Singha Estate Plc, the properฌty company of beverage giant the Singha Group owned by the Birombhakdi family, is fast expanding its footprint  in the local  and overseas realty markets with a five-year investment budget of over Bt55 billion, from 2017 to 2020.

The group entered the property market in 2014 through the Bt7.78billion takeover of Rasa Property Development Plc by its then property arm Singha Property Management Co Ltd, later renamed Singha Estate Plc.

In 2105, Singha Estate sealed a shareswap deal to acquire Nirvana Development Co Ltd, worth more than Bt1.7 billion.

 In the following year, Singha Estate Plc was involved in another shareswap deal between its subsidiary Nirvana Development Co Ltd and Daii Group. The takeover of Daii, worth Bt3.39 billion, paved the way for Singha Estate’s inroads into the middleincome residential market.

After the 2016 acquisition, Singha Estate last year announced a Bt31.87billion plan to develop residential and commercial projects – including condominiums, office buildings, hotels, and retail premises under the ESSE brand on Sukhumvit 36, Sukhumvit 43, soi Asoke, and Santiburi The Residences.

The Nirvana Development Co Ltd and Daii Group have also expanded their investments in single-detached house, and townhouse projects.

Meanwhile, the SET-listed Singha Estate Plc ventured abroad through the takeover of six Outrigger hotels costing US$310million (nearly Bt10 billion), in line with its investment strategy – “SMART Mergers and Acquisitions” (SMART M&A), focusing on high-return, fast-growing assets in tourist destinations around the globe.

The maiden acquisition overseas helped accelerate the strategic intention of S Hotels & Resorts, another Singha Estate subsidiary, to conduct an initial public offering next year, whereby S Hotels & Resorts will become a full-fledged global holding company.

Singha Estate has signed a contract with the Hard Rock Cafe to manage the company’s  resort, located in the Emboodhoo Falhu Lagoon, in the Maldives. It will also  build a new hotel in the country, worth up to Bt11 billion.

Singha Estate’s CEO Naris Cheyklin said the aggressive investment approach since 2017 followed the company’s pursuit of Bt20 billion in total revenue in 2020. That goal has now been moved forward to 2019, he added.

“Singha Estate aims to become a ‘premier property development and investment holding company’ with an annual revenue of Bt20 billion by 2019. We will be an integrated property developer of residential and commercial projects for sale and recurring incomes. The two project categories are expected to make an even contribution to the company’s total revenue in the next five to 10 years. Up to 30 per cent will come from overseas business,” Naris said.

Under the group’s property strategy, Singha Estate Plc is the investment arm for both the domestic and overseas markets, developing luxury condominium and commercial building projects. Nirvana Development Co Ltd focuses on low-rise residences including single-detached house, and townhouses for the middle and upper market, and as a joint venture firm with Daii Group, also develops residential projects for the middle and lowerincome segments.

As of the end of the first half, Singha Estate and subsidiaries posted Bt54.80 billion in total assets, Bt3.05 billion in revenue and a net profit of Bt663.5 million. This represented a significant recovery from a net loss of Bt250.78 million in 2014, with Bt11.28 billion in assets and Bt402 million in total revenue.

Besides beverages and property, the Singha group is also active in the packaging, food and services sectors. The group expects its total revenues to reach Bt200 billion this year, from Bt180 billion in 2017, with beverages and related businesses accounting for up to 80 per cent.

It expects the property business to make a doubledigit contribution to the group’s total revenue in 2020, from less than 10 per cent currently.

Phurit Bhirombhakdi, chief executive of Boonrawd Trading, the holding company of Singha group, said the company is keen on business diversification when opportunities arise, adding that its property investments would boost the group’s revenue and profit.

To achieve this goal, the company has set up a joint venture firm, AHJ Eakkamai Co Ltd, with Japanese partners JR Kyushu and Hoosiers Holdings to develop their first condominium project, in Ekkamai, under the Excel Rise brand. It will be launched in the first half of 2019.

All Inspire Development Plc holds a 51 per cent stake in AHJ Eakkamai Co Ltd, with 29 per cent owned by Hoosiers Holdings and 20 per cent by JR Kyushu.

“The project is undergoing the design process and the project value will be announced at the end of this year, for presales to open in the first half of next year,” Thanakorn said.

He said the joint venture firm would support the company for its business expansion in terms of financing and technology, as both JR Kyushu and Hoosiers Holdings have long experience in the construction and design of residential buildings in Japan.

This marks the second time that the company has set up a joint venture with Hoosiers Holdings, following a deal last year for the development of Excel Hideaway Sukhumvit 50, worth Bt2 billion.

“We are open to the opportunity to set up joint venture firms with all foreign partners who interested in expanding their investments to develop residential projects in Thailand, because we want to learn about technology and design from our partners,” Thanakorn said.

He said the partnership with JR Kyushu marks the first time that they have cooperated. Thanakorn is looking ahead to more joint developments with JR Kyushu and Hoosiers Holdings.

JR Kyushu, which is the market leader for the operation of rail systems in Kyushu, recorded total revenue equivalent to Bt111 billion at the end of 2016. Hoosiers Holdings has total sales averaging Bt16.5 billion a year.

Separately, All Inspire Development yesterday applied to raise capital from the Stock Exchange of Thailand under a plan to increase its registered capital from Bt408 million to Bt560 million by issuing 152 million new shares in an initial public offering (IPO). The flotation would take place after the company secured approval from the Securities and Exchange Commission of Thailand.

“We will spend the new capital on our business expansion and pay back some of our loan, reducing our debt-to-equity ratio from an average of 3:1 to less than 3:1,” deputy chief executive officer Somchai Charntanawet said.

After the IPO, the Thanawarith family will reduce its majority stake from 99 per cent to 75 per cent, from its total registered capital of Bt560 million.

All Inspire Development Plc was established in 2013 with registered capital of Bt2 million by the Thanawarith family and launched its first condominium project, the Excel Baring, at that time.

The company has a total backlog worth Bt8 billion from its existing residential projects, which are undergoing construction.

The company recorded total revenue of Bt1.15 billion in the first half of this year. It is preparing to transfer to customers property worth Bt730 million, out of a total backlog of Bt8 billion, and this will be booked as revenue during the rest of this year, Thanakorn said. This would mark strong growth from last year, when total revenue was Bt714 million, he said.

This year, the company has launched five residential projects worth Bt7.2 billion, down from an earlier plan for the launch of seven projects worth Bt10 billion. It also enjoyed record-high presales in the first nine months of this year.

“Now that we have a high backlog and presales were a record high, we considered delaying the launch of the next two projects from this year to next year,” Thanakorn said.

He said that the business strategy for the joint venture firm with the Japanese partners and the planned capital raising came under the company’s efforts to boost its investment and achieve the brand-recognition goal within five years.

The company plans to launch 18 residential projects worth a combined Bt31.23 billion in the last quarter of the year.

Two of those are condominiums worth Bt14 billion, six are single detached housing worth Bt7.84 billion, and 10 are townhouses worth Bt9.39 billion.

AP unveiled one of the luxury single detached homes projects on Monday, the Palazzo Srinakarin, worth Bt1.75 billion with unit prices starting at Bt29 million.

It entails 52 units on 31 rai.

The research found that Thailand’s mergers and acquisitions (MA) activity had remained resilient over the past few years.

The survey learned that between 2015 and 2017, the average transaction increased by 21 per cent from US$39.7 million (Bt1.29 billion) to $48.2 million (Bt1.56 billion) while transactions larger than $400 million (Bt12.96 billion) also increased by the compound annual growth rate (CAGR) of 5.5 per cent, signifying a surge in M&A deals in Thailand. In terms of industry breakdown, consumer discretionary and staples represented the largest sectors for both deal volume and value, followed by industrial and material sectors between 2015-17. They are still seen as promising sectors with potential to grow in 2018.

As of the first quarter of 2018, Thailand’s M&A transactions reached $2.2 billion over a total of 57 deals. Some 37 per cent of M&A transaction value in the first quarter of this year occurred in the consumer discretionary sector, followed by energy (34 per cent) and real estate (14 per cent), respectively.

This figure is lower by almost half in terms of volume and value compared with Thailand’s first quarter of 2017. However, the country’s by strong GDP growth and rising FDI inflows should improve M&A growth opportunities in 2018 and are expected to reach similar levels to 2017 or higher, the research found.

One major M&A deal of note from early 2018 was the energy-sector acquisition of Bongkot Project by PTTEP International Ltd valued at $750 million. Some 85 per cent of the M&A transaction value in early 2018 was from domestic investments resulting from a recovery of exports in the industrial sector.

Backed by a manufacturing-driven economy, Thailand is also perceived as an emerging manufacturing hub as well as a global destination for tourism. Moreover, the government’s commitment to invest and foster a business scheme in the Eastern Economic Corridor is expected to further stimulate market opportunities. Thailand will remain an attractive stage for domestic, outbound and inbound M&A deals, which should reach its peak in 2020, according to the report.

The report also said that consumer discretionary and staples, energy and real estate sectors have been promising sectors and would continue growing in 2018, given the increasing regional consumption spending and the recovery of Thailand’s exports.

“The Bt20.14 acquisition last month of a majority stake in Grand Canal Land Plc(GLAND) by CPN Pattaya Co Ltd, a subsidiary of Central Pattana Plc (CPN), showed the demand for land on Rama IX Road,” a source said.

The takeover occurred as GLAND was developing Super Tower, which would be the tallest building in Thailand on completion. The tower is located on prime land, close to CPN’s shopping centre and is suitable for development as a mixed-use project. It now remains to be seen whether the new owner will stick to the existing project or replace it with one of its own.

According to a survey by The Nation, the total value of merger and acquisition deals exceeds Bt50 billion since 2014 (see graphic).

Thai conglomerates were the major players in M&A deals – such as TCC Group of beverage tycoon Charoen Sirivadhanabhakdi, and Singha Group owned by the Bhirombhakdi family. The moves are seen as a vehicle for back-door listing in the Thai stock exchange.

However, some of the deals involved listed property companies taking over listed and non-listed firms to boost their realty portfolio.

For example, Singha Property Management Co Ltd, the property arm of Singha Group, changed the name of Rasa Property Development Plc to Singha Estate Plc after acquiring a majority stake for Bt7.78 billion in Rasa in 2014. It was followed by a Bt1.7 billion share-swap deal between Singha Estate and Nirvana Development Co Ltd the next year.

In 2016, Singha Estate Plc pulled off a Bt3.39 billion share-swap deal between Nirvana Development Co Ltd and Daii Group, designed for Singha to make inroads into the middle-income residential market.

Chuan Tangmati-tham, the founder and owner of MK Real Estate Development Plc, decided in 2015 to sell his family stake in the property company to Castle Peak Developments and CPD Holding Group for a combined Bt1.2 billion. In the year 2018, Supalai Plc also tried to acquire a major shareholding in MK Real Estate Development Plc but it managed just 0.30 per cent at the close of the tender offer.

In 2015, Property Perfect Plc acquired a majority stake in Thai Property Plc for more than Bt1.8 billion, making it the major shareholder in Grand Asset Hotel and Property Plc through Thai Property Plc.

Recently, duty-free operator King Power Group, splashed out Bt14 billion on the acquisition of condominium units and the observation deck of the MahaNakhon project from Pace Development Plc.

Asia Plus Securities Co Ltd vice president Terdsak Taweethiratham said, “Since the asset value of most listed property firms is above their accounting value and share price, it poses a challenge for investors interested in merger and acquisition of the companies.

“For example, CPN stands to gain from the GLAND deal as the latter’s asset on Rama IX Road has a higher market value when compared with the company’s book value,” he said.

“We bought a listed developer in order to survive the market competition after the country’s two beverage tycoons, Charoen Sirivadhanabhakdi and Santi Bhirombhakdi, stepped up their investments in the market,” said Chainid Adhyanasakul, CEO of Property Perfect Plc.

Merger and acquisition is a means of survival for lesser players as big conglomerates expand their presence, he said.

Joint-venture deals with large overseas property companies with a view to expand their investments here is another option for local developers to survive the fierce competition. A number of listed Thai developers, including AP (Thailand) Plc, Ananda Development Plc, Sansiri Plc, Property Perfect Plc, Sena Development Plc, Origin Property Plc have opted for partnership with foreign companies.

“Besides developing a condominium project with our foreign partner, the joint venture also comes with the transfer of design skills and new technology to the benefits of our future projects,” said Ananda Development president and CEO Chanond Ruangkritya.

AP (Thailand) Plc chief executive officer Anuphong Assavabhokhin said the joint venture firm between the company and its Japanese partner Mitsubishi Estate Group has improved the firm’s construction process and project designs.

“Technology transfer is the main reason for us to team up with Mitsubishi Estate Group, while financial support for business expansion is also a factor in the present environment,” Anuphong said.

M&A activities and joint ventures are changing the face of the property market during this period of tough competition. Currently, the top 10 residential developers account for more than 70 per cent of the total market value, or Bt600 billion a year.

The new projects consist of four housing estates and one home office, according to a company statement.

They consist of Bangkok Boulevard (Srinakarin-Bangna, Rama 9, Ramindra-Serithai), Avenue Rama 9 and Work Place Phetchkasem.

Manage

The event , organised by the Thai Real Estate Association, Business Housing Association, and Thai Condominium Association runs from October 4-7, at the Queen Sirikij Convention Center.

Pruksa Real Estate Plc is offering discounts of up to Bt500,000 for homebuyers deciding to purchase its residential units at the event while Property Plc offers discount prices of up to 50 per cent on downpayment. Thanasiri Group Plc offers discount prices of up to Bt1 million.

The Government Housing Bank offers special interest rate at minimum retail rate or MRR minius 5.76 per cent to homebuyers. Alternatively, they can choose to pay an interest rate of 0.99 per cent for the first four months.

All Inspire Development Plc offers discount prices of up to Bt200,000 at the event.

200 property firms are participating in the event , introducing more than 1,000 residential projects.

“We expect up to 100,000 visitors for the four-day show with on-site sale value of up to Bt4 billion. Another Bt8 billion in sales is expected following the event .

This will drive growth of the property market in the rest of this year,” said Pitipat Preedanond, chairman of the organising committee of the event.

“This event is the last chance for homebuyers to get special promotion from property developers and financial institutions before the BOT announces new measure to rein in commercial banks’ lending to homebuyers,” said an industry source.

The central bank is seeking to rein in the mortgage market by reducing the debt-service ratio and loan-to-value criteria for prospective borrowers. The moves will hurt sales for homes priced below Bt3 million, the developers say.

“Although the BOT says it will hold a public hearing for this measure on October 11, it has an agenda to restrict the commercial banks in their provision of loans for the residential sector,” a source from a property company said.

“This will directly impact the industry, especially the middle to lower-income market, which offer homes priced lower than Bt3 million per unit.”

Under the current rules, the commercial banks have a debt-service ratio of between 33 per cent and 50 per cent, which means homebuyers pay their monthly instalments at an average of between 33 per cent and 50 per cent of their monthly salary.

The banks have also imposed loan-to-value ratios of about 90 to 95 per cent, requiring homebuyers to make down-payments of about five to 10 per cent.

Now, people with an average monthly salary of Bt27,000 are limited to buying homes priced at up to Bt1.5 million per unit.

If the BOT proceeds with the tightened rules, the new conditions will take effect in 2019. Under the new regime, homebuyers would need a monthly salary of more than Bt40,000 to buy a Bt1.5 million property, the source from the property firm said.

“Following this model, this would force property firms to change their business strategy and focus on the middle to upper-income market, rather than the middle to lower-income market,” he said. “We concede that this policy will impact the property market next year when the new rule becomes effective.”

At present, up to 30 per cent of the demand for residential units aimed at the lower-middle to lower-income market are priced between Bt1.5 million and Bt3 million. Properties of at least Bt5 million, pitched at the upper-middle and upper- income market, account for the rest of the demand.

Yesterday, BOT announced measures under which it would set limits on bank lending for purchases of second homes and luxury houses selling for more than Bt10 million. It will impose a loan-to-value ratio (LTV) – the percentage of a property’s value that can be given as a loan – for such homes at 80 per cent from January 2019. This means buyers will be required to place deposits of at least 20 per cent of the property price.

“The principle is to set a minimum down-payment for loans on second homes or residential units worth over Bt10 million,” the central bank said.

The BOT has also revised the definition of debt for the purpose of calculating the debt-service ratio. Instead of this debt being taken as the housing loan only, it will also incorporate other liabilities, such as personal loans and hire-purchase obligations. This broadened scope for total debt will be used by the commercial banks to calculate the debt-service-ratio when assessing home-loan applications.

The BOT’s public hearing on the planned regulations will be run for financial institutions, business operators, consumers and other interested parties from October 11. The new rules will apply for new loans and take effect from January 1 next year.

Kasikorn Research Centre (KResearch) said that the BOT measures could affect property developers in their marketing approach, and new residential projects would be launched with more caution amid an upward trend in interest rates and the high stock of unsold residential units.

The unsold housing stock is estimated to reach 190,000 units at the end of this year, close to that of the year before, the research house said.

The BOT measures would generate a certain impact next year when the unsold housing stock is expected to decline to 179,000 units and property loans are projected to rise to no more than 6 per cent, KResearch said.

The research house points out that the current property market is different from that in the 1997 financial crisis. Now, listed property developers, which share about 60-70 per cent of the Thai property market, have more a flexible financial footing with good business management. Moreover, Thai financial institutions have much more prudent risk management, KResearch said.

Financial institutions’ non-performing property loans edged higher to 3.39 per cent of total property loans in the second quarter of this year, up from 3.23 per cent at the end of 2017 and 2.44 per cent at the end of 2015.

KResearch said that repayment capability of borrowers who own houses valued from Bt10 million to over Bt50 million required monitoring, given the higher NPLs in this segment compared with the mass market.

Following the BOT’s announcement yesterday, the share prices of most listed property firms dropped. At the close of trade, shares in Land & Houses fell Bt0.20, or 1.79 per cent, to Bt11; Pruksa Holding Plc dropped Bt0.40, or 1.93 per cent, to Bt20.30; Sansiri Plc edged down Bt0.03, or 1.82 per cent, to Bt1.62; and AP (Thailand) Plc shed Bt0.15, or 1.70 per cent, to Bt8.65.

The Stock Exchange of Thailand Index yesterday ended trading at 1,724.13, a drop of 17.83 points from Wednesday, with a trade value of Bt54.21 billion. Foreign investors recorded net sales of Bt4.95 billion and institutional investors made net sales of Bt3.43 billion.