Areeya gets condo fund

Residential developer Areeya Property is signing deals for bank loans totalling about Bt4.47 billion, to complete construction of three Bangkok condominium projects.

It signed a loan contract with TMB Bank yesterday to borrow up to Bt3.8 billion and plans to borrow US$20 million (Bt676 million) from ABN Amro Singapore by issuing warrants as security guarantees in the second half of the year.

Depending on the draw-down rate against the loans, the borrowing could raise Areeya's debt-to-equity ratio from its present level of 2:1 to 2.5:1 or even 3:1 next year.

Chairman and CEO Wisit Laohapoonrungsee said the loans would cover the construction of three condominium projects brand-named "a space" and valued collectively at Bt5.8 billion.

They are to be built in Sukhumvit Soi 77 and near the Asoke-Ratchadaphisek and Kaset-Nawamin intersections.

Wisit said the three projects were already 80-per-cent pre-sold and that this income would be booked to revenues next year.

"We must borrow from the bank, because our cash flow is not enough to construct the three projects. However, once they're completed, they'll generate enough revenues to repay the loans and return our debt-to-equity ratio to 2:1," he said.

At 2:1, Areeya's debt-to-equity ratio would be higher than other property developers listed on the Stock Exchange of Thailand.

In this year's first quarter, Areeya recorded sales of Bt219.03 million for a net loss of Bt30.35 million. At present, the company carries total debts of Bt2.8 billion, requiring interest payments of Bt20 million a month.

Wisit said the company's expansion was outstripping its turnover because one of its policies was to maintain its housing prices and that, as a result, presales for its detached and town houses were lower than those of other property developers.

However, the company believes it will record better sales and achieve a net profit in its second-quarter results. When its condominium projects are completed next year, Areeya's sales are expected to increase to Bt2.5 billion, from this year's target of Bt1 billion.

"We have no plans to increase the company's capital to support our new projects, because we believe our sales from the three condominiums will generate enough income for our business expansion. As a result, we've decided to borrow from banks instead of raising funds from the capital market and accept the higher interest rates," he said.

Last week, the Securities and Exchange Commission fined nine people a total of nearly Bt30 million after finding them guilty of manipulating Areeya Property shares in 2004.

One of the nine, Wiwat Laohapoonrungsee, Wisit's older brother and a major shareholder in Areeya, received the highest fine, Bt18.18 million.

The company's share price now averages Bt3.50 to Bt3.74 apiece.

Somluck Srimalee

The Nation