MBK shifts its focus to property projects

B639m earmarked for land, office buildings

MBK Plc, the operator of MBK shopping centre, plans to spend 639.4 million baht next month to buy land and office buildings.

The move reflects a shift in its strategy after it decided to delay tourism-related investment plans in the aftermath of the severe political violence last month.

As well, the company plans to increase the sales proportion of its property business to 20% of total revenue over the next five years from 8% currently as part of a strategy to reduce its business risks. Its total sales are now 6 billion baht.

President Suvait Theeravachiraku said that the company received approval from MBK shareholders yesterday to buy two plots on Ratchadaphisek Road.

It will also pay 431.4 million baht to buy eight vacant plots on 6.3 rai and the right to rent 480 square metres from the State Railway of Thailand in the adjacent area.

About 208 million baht will be used to buy the 18-storey Glas Haus building on Ratchadaphisek Soi 17. Glas Haus has total space of 10,976 square metres, of which 8,223 are for rent. Currently, Thanachart Group is a tenant at the the building, which was developed under a lease contract with the SRT with about 13.8 years remaining.

If the lease contract expires, the company will have the first right to renew the contract.

For the first 6.3 rai, the company plans to develop six buildings for mid-market condominiums, with prices set at 70,000 baht per square metre. Each building will have 7-8 floors of 10,000 sq m each.

The company expects to gain a 14% internal rate of return (IRR) from the investment in the two plots.

In addition to the new land purchases, the company asked for approval from its shareholders to issue debentures worth up to 5 billion baht.

Mr Suvait said that the first lot worth 3 billion baht would be issued in July to replace existing debentures that are due to expire in the same month.

The company expects that the coupon rate would be about 3%. Thanachart Securities will be the underwriter.

Discussing the recent political violence in Bangkok, Mr Suvait said the company suffered about 118 million baht in lost sales, of which 100 million baht was from Siam Piwat, the operator of Siam Center and Siam Discovery, in which the company holds a 31% stake.

It lost an estimated 26 million baht from the hotel business and the remaining 92 million baht from its MBK shopping centre.

“We closed the Pathumwan Princess for four days,” he said.

The company closed its shopping centre for nine days and shortened its service hours. It plans to reduce rental fees by 10% this month and next to help its tenants.

“Earlier, our hotel’s occupancy rate was about 70-80%, but now it is only 20% and we don’t know when the situation will be back to normal,” Mr Suvait said.

MBK shares closed yesterday on the Stock Exchange of Thailand at 83 baht, unchanged, in trade worth 36.7 million baht.