SET-listed developer Land & Houses has reshaped its investment portfolio, amplifying its focus on recurring income properties, particularly hotels in Thailand and the US, while reducing investments in residential development.
Naporn Sunthornchitcharoen, chairman of the board of directors, said the residential market in Thailand remains under pressure from various negative factors, particularly economic challenges, household debt, and stricter pre- and post-financing conditions.
"Anticipating risks for this year is challenging, considering how the unexpected the war in Ukraine was two years ago. We must monitor our investment portfolios while navigating volatile situations," he said.
This year, the company's investment budget increased to 11.5 billion baht from 8.97 billion last year.
The higher amount includes 6.5 billion baht allocated to recurring income properties, up from 2.87 billion last year, while the budget for land purchases for new residential projects drops to 5 billion baht from 6.1 billion.
Driven by the robust resurgence of the tourism sector in both Thailand and the US, the company's investment budget for recurring income properties is entirely allotted to hotels, comprising 4.1 billion baht in Thailand and 2.4 billion in the US.
Wit Tantiworawong, managing director for support, said the company plans to spend US$68 million to acquire a hotel near Disneyland in Los Angeles managed by Marriott International. The deal should be finalised next month.
"The hotel is for medium-term stays with a room rate ranging from around 5,000 to 6,000 baht per night," he said. "We can generate revenue immediately upon acquisition as the hotel is operating."
The property would be the second hotel for Land & Houses in the US, following SpringHill Suites by Marriott in Anaheim, California, for which it spent $31 million to buy in 2021.
"We shifted our investment focus in the US from apartments to hotels as the yield is higher and the hotel sector has shown a more favourable trend," said Mr Wit.
"Two years ago, our yield from this hotel was 6-7%. Now, after renovating it and offering a full breakfast, it stands at 8.5% as other hotels do not provide breakfast."
For the hotel business in Thailand, the investment budget of 4.1 billion baht will be allocated to continue the construction of three hotels under Grande Centre Point, comprising two locations in Bangkok -- Lumpini and Ratchadamri -- and one in Pattaya, he said.
The two hotels in Bangkok are slated to open in the fourth quarter of 2024 and the fourth quarter of 2026, while the Pattaya property, which will be its third at the destination, is scheduled to start operation in the first quarter of 2027.
"Our recurring income business last year posted significant revenue growth, with a 70% increase in the hotel sector and a 100% gain in the retail sector, fuelled by the return of foreign tourists, though the Chinese market did not fully return," said Mr Naporn.
He said the occupancy rate of its hotels in Bangkok and Pattaya last year averaged 90%, similar to pre-pandemic levels.
In Thailand, the company operates seven hotels under the Grande Centre Point brand, with five in Bangkok and two in Pattaya, along with two shopping malls dubbed Terminal 21 in each city. The total investment value was 22.7 billion baht.
Land & Houses has three apartments in the US, including Parc and Revere in Campbell, California and Yard in Portland, Oregon. Their total investment value, including that of SpringHill, was $412 million.
Despite increased investment exposure to the recurring income business, the majority of the company's revenue still comes from residential development.
Land & Houses set a goal of 28 billion baht in revenue from residences and 8.54 billion from hotels and malls, said Mr Naporn.
"Our land banks and housing inventory, comprising 73 projects worth a total of more than 68 billion baht in Bangkok and various provinces, carried over from last year and are sufficient for our 2024 goals amid uncertainty," he said.
This year the company plans to launch 11 residential projects worth a combined 30.2 billion baht, compared with 17 projects worth 48.5 billion last year. All of them are low-rise houses.
"We will take a wait-and-see approach for the condo market as the unsold supply is large and the market is strong in certain segments and locations," said Mr Naporn.
"We have a condo inventory worth 16 billion baht, of which 6 billion is ready to move in."
He said low-rise houses remain the key product generating sales for the company, accounting for 73% last year.
The remaining 27% was from condos. More than half of them were units priced greater than 10 million baht.
Land & Houses owns units priced at 3 million baht in limited quantity because of cost structure constraints and a higher mortgage rejection rate in the lower-end segment.
"The rejection rate for our prospective customers used to be 10%. Now it has exceeded 10%, sometimes reaching 20% despite a pre-financing programme," said Mr Naporn.
"We plan to engage in further discussions with banks and examine each case individually to see why banks rejected customers."