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Published on February 29, 2008

This year's second quarter will see the start of a new business strategy for property developer Chaopraya Mahanakorn (CMC). It plans to launch a new business plan built around a more aggressive approach to marketing.

The middle-sized property developer and property-management service provider is working hard to expand its customer portfolio, from the mass market to middle- and high-income earners. It is developing both single-detached-house and condominium projects despite the current economic slowdown.

Recently, managing director Vichien Paethayanan revealed not only his key management concepts and vision for his company, but also that he was determined to see CMC among Thailand's top five property companies.

CMC entered the property industry in 1994 and only a few years later found itself caught up in the economic crisis of 1997.

"We were able to pass through the situation because we had no non-performing loans. If you can remember, our Baan Phayabhirom received very good feedback, and that made me confident we were good at developing condominiums," Vichien recalls.

But he admits the years of the financial crisis gave CMC some valuable experience.

From its early success, combined with long-term market studies, CMC decided in 2002 to launch another condominium project using the brand name Chateau in Town.

To date, Chateau in Town has grown to three projects in three locations along the Skytrain.

Chateau in Town Ratchada 13, with a market value of Bt616 million, has two eight-storey buildings. Parking is on the ground floor, and one level up is a central area consisting of a swimming pool and gardens. The project has 292 units ranging in size from 32-47 square metres with prices from Bt1.86 million to Bt2.94 million. Ninety per cent of the project has already been reserved.

Chateau in Town Ratchada 17, which is worth Bt310 million, has 150 units in an eight-storey building and ranging from 35-90 square metres. Prices start from Bt1.5 million. The project, which is designed in contemporary style, will be finished in June 2009.

Chateau in Town Major Ratchayothin (Phaholyothin Soi 30) occupies 1 rai of land. It will have 122 units in another eight-storey building. Prices will start from Bt1.6 million for units ranging from 34-67 square metres. The project is worth Bt220 million and will also be finished in June 2009.

In the second half of this year, CMC will launch two more projects with a combined market value of Bt4 billion.

The first, called The Exclusive, will feature high-end single-detached houses and in the Tha Phra area. It will have a market value of Bt2.6 billion.

The second project is Bangkok Horizon Ramkhamhaeng condominium, located in Ramkhamhaeng Soi 58/3. The 37-storey condo building, containing 596 units, will be worth Bt1.5 billion. It will have three kinds of units: 31-square-metre one-bedroom units, 84-square-metre two-bedroom units and penthouses ranging in size from 285-310 square metres. Prices for ordinary units will start at Bt1.2 million and range up to Bt20.67 million for penthouses. Facilities will include a big free-form swimming pool on the 8th floor and gardens on the 22nd and 37th floors.

CMC has three strategies for running its property business.

First, each project must have strong selling points and be designed by a top architect.

Second is location, and Vichien gives The Exclusive, on Rama II Road kilometre 10, as an example. Because the area in which the high-end single-detached-house project is located is to become a green zone, all houses developed there must occupy at least 100 square metres. This wipes away many competitors, making it easy for CMC's project to attract buyers.

It features two-storey single-detached houses, with selling prices starting at Bt14 million. The Exclusive will eventually consist of five phases, but CMC will develop only the first two in the second half of this year, involving 80 houses from a planned total of 229.

There is another aspect to CMC's preference for good locations. Those in Bangkok's outskirts may suffer rapid depreciation in infrastructure, Vichien says. The ability to increase prices is also slow in outer areas, so CMC is mainly interested in high-potential locations in central Bangkok.

Finally, many property-industry pundits say there's a downturn in sales of luxury-property projects, but Vichien takes the opposite view. He is confident the luxury market will revive starting next year.

"This does not come just from my personal feelings, but rather from research. Many developers have constructed luxury houses, and the market reached a peak in 2003, then started to slow down," he says.

He says the market for expensive houses always goes in the opposite direction from current economic conditions. Wealthy people, who are not normally sensitive to economic downturns, will grab the opportunity to buy an expensive house if they can buy it for less than usual.

"We spent a long time studying the potential of The Exclusive, because it's not a small project. We're also developing the first two phases to study consumers' behaviour. In the first phase, we'll sell houses that are 80-per-cent finished, and in the second phase we'll construct all homes by order. The construction period for each house will range from four to six months," he explains.

Target customers are business-owners and executives aged 40-55. The customers will already have successful careers and want to upgrade their living standards. Selling prices at The Exclusive will range from Bt14 million to Bt32 million. He is even confident that customers for the project will pay in cash.

Although Vichien foresees high business potential for CMC, he still considers risk management important. But he chooses to invest when others may consider stopping.

He lists three key components of his strategy for managing CMC's portfolio: management, location and products. Construction costs and cash flow are also important. Another important point is not collecting land for long-term development, because this increases costs unnecessarily.

CMC is now in the process of finding money for new investments and considering three channels. The first is finding banks to lend the company money. It is negotiating with Kasikornbank and Siam Commercial Bank.

Second, CMC is thinking of raising money in the stock market. It is planning to list on the stock exchange with an initial public offering around March 2009. It plans to offer 250 million shares, making up 25 per cent when combined with its current registered capital of Bt750 million.

Third, it will offer international funds the opportunity to buy some of its shares.

"In the past, we used our money or bank loans [to develop projects]. This was enough for one or two projects. If we wanted to develop a third one, we had to wait to finish those projects first. However, if we can find a solution to raising new money, we'll be able to continue expanding projects smoothly and gain Bt10 billion to Bt20 billion in revenue," Vichien says.

By his reckoning, having enough money is important to running a business smoothly. He believes only 20 per cent of Thailand's property developers have high business-expansion potential, and they are gradually stealing the market share of small- and medium-sized players.

With all of its strategies, CMC has targeted an increase in annual revenue of at least 20-30 per cent this year. It is expecting to show up to Bt1.9 billion in revenue for a net profit of Bt200 million for last year, with half coming from "horizontal" property projects and the rest from condominiums.

This year, it plans to generate more than 20 per cent of its revenue from serviced apartments, hotels and resorts. Of the other 80 per cent, condominiums will generate half and single-detached houses the rest.

Property reporter

 The Nation