Apollo eyes investment opportunities
US-based private equity fund Apollo plans to invest more in hotels, residential projects and loans in Thailand after injecting US$165 million in MahaNakhon, the country's tallest building, developed by SET-listed developer Pace Development Corporation Plc.
Philip Mintz, head of Apollo in Asia, said yesterday the fund will look for an investment opportunity in Thailand in the three segments after making its first footprint MahaNakhon.
"It is our first time to invest in Thailand after we have investing in Asia for 15 years," he said yesterday.
"The opportunity to invest in such a well-constructed trophy tower and work with a developer like Pace was compelling."
The $165 million (5.9 billion baht) expenditure accounts for 10% of total investment in Asia, the majority of which was in India and Australia.
Besides Apollo, global investment bank Goldman Sachs will also invest $70 million in MahaNakhon.
Together, the companies have invested a combined 8.4 billion baht in Pace Project 1 Co and Pace Project 3 Co, two of Pace's subsidiaries.
Apollo and Goldman Sachs will together hold 49% of the two subsidiaries, which are developing the 154-room Bangkok Edition Hotel, retail space Cube and an observation deck at the 314-metre pixelated building on Narathiwat Ratchanakharin Road near BTS Chong Nonsi station.
Pace chief executive Sorapoj Techakraisri said the capital from the new shareholders of the subsidiaries will be used to repay project bank loans of around 2 billion baht, which the two subsidiaries borrowed to develop the project.
The developer will also use the capital to continue developing the hotel and the observation desk at MahaNakhon, which will open in the fourth quarter of this year.
Some of the capital will be used to open new branches of the 40-year-old US gourmet food brand Dean & Deluca in Thailand, US, Japan and globally.
Pace will also spend some of the capital on acquiring land for future project development.
"We are eyeing a long-term partnership with Apollo as it has a head office in New York. We may draw further investment into Dean & DeLuca," said Mr Sorapoj.
He said the injection of the funds will also help reduce Pace's debt-to-equity ratio, which stands at 8-3 times and clear an accumulated loss of 3.7 billion baht as of the third quarter last year within 2017.
Pace has remaining units worth a combined 5 billion baht at MahaNakhon Tower, which accounts for 25% of the total. Last year it transferred 1 billion baht from a total sales backlog of 10 billion baht.
"After the deal is completed at the end of January 2017, we will start buying new land plots and plan to develop a few projects worth combined 10 billion baht per year," he added.
The company has other two residential projects, MahaSamutr, a luxury resort project in Hua Hin, and luxury condo Nimit Langsuan, together worth 20 billion baht, which will become realised revenue over 2017-18.
After 2019, its annual revenue will be stable at around 10 billion baht from property sales and recurring income from hotel and food and beverage.
"We want to be like CPN Plc and Minor International Plc, whose portfolios include revenue from sales, rent and food and beverage," Mr Sorapoj said.
"During the past decade, we have gathered a good combination of stable income, to counter the up-and-down cycle of the property sector. With recurring income, the company will be more sustainable."
Pace plans to launch at least two new projects worth a total 7 billion baht this year, the 40-storey luxury condo project on Narathiwat Ratchanakharin Road, near Chan Road, with unit prices of 80-100 million baht, and a resort home project in Niseko, Japan, to be launched by the end of the year.
PACE shares closed yesterday on the Stock Exchange of Thailand at 3.74 baht, down 24 satang, in trade worth 493 million baht.