TCC to fund all investments via cash flow

Chief executive Soammaphat Traisorat

Chief executive Soammaphat Traisorat

Firm will focus |on domestic retail, foreign hospitality markets

TCC Land, the property arm of beverage tycoon Charoen Sirivadhanabhakdi, will expand its investments, both domestically and overseas, by nearly Bt4.5 billion in the coming year by shifting its focus to retail and hospitality business, deputy chief executive Soammaphat Traisorat said.

All of the company’s investment budget will come from its cash flow, he said.

“We have had to revise our business focus in 2009 because the global economic crisis hit demand in the property sector in the last quarter of 2008. We will focus on retail development in the domestic market and the hospitality business overseas,” he said.

Meanwhile, TCC Capital Land, the joint venture between TCC Land and Singapore’s CapitaLand group, will launch two new luxury condominium projects, each with a market value of Bt2 billion, in 2009. These will generate revenue for the company in the years 2011 and 2012, said Soammaphat, who is also vice president of TCC Capital Land.

“Although demand for luxury condominiums is expected to fall significantly next year, we have to launch new projects because the three existing condominiums, which were launched in 2005, will be delivered to customers this year and in 2010. If we don’t launch new projects, our revenue will decline in 2011 and 2012. We expect to presell only 10 or 20 per cent of our two new projects next year, but that will be long-term income, for the future,” he said.

The company has also decided to delay the launch of a planned property fund, worth nearly Bt10 billion, next year. The decision follows plunging overseas demand for property fund investment.

However, the company will continue to study the property fund plan and when the global economy recovers, it will launch the fund as soon as possible, he said.

TCC Land now has five business arms operating in the property sector. They cover retail developments, office space, hotels and resorts, apartments and residential properties. The first four units are managed by TCC Land and the last, covering residential development, is managed by TCC Capital Land.

Soammaphat said that after the global economic crisis hit Thailand’s economy in the final quarter of 2008, and the People’s Alliance for Democracy closed Bangkok’s airports, the number of foreign tourists coming to Thailand had dropped significantly in the current high season.

“Nevertheless, the company will launch five new retail properties around Bangkok in 2009. They will have a market value of Bt1.1 billion”“On some days, our hotel occupancy rate is only 10 per cent. As a result, our hotel business, which now has between 5,000 and 6,000 rooms, will generate between Bt1.3 billion and Bt1.4 billion in revenue this year. Our target was Bt2 billion,” he said.

With the market trend, the company has suspended plans to build budget hotels in Thailand under the brand “Imm”. It earlier planned to launch up to 10 Imm hotels in 2009.

However, it has set aside a budget to invest in or take over hotels and resorts in overseas countries worth between US$80 million and $160 million (Bt2.76 billion and Bt5.52 billion) in the coming year. These properties will be in places like Europe, Asia and Australia.

“We believe that prices for hotels and resorts - especially those in Europe - will drop by 20 to 30 per cent from now. This will mean that hotels and resorts in Europe will be 50 per cent cheaper than in the time before the global crisis hit the European economy. This will make next year a good time for our overseas business expansion,” he said.

Soammaphat said TCC Land was expanding its investment into the overseas hospitality sector in order to manage its business risks. If the company expands its investments in Thailand, and if the main airports are shut down again, this will affect its business here.

Nevertheless, the company will launch five new retail properties around Bangkok in 2009. They will have a market value of Bt1.1 billion.

Two of them will be budget retail markets under the new brand “The Market”, located in the Bang Pho and Thavet areas. Each will require the expenditure of Bt100 million. “The Market” concept will focus on food courts and open spaces in which small- and medium-sized entrepreneurs can conduct open car-trunk sales.

The next two will be community retail markets designed to serve their surrounding residential areas. They will be located on Silom Road and Charoenkrung Road, and Bt200 million will be spent on developing each of them.

“We have suspended the development of a luxury riverside hotel on 60 rai (9.6 hectares) of land that was occupied by the EAC warehouse because of the economic crisis. But near this plot we will develop another 30 rai as a community retail market that will serve both domestic demand and support small- and medium-sized entrepreneurs who are feeling the impact of Thailand’s economic slump,” he said.

The last of the five will be the development of the latest branch of Pantip, in the Bang Kapi district, which will cost between Bt400 million and Bt500 million.

“Our strategy in 2009 will focus on business that is supported by domestic consumption, rather than business related to foreign consumption. We believe that foreign tourism will be low until 2010, although our hotel prebookings for February have begun to recover to an average occupancy rate of 50 to 60 per cent, from just 20 to 30 per cent earlier,” he said.

TCC Land expects total revenue of Bt6.5 billion in 2009. Of this, Bt2 billion will come from its domestic hotel business; Bt2 billion from its overseas hotel business; Bt1 billion from retail rental fees; and Bt1.5 billion for office rental fee. That will make next year’s revenue 9 per cent higher than the estimated total of Bt5.9 billion in 2008.

“Our revenue this year is lower than our estimates because the hotel business generated revenue of only between Bt1.3 billion and Bt1.4 billion, after the two airports were closed, when we expected to reach Bt2 billion. Our office-rent revenue also dropped this year when the Administrative Court of Thailand moved its office from Empire Tower to the new Government Centre in Chaeng Wattana Road. As a result, we have 20,000 square metres of vacant office space at Empire tower,” he said.

Meanwhile, TCC Capital Land expects to reach a sales target of Bt4 billion in 2008, coming from its three condominium projects that have begun to deliver completed units to customers. The company expects revenue of Bt7 billion in 2009 from the three luxury projects, The Empire Place, Athenee Residence and The Emporio Place.

About the author

Somluck Srimalee Somluck Srimalee
Somluck Srimalee is a journalist with The Nation, Bangkok's independent English language newspaper and specialises in the property and real estate sectors.
Other posts by Somluck Srimalee ( 34 )

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