SET-listed Singha Estate Plc (S), a property development arm under the Boon Rawd Brewery Group, will invest 17 billion baht to both develop and acquire four commercial projects during 2019-23 to boost revenue from recurring income to 50% from 30%.
Chief executive Naris Cheyklin said the investment budget, which will represent 20% of the five-year total budget, will be for 200,000 square metres of commercial space, including offices, hotels and retail, using both new developments and acquisitions.
Target office locations in the next few years are outside the central business district (CBD), as new office supply in the CBD being completed in 2019-21 is projected to have a glut.
"The majority of new office supply will be on Rama IV Road, from Lumpini to Sala Daeng. All will be grade A," he said. "Our target development and acquisition will be grade B+ in non-CBD areas, as the grade A segment will have a very high competition in the next few years."
For acquisitions, the company will consider a mix of tenants in buildings aged below 20 years and a rental rate of around 800 baht per sq m per month. The internal rate of return should be 15-20%, said Mr Naris.
He said funds will be sourced from the sale of Suntowers in the Chatuchak area into S Prime Growth Leasehold Real Estate Investment Trust scheduled early next year.
The project comprises two office buildings and a total lettable area of 63,800 sq m.
The company aims to increase commercial space to 350,000 sq m within 2023 from 150,000 sq m. They comprise the Suntowers, the 3,500-sq-m Lighthouse on Charoen Nakhon Road, 120,000-sq-m Singha Complex and Crossroads in the Maldives.
In mid-2019, the company will develop a new mixed-use project, Oasis, with a 36-storey tower and a lettable area of around 53,000 sq m with an investment of 3.7 billion baht. The project, to be completed in 2022, will be located on Vibhavadi Rangsit Road.
By 2023, income from commercial property will account for 50% of total revenue, which will rise from 30% in 2019. The rest will be from residential projects.
"We will play down the residential development business in the next few years as the economic situation will be not suitable," he said.
Mr Naris said many risk factors are expected next year, including the establishment of the new government, macroeconomic factors, high household debt, an uptrend in interest rates and the US-China trade war, which will have an impact on the tourism sector.
Last week, Singha opened a new mixed-use project, Singha Complex, on Asok-Phetchaburi intersection. The project has 60,000 sq m of office space available for rent, which is 82% occupied.
The company will spend 50 million baht to build a connection to MRT Phetchaburi station.
S shares closed yesterday on the Stock Exchange of Thailand at 3.20 baht, a decrease of 12 satang, in trade worth 35.32 million baht.