LH tipped as developer with Bt8-bn stake

A source from the Property Office at Chulalongkorn University said the committee overseeing the project had selected LH as the developer of a 13-rai (2.1-hectare) plot in the area of Chamchuri Square after holding an auction in which two bidders participated: Charoen Sirivadhana-bhakdi and LH. The source asked not to be identified.
Adisorn Thananun-Narapool, LH deputy managing director, said he had not been informed of the bidding result yet. If the company is selected, it has about Bt8 billion to spend on development of the project, which will be in the mixed-used style, similar to Terminal 21.
The planned project will include a retail section, a 500-room hotel and a convention centre in a 200,000-square-metre area including a building of more than 20 storeys. The construction period is expected to be about four years. LH will hold a 60-per-cent stake in the project, and GIC will own the remaining 40 per cent. LH will use its cash and borrowings to finance the development.
Apart from its core property business, LH makes investments for long-term returns. In 2011, the company had registered profit of Bt5 billion, including a Bt3.5-billion gain through its divestiture of Bangkok Chain Hospital, and sales of its Indonesian subsidiary. Lately, there have been rumours that LH will sell Home Product Centre.
While pointing out that rumours are commonplace, Adisorn did not rule out such a sale, given the appropriate timing and price. “If we can make a profit, we will definitely sell.” Currently, LH holds a 30.7-per-cent stake in Home Product Centre.
The new Land and Houses Prop-erty Fund owns majority stakes in three projects: two freehold projects and one leasehold project. The remaining stakes are owned by GIC.
In the first quarter, LH expects revenue of more than Bt1.5 billion from the fund, which is valued at Bt3.3 billion, Adisorn said.
The proceeds from sales of the projects’ units will be used to finance future expansion.
This year, LH set aside about Bt6 billion for investment (excluding the Chamchuri Square project). About Bt5 billion will be used for land purchases and the rest will be invested in a department-store project, also similar to Terminal 21. More than Bt9 billion was invested in this project last year.
Although LH sold three projects to the fund, the company’s board of directors approved the firm’s purchase of 15 per cent of the fund’s units, as the projects are in prime locations with stable cash flow and occupancy rates of about 80-90 per cent. GIC will also buy 15 per cent.
Subhak Siwaraksa, chief executive officer at CIMB Thai Bank, which supports the fund units’ sales, said the fund was expected to provide a return as 80 per cent of total assets are freehold and it is likely to gain higher return from higher land prices in the future.
The fund guarantees a return of 7 per cent until 2015.
Its subscription period is expected early this month.