Limited land, rising investment costs, and high competition have forced property firms to change their business strategy from trying to grow by themselves to entering joint ventures or merging with other property firms.
Three joint ventures have been established to develop condominiums close to Bangkok’s mass-transit system. Sansiri, one of the top three listed property firms, decided to enter a joint venture with BTS Group for this purpose, while AP (Thailand) did so with Japan-based Mitsubishi Estate Group and Ananda Development with Mitsui Fudosan, another Japanese firm.
CP Land Co, meanwhile, is collaborating with Siam Piwat to develop a mixed-use project worth more than Bt50 billion on the Chao Phraya River.
Thailand’s landlords have also expanded their investment in the property business by backdoor listings on the Stock Exchange of Thailand.
Singha Estate Co, a property arm of Singha Corp, acquired a major stake in Rasa Property. Golden Land Property Development, owned by beverage tycoon Charoen Siriwattanabahkdi, took over Krungthep Land. Property Perfect took over Thai Property, while BTS Group took a major stake in Natural Park.
“We had to take over Thai Property because we wanted to expand our business from developing homes for sale to generate income from rentals,” Property Perfect chief executive officer Chainid Adhyanasakul said.
With this acquisition, the company will own two office buildings, One Pacific Place and Two Pacific Place, on Sukhumvit Road in Bangkok, now owned by Thai Property.
Property Perfect will also acquire a 40-per-cent stake in Grande Asset Hotels and Property, currently held by Thai Property and its subsidiary Metro Premier Holding Co. Grande Asset owns four hotels in Bangkok, Hua Hin, and Pran Buri district of Prachuap Khiri Khan province and is developing two condominium projects under the Hyde brand.
In the property business, joint ventures can be a way to share the partners’ respective strengths. Besides injections of capital, Ananda Development and AP (Thailand) are learning about technology for building homes from their Japanese partners, while Mitsui Fudosan and Mitsubishi Estate Group gain opportunities to expand their investment in Thailand.
Sansiri cut its costs for acquiring land close to the mass-transit system when it established a joint venture with BTS Group; for its competitors, land prices near the transit routes have doubled over the past five years, while availability is limited.
Meanwhile, BTS Group has had little luck getting into the property-development business on its own. Five years ago, it launched a residential project under the Abstract brand and also tried to sell its Thana City project on Srinakarin Road, but the company did not succeed. But its new joint venture partner Sansiri has a strong brand in this segment, so this is a win-win deal for both companies.
“Sansiri has proven expertise in developing residential projects along both existing and future mass-transit lines, creating the ideal synergy for successful collaboration,” said Keeree Kanjanapas, chairman of BTS Group Holdings.
Sansiri president Srettha Thavisin added: “We also will get more information from BTS Group, which has a database on customers who use the mass transit system through the Rabbit card. The database will enable the company to gain insight into customer behaviour.”
Singha Estate, which acquired a major stake in Rasa Property, also needs the business experience of Rasa’s management team while gaining a backdoor listing on the SET. This will help Singha Estate raise capital to develop its residential, office and retail property projects.
Credit: The Nation