Authority to build a Chao Phraya River dam. Revenue will be booked in 2008.

According to CB Richard Ellis, two property funds were listed on the Stock Exchange of Thailand in the first half of 2007, bringing the total to 14 with a market capitalisation of about 46.4 billion baht.

The JC Property Fund (JCP) was listed in January. Its 620-million-baht portfolio consists of space in the JC Kevin Office Tower A building and a car park, both held under a 30-year lease with an option to extend for five years.

Gold Property Fund (GOLDPF) was listed in May. It has invested in the 30-year land and building leasehold Mayfair Marriott Executive Apartment serviced apartment complex, and has an option to renew for another 30 years. The 26-storey building is owned by a subsidiary of Golden Land.

Source: BangkokPost.com