SET-listed Pace Development Corporation Plc, the high-end property developer, is rushing to raise capital to help build up its financial strength amid concerns by some observers over the company's hefty financial liabilities and bills of exchange.
Chief executive officer Sorapoj Techakraisri said the company is preparing to issue new shares representing a 10% stake in the company to a new Chinese strategic partner, Citic Construction, after Pace and Citic recently signed a memorandum of understanding on partnership in three areas: construction, marketing and strategic partnership.
Citic Construction, the construction and engineering subsidiary of a former China International Trust and Investment Corporation, will help construct Nimit Langsuan, a 54-floor luxury condo in the Lang Suan area, and provide a project financing facility.
"The project financing facility will help cut Pace's interest rate costs by half compared with the project loans secured from banks or bills of exchange, a short-term financial instrument that carries an interest rate of 5-6%," he said.
But Mr Sorapoj said the firm will still rely on bank loans for some projects that Citic is not engaged in.
He said Citic approached the company on the recommendation of CLSA Securities, which was acquired last year by Citic Group.
Citic Group is committed to helping promote marketing and organising roadshows next month in China for the large-scale, super-high MahaNakhon and MahaSamutr projects.
"The high-end segment remains promising and in strong demand both by domestic and foreign customers," he said. "Property prices in the central business district remain relatively cheap compared with those in Beijing, where prices average 2.5 million baht per square metre, in Hong Kong, where prices are 3 million and in Singapore, where they are 1.5 million."
But he declined to give further details about the share issuance and the exact time frame for the company's capital increase plan.
According to the Stock Exchange of Thailand, Pace has registered capital of 4.1 billion baht, 3.75 billion of which is paid up.
Currently, two parties from overseas, Apollo Global Management and Goldman Sachs, invest in Pace.
Both have invested a combined 8.4 billion baht in Pace's two subsidiaries -- Pace Project 1 Co and Pace Project 3 Co.
The subsidiaries are developing Bangkok Edition Hotel, retail space Cube and an observation desk at the 314-metre pixelated MahaNakhon Tower.
Pace plans to launch a new ultra-luxury project Wind Shell, worth 3.5 billion baht, on Narathiwat Ratchanakarin Road.
The project will only have 36 units at an over-40-storey building with units priced 85-100 million baht or between 180,000-220,000 baht per sq m.
At the end of March, The Ritz-Carlton Residences Bangkok in MahaNakhon was 75% sold, with 7 billion baht pending revenue recognition.
The MahaSamutr, meanwhile, is 30% sold, with 1.4 billion baht waiting for revenue recognition.
Nuanpun Noiruchchukornm, an analyst from Asia Plus Securities, said the only concern for Pace is its huge backlog and the pace at which it converts its backlog into cash.
"The company may also save on financial costs if Citic can help provide it construction financing," he said.