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Developers target M&A route to diversify their businesses

Jul 28. 2016
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A NUMBER of leading developers have set aside investment budgets worth more than Bt100 billion combined for this year through 2022 to fund merger-and-acquisition deals for office, hospitality and other non-residential projects in Thailand and abroad, as t

For example, TCC Land Asset World, a property arm of beverage tycoon Charoen Sirivadhanabhakdi, plans to invest more than Bt74.2 billion for hotel development in the Kingdom through to the end of 2022.

The investment will be for the development of new hotels and also acquiring hotels for renovation.

Country Group Holdings (CGH), owned by the Taechaubol family, has reserved Bt6 billion to acquire businesses and invest in potential opportunities both locally and overseas.

Singha Estate, meanwhile, has set aside an investment budget of Bt18.8 billion to acquire major stakes in hotel and office businesses in Thailand and abroad this year.

Land & Houses has earmarked Bt7 billion for investment this year, with Bt4 billion set aside for buying undeveloped land for the development of residential projects for sale in 2017, and the remainder to take over serviced apartments in the US and for the acquisition of hospitality projects in Thailand.

Pruksa Real Estate has set aside Bt1.5 billion to acquire major stakes in the hospitality sector next year, after its restructuring into a holding company is completed by the end of this year. Tommy Taechaubol, chief executive officer of CGH, said this week that the group had completed a two-year restructuring process turning it from a securities brokerage firm into an investment holding company.

The new holding company, which has increased its registered capital from Bt2.36 billion to Bt4.33 billion, is looking for companies to acquire with a targeted internal rate of return of 15 per cent, he added.

CGH is the major shareholder in Country Group Development, a property firm that is developing the Four Season Private Residence Bangkok, a luxury condominium worth Bt32 billion.

TCC Land Asset World’s chief executive officer, Soammapat Traisorat, said recently that up to Bt14.2 billion would be spent on developing four new hotels to be managed by Marriott International Group, while Bt60 billion would be for more than 10 hotels nationwide managed by other chains.

The investment will boost its hospitality income to 60 per cent of total revenue by 2022, with the rest coming from retail and office space, he said.

Last year, the company’s revenue from hospitality business was around Bt8 billion, or about 40 per cent of overall estimated income of Bt20 billion.

Soammapat explained that TCC Land planned to invest aggressively in hospitality business as it foresaw Thailand becoming more of a regional travel hub now that the Asean Economic Community was in effect, especially for meetings, incentives, conferences and exhibitions – the MICE market.

The company is suspending expansion in the residential market, and will invest less in retail properties because of limited land availability. As a result, it will focus more on hospitality business, he added.

CP Land, the property arm of Charoen Pokphand Group, also is looking to go international by expanding throughout Asean, Europe and Australia.

President and CEO Sunthorn Arunanonchai said earlier that the company’s overseas investment focus was on office buildings and hospitality. In Asean, he said Yangon in Myanmar and Ho Chi Minh City and Hanoi in Vietnam were potential expansion options within the next two to three years, while the UK and Australia would be the next focus for CP Land.

The cost of each investment will range from Bt1 billion to Bt3 billion, he said, adding that the company would buy land and acquire existing hospitality and office-building assets.

“Up to Bt15 billion of our investment budget of Bt18.8 billion will be spent on taking over hotels, offices, industrial estates, warehouses and community malls, both in Thailand and overseas,” said Singha Estate’s chief executive, Naris Cheyklin.

He added that the company was currently negotiating up to seven deals, five of them for acquiring hotels in the UK, and the others for the purchase of an industrial estate and warehouse, and a community mall.

Meanwhile, Pruksa Real Estate CEO Thongma Vijitpongpun said the company had decided to restructure the business into a holding company because it needed to have sustainable growth by creating income from rental business.

“We have set aside a budget Bt1.5 billion for investment next year in property projects that generate recurring income for the long term, after our restructuring is finalised at the end of this year,” he explained.


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