Raimon Land plans large projects for Thai buyers

The listed developer Raimon Land will continue building luxury condominiums but with a new focus on larger projects and Thai buyers, a shift from its previous focus on foreigners, says chief executive Hubert Viriot.

The previously troubled company has almost completed a financial restructuring, resolved its “internal issues” and is ready to move forward with greater confidence, he said.

Mr Viriot was appointed CEO in March, replacing Nigel Cornick who resigned under a cloud of controversy and falling sales figures. At the time, the company postponed the launch of three projects and industry observers speculated that its flagship project The River, a 15-billion-baht 838-unit development, was in trouble.

Since then, the former vice-president of investments and acquisitions at Kuwait-based IFA Hotels and Resorts, Raimon Land’s major shareholder, has implemented a “sound, but substantial” rehabilitation plan that has cut the company’s operating costs by 40%.

The most significant part of the plan is to repay or refinance the developer’s short-term debt with banks, which stood at 1.67 billion baht at the end of the third quarter. The company expects the process to be completed by next March.

“That [starting to repay/refinance the debt] gave a lot of stability to the company and enabled it to look beyond the week after next,” he said.

Raimon Land in August bought back a 25% stake in Taksin Hotel Holdings, The River’s holding company, from Lehman Brothers Bangkok Riverside Development Ltd, which was unable to fulfil its debt obligations. This increased the developer’s stake in the company to 85%, with IFA holding 15%.

Raimon Land also slashed its marketing budget in 2009 to 4% of revenue from 11% the year before.

“We had to create a more efficient organisation to take care of fewer projects and get ready for a year that we knew would be tough,” he said.

In the first nine months of the year it reported a net loss of 55.6 million baht compared with a profit of 145.78 million for the whole of 2008.

As of September, the company had 9.57 billion baht in assets, liabilities of 6.91 billion, equity of 2.57 billion, and paid-up capital totalling 3.25 billion.

“While we will finish the year on a loss, Raimon Land now has a sound business plan with sound projections and we will continue to build our position within the market,” he said.

IFA increased its stake in the developer by 14.92% to 41.08% when Isthitmar Hotels Fze – a subsidiary of the beleaguered investment arm of Dubai World – divested its shares last August. The buyout effectively reduced the developer’s direct exposure to the Dubai market crash to zero, he said.

The developer is currently consolidating its assets as the final step of its rehabilitation plan. The firm currently owns from 51% to 100% of its projects.

“We realise this has caused some confusion in the market over whether we are a fee developer or an investment developer,” said Mr Viriot. “We’re currently somewhere in the middle and we will have to go one way or the other.”

After more than a decade of developing foreigner-focused projects, and having closed its sales office in Russia, the firm will now target Thai buyers.

“We will continue focusing on luxury but we are now looking at 28- to 40-year-old Thais … in Thailand’s biggest, most sustainable market, which is Bangkok.”

The firm will also focus on large-scale projects, such as The River. The 200,000- square-metre project with 105,000 sq m of saleable space has sold 62% of its units, passing the 9-billion-baht break-even point, he said.

With two years to go before transfer, Mr Viriot said he has no concerns about the project failing to sell out.

The value of The River is equivalent to Raimon Land’s six other projects in Phuket, Pattaya and Bangkok.

The developer has also acquired a plot on Phloen Chit Road for about 2 billion baht, where it plans to develop another large-scale property.

“These kind of projects may require partners simply because, due to their size of 150,000 to 250,000 sq m of floor area, they may include different components [residential, retail and commercial],” he said.

Outside Bangkok, Raimon Land is still selling completed units at Northpoint in Pattaya and The Heights in Phuket, which have about 20% of units left unsold.

SOURCE: Bangkok Post