MBK is ready to enter into a new land-lease contract with Chula-longkorn University, which will allow the company full rights over the Pathumwan commercial complex on which the Mah Boonkrong shopping centre is located, in exchange for a promised overall return of Bt26.33 billion.

The deal follows lengthy discussions between both parties, as the university presses hard for higher returns from renting out land and properties at the heart of the central business district. Under the previous 25-year agreement, Chulalongkorn is entitled to returns of only Bt3 billion.

"The company will benefit from entering into the agreement by renting out or having the full utilisation of all buildings. This will be supported by the management team with expertise and a good understanding of the nature of systematic operations. The support is expected to give the company efficiency in continuously strengthening the land-development project," Suvait Theeravachirakul, president of MBK, said in a statement yesterday to the Stock Exchange of Thailand.

The lease covers the Mah Boonkrong shopping centre, hotel, office building, car-parking buildings, roads and sidewalks around the buildings, installations such as escalators, and a pedestrian bridge.

The new contract, which will run from April 2013 to April 2033, needs approval of at least three-quarters of all shareholders due to the huge transaction value. The deal is worth 155.77 per cent of MBK's consolidated assets at the end of 2006.

The return to Chulalongkorn will be financed through MBK's working capital and/or the issuance of debentures.

Under the agreement, MBK promises to pay Bt22.86 billion as a return from the utilisation of the shopping complex, which will be made in 20 annual instalments. If the instalments are paid before the due date, MBK is entitled to a discount of 6 per cent. Every five years, if combined revenue is higher than the projection, MBK agrees to share 5 per cent of the extra revenue with the university.

MBK is also required to invest no less than Bt1.2 billion on renovations, slated for completion by 2018.

In the statement to the exchange, MBK's board of directors and the audit committee conceded that the contract value was huge, but said that entering into the contract was more beneficial to the company than not doing so.

"Although the conditions imposed by the university with respect to the payments are rather high, the board of directors is of the opinion that extending the lease is more beneficial to the company than not extending it, and that entering into the agreement is appropriate and relatively beneficial. As a result, the board recommends that the shareholders give their approval for the company to enter into the agreement," the statement said.

MBK has appointed Dharmniti and Truth as an independent financial adviser to provide an opinion on the transaction. An extraordinary shareholder meeting will be called after the opinion is available.