BTS bets big on property

BTS bets big on property

The group allotted 100 billion baht for the residential segment, mostly near mass transit lines.

Mr Rangsin says the group will become a holding firm and play down direct investment. It will invest in property through subsidiaries.Pornprom Satrabhaya
Mr Rangsin says the group will become a holding firm and play down direct investment. It will invest in property through subsidiaries.Pornprom Satrabhaya

SET-listed firm BTS Group Holdings Plc is restructuring its property business to support a five-year residential development plan worth 100 billion baht and expand its commercial property segment.

The company aims to raise the real estate revenue proportion from 10% to 15% of the total in 2018.

The company is re-grouping its property business after it entered into a residential development joint venture with SET-listed developer Sansiri Plc (SIRI) in 2015, BTS chief operating officer Rangsin Kritalug told the Bangkok Post.

"The group will become a holding firm and will play down direct investment," he said. "We will invest in the property business through subsidiaries totalling over 30 companies."

BTS has four business units -- mass transit, media, services and property -- that generated 43%, 35%, 13% and 9% of total revenue respectively in the first quarter of fiscal year 2016 ending on June 30, 2016.

The group plans to invest 7.6 billion baht this fiscal year. Some 4.28 billion baht will be injected in the mass transit business while 2.7 billion is allotted for property.

Of the property investment, 1.2 billion baht will be for land acquisition, 1 billion for residential business and 500 million to renovate Thana City Golf and Sports Club.

Property business comprises residential development for sale through the BTS-SIRI joint venture and commercial properties including golf courses, rental office space and hotels that will generate recurring income.

With an expected initial return rate of 17% and a net profit of 12%, the BTS-SIRI partnership plans to develop 25 residential projects worth a combined 100 billion baht in 2015-19 with a focus on locations close to mass transit lines.

"We are aiming to create a city solution through synergy with our mass transit business," said Mr Rangsin.

The joint venture has launched four condo projects worth a combined 13.6 billion baht under The Line brand, all of which have sold out. The first project to be completed will be The Line Sukhumvit 71, worth 2 billion baht, which will start to realise revenue early next year, he said.

However, a large amount of revenue from residential development is slated for 2018 when two projects -- The Line Jatujak-Mochit worth 5.7 billion baht and The Line Ratchathewi worth 2.9 billion baht -- will be completed.

The joint venture is projected to increase revenue from property to 20 billion baht in fiscal year 2018 (ending March 2019), accounting for 15% of the group's total revenue, said Mr Rangsin.

In fiscal year 2016 ending March 2017, the joint venture plans to launch six new projects worth a combined 23 billion baht. One launched in June, The Line Asoke-Ratchada worth 3 billion baht. The project is sold out, with 36% of units acquired by foreign buyers.

Earlier this month its fifth project, The Base Garden-Rama 9, was launched on Rama IX Road with 639 condo units worth 2.28 billion baht. It is now 70% sold.

BTS Group also has a joint venture with SET-listed developer Grand Canal Land Plc (GLAND) called Bayswater Co, which was established in 2014 with equal holdings.

The affiliate spent 7.35 billion baht late last year to acquire a nearly 49 rai plot near Phahon Yothin Soi 19/1. It won the bid from Bangkok Commercial Asset Management. The plot was formerly owned by Univest Land Co, which was hit hard by the Asian financial crisis.

"The plot has potential as there will be a future skytrain extension line that will run from Mor Chit to Saphan Mai," he said.

For its commercial property business, BTS Group has total assets worth 10 billion baht, comprising Thana City Golf and Sports Club, a 26-year-old 18-hole golf course on Bang Na-Trat Road KM 14 that generates 200 million baht of income per year.

"We used to see Thana City as a satellite town, but now the location has changed," said Mr Rangsin. "Change will happen quickly if a mass transit line passes by."

The group will offer some of its vacant plots near the golf course for use as a depot for light rail transit from Bang Na to Suvarnabhumi airport. It has vacant plots covering 400 rai remaining from its total of 1,600 rai in Thana City.

BTS Group also has an office building, TST Tower, near the Mor Chit skytrain station. With a lettable area of 15,000 square metres and a monthly rental rate of 500 baht per sq m, the space is fully occupied, generating rental income of almost 100 million baht a year.

It is developing U City Phayathai, a mixed-use development on 6.5 rai on Phaya Thai Road comprising 22,400 sq m of office space, 397 hotel rooms, 118 serviced apartment units and 7,000 sq m of retail space.

The group also owns three hotels operating under the U Hotel brand in Chiang Mai, Kanchanaburi and Bangkok's Sathon Road. They had occupancy rates of 84%, 67% and 76%, respectively, from April-June 2016.

BTS Group aims to have 680 million baht in revenue from property in fiscal year 2016, with 620 million baht from commercial property and the rest from residential. It projects a net loss of 100 million baht from its BTS-SIRI joint venture.

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