KPN Group plans |property fund to |finance its new condo projects
The Narongdej family's private investment arm, KPN Group Corporation, is launching a property fund to finance its next condominium projects in the transition period when it switches its business focus from automotive to property.Chairman Kris Narongdej said in an interview with The Nation Group, that the company would launch a property fund through its wholly owned subsidiary, KPN Lifestyle Co, this month.
"The fund is expected to sell its initial public offering units in the middle of this month after getting the approval of the Securities and Exchange Commission."
He declined to disclose the size of the fund. Starting in 2006, KPN Group has gradually sold out its stake in the listed firm, KPN Automotive, a manufacturer of automotive parts and plastics used in car and motorcycle assembly, to one of the country's leading auto parts manufacturing firm, Apico Hitech, for a combined Bt1.8 billion. Most of the money from the deal is being poured into the property business.
KPN Lifestyle, the group's property arm, now has more than 10 apartment block rentals, low-rise and high-rise condominiums, and commercial building rentals in KPN Tower. The two condo projects in the Din Daeng and Thonglor areas under its new brand - The Capital - have been successfully sold out. KPN Group, most of whose income came from automotive sales, has diversified to other businesses after manufacturing bases of various industries started to be moved out of Thailand to cheaper countries. Kris, 43, the first son of Kasem and Khunying Phornthip Narongdej, conceded that the group's net margin in the automotive business is very small, declining to only 2-3 per cent now.
Strategically, he said KPN Group was focusing more on the property business, buoyed by several key driving factors such as the rising national income per-capita base, people's changing lifestyle with the new generation preferring to living in condos, and the changing landscape of mass-transit transportation which would have 10 more routes in Bangkok and its surrounding areas. Chief financial officer Nuttawut Phowborom added that KPN property fund would be the first-ever property fund, backed by rental income from "freehold" commercial office building KPN Tower on Rama IX Road, which means the fund's terminal value is unlimited.
The 27-storeyed KPN Tower has a total space of 50,000 square metres. About 27,000 sqm of that are for rent. Though the building is 13 years old, its location is considered a central business district of Bangkok, booking average rental fees at Bt340-Bt350 per sqm. Occupancy rate is about 90 per cent.
In addition, the tower will be 300 metres away from the subway station of the upcoming MRT Orange Line. Apart from good location and high occupancy rate, the KPN Tower also enjoys other income, 20 per cent of which comes from outdoor advertising.
Kris said 10 per cent of the building's 60 tenants are subsidiaries of the KPN Group. However, 80 per cent are foreign firms.
Kris said proceeds from the property fund would be used to finance the two new condo projects with a combined value of Bt5 billion. The projects will be near BTS Sky trains and expected to launch this year.
KPN Lifestyle focuses on luxury property projects with prices starting from Bt2.5 million a unit. Kris said the group also planned to list KPN Lifestyle on the Thai bourse by the end of 2014. Last year, KPN Group posted Bt18 billion to Bt19 billion in total revenue, of which 60 per cent came from automotive sales, 20 per cent from property, and 10 per cent each from music and education and investments.