Skytrain operator to develop city properties

Hotels and residences planned near Bangkok Mass Transit System's routes

Skytrain operator Bangkok Mass Transit System (BTS) is planning to diversify its business to become a property developer, focusing solely on locations around the Skytrain's routes, executive chairman and CEO Keeree Kanjanapas said last week.

He said the company had set aside Bt5 billion to develop properties it owned at five locations. They include land on Lat Phrao Road, at Morchit opposite BTS headquarters, in Phya Thai district, in Soi Nana off of Sukhumvit Road and on Sathorn Road close to Surasak Station.

The company is planning both hospitality and residential developments. The land in Lat Phrao road and at Morchit will be used for condominium and office buildings. The plots in Phya Thai district, Soi Nana and Sathorn Road will be developed as luxury and boutique hotels.

Development of the first hotel, on the Sathorn Road site, is just beginning. It will be called Four Points by Sheraton and is expected to open in two years. The project is being partly funded by a Bt1.8-billion loan from Bangkok Bank.

The other four projects are currently the subject of negotiations with strategic partners, Keeree said.

"All five projects will involve a development budget of more than Bt17 billion. We [BTS] will limit our investment budget to only Bt5 billion, and the rest will come from strategic partners who are interested in helping to develop these projects," he said.

BTS has been talking to several property firms that are interested in jointly developing residential and hospitality businesses. One of them, Tanayong, is owned by the Kanjanapas family. Tanayong, along with other property developers, is expected to offer a deal to BTS. From these offers, BTS will choose the best solutions for forming joint property-development ventures, Keeree said.

Under the business model that BTS plans to follow, it will form and wholly own a subsidiary company specifically for property development. This subsidiary will own BTS's property assets. The subsidiary will set up joint venture companies with strategic partners to develop BTS's land plots on a property-by-property basis. BTS's subsidiary will hold a stake of at least 51 per cent in all joint-venture firms, he said.

"At present, we are negotiating with several property-development firms, both domestic and foreign. These investors will help us to reduce our investment budget," he said.

Keeree said BTS's property-development investments would come from its cash flow. Since emerging from debt rehabilitation, the company is now showing positive financial results. BTS now has loan liabilities totalling Bt10 billion that it will pay back over eight years, beginning this year.

He said the number of passengers on the Skytrain now averaged 430,000 per day. After the route was extended from Taksin Station on Sathorn Road to Wong Wian Yai in Thon Buri, the number of passengers increased significantly, showing that this was good for business in the long term.

"We are investing in property because we see business opportunities in doing this - especially on plots close to the Skytrain. Our strategy for property business will be to focus only on locations around the Skytrain. We have no plans for property developments in other locations," he said.

Keeree said BTS would continue to concentrate on its infrastructure business. The property business was an investment opportunity that would generate long-term income.

"We'll still be an infrastructure business, more than a property developer," he said.

By Somluck Srimalee
The Nation
Published on June 30, 2009