[Special Scoop] As the property market in Thailand becomes more intense and limited land supplies cause prices to rise, developers are now looking for new sources of income that are stable and sustainable to protect their long-term, financial health. In order to do this, they need recurring income to mitigate risks as well as boost total revenues. Whether building a golf course, investing in a renewable energy business, or constructing a stylish department store, it all helps the bottom line and now it has become an emerging trend among Thai developers.
Pruksa Holding
The company diversified recently and built a medical centre on Phahonyothin Road, Vimutti Hospital, and a new office around the Saphan Kwai area. These 2 sources of recurring revenue will account for 5-15 per cent of its expected total revenue of THB 100 billion in 2020. According to statistics, the healthcare industry has been a booming sector, surpassing the growth rate of the nation’s GDP. The industry has grown by 8.7 per cent and its market value jumped from THB 243,000 to 658,000 million in the past 13 years. The company is penetrating this sector hoping it will help expand their channels of income.
Property Perfect
Since the company partnered with Grande Asset Hotels & Property last year, they have built hotels with a total of 1,000 rooms and now it plans to grow this total to 3,000 rooms within the next 4 years. They plan to increase their recurring revenues and hope for these to account for 30 per cent of total revenue. Right now it is only 10 per cent of total revenue.
Ananda Development
The well-known condo developer had diversified into the serviced apartment segment and will launch its 1st project in the coming months. The serviced apartment project is located on Ratchadaphisek Road and features 450 rooms. The company plans for the recurring revenue from rental properties to account for 5-10 per cent of their total revenue. After this project, the company will launch more serviced apartments in each following year. “Now we are carefully looking at the production cost management and security system suitable for serviced apartment. It’s still a niche segment in our product lines, but after things are settled down in 2020, we plan to launch more of them,” said the developers.
Singha Estate
The company has a 3-year plan to achieve revenue of THB 20 billion. The number will be derived equally from residential properties and commercial properties. The company also has 2 hotels in Thailand, 29 hotels in the UK, a premium office building, and a retail development. In the first 9 months of 2016, 32 per cent of income came from residential projects, 43 per cent from hotels, and 25 per cent from offices. Now Singha Estate is looking to diversify into the logistic and warehouse business as well. Meanwhile, its subsidiary, Nirvana Development, joined hands with Daii Group to penetrate the construction business.
N.C. Housing
N.C. Housing has diversified by building a 200-unit apartment on Arun Amarin Road, near Siriraj Hospital, aiming to accommodate medical students. The company is also negotiating with foreign customers who are interested in the company’s projects in Pattaya and Chiang Mai. They have 53 residential projects on sale at the moment, including both low-rise and high-rise, with the toal value of THB 36 billion. N.C. Housing aims its taget revenue for the year 2017 at THB 1.7 billion, in addition.
Charn Issara
Charn Issara is looking to acquire hotels in Europe, focusing mainly on Great Britain. It is also considering properties in Italy and France. It has a budget of THB 1.5-2 billion for each location. These overseas properties will be used to increase Sri Panwa REIT’s value, aiming to grow it to THB 10 billion in the next 5 years. In 2018, the company will also put Baba Beach Club Hua Hin and Baba Beach Club Phuket into the Sri Panwa REIT, which will see the security value rise by over THB 5 billion creating huge recurring revenue for the company.
M.K. Real Estate Development
They invested THB 3.5 billion in a high-end commercial property Park Court, located in the T77 community, with the aim to accommodate foreign customers who have children that will attend Bangkok Prep International School, which is also located in the community. The company has also renewed its strategies by focusing on low-rise developments and building recurring revenue from commercial properties.
Diversification is the current practice among developers to achieve recurring revenues. As the market is highly competitive with excessive residential supplies and a decreasing number of feasible land plots, it is vital to have other sources of income. Each developer has its own strategy and a solid long-term plan to achieve its goals. Of course, we will see a greater variety of products launched into the market in the next few years, but the price level will be high as well.
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