Published on August 04, 2006 - Additional income stream will provide more stability, say Metrostar and Sena Development

Two property firms held press conferences in Bangkok yesterday to deliver a very similar message: both are moving away from selling residential properties and into projects that will generate rental income.

The companies, Metrostar Property Plc and Sena Development Plc, blamed unpredictable economic conditions for their move to retail and office buildings, apartments, serviced apartments and hotels.

Metrostar Property Plc said it will invest Bt4.6 billion in an integrated project on Sathorn Road called "Metro Sathorn Tower". It will include an office building, serviced apartments, condominiums, a shopping centre and a sports complex. Its finished value will be Bt5.8 billion.

Construction will begin immediately and is expected to take three years.

When finished, rental income from the project is expected to contribute 30 per cent of Metrostar's total revenue.

The company is also planning to invest in hotels and resorts in Bangkok and tourist destinations such as Phuket, Koh Samui and Chiang Mai next year.

Sena Development Plc said it plans to launch three new property projects worth Bt1 billion. Two of them are housing projects at Rangsit, in Bangkok's northern suburbs, and the third is an apartment and serviced- apartment project, which when complete is expected to generate rental income for the company amounting to at least 10 per cent of its total revenue.

Metrostar Property's chief executive Veera Buraphachaisri said his company wanted to balance its total revenue, because it finds itself in an economic slowdown with 100 per cent of revenue coming from residential project sales.

Metrostar also expects to achieve sales of Bt1.5 billion this year, up 77 per cent from sales of Bt845.64 million last year. However, it reported sales of just Bt161.01 million and a net loss of Bt34.35 million in the first quarter of the year.

Sena Development Plc director, Kessara Thanyalakpark, said her company plans to spend Bt63 million on its first apartment project this year, on Phaholyothin Soi 30.

It will focus on the middle market, and is partly aimed at balancing the company's sources of revenue.

Currently, 100 per cent of Sena's revenue comes from property project sales, but it expects rental fees to make up 10 per cent of total revenue upon completion of the apartment project.

"We have to balance our income in the future because when the economy slows down, the residential property market suffers a negative impact. As a result, we have to have projects that will generate rental income for our business," she said.

Expecting only slight economic growth this year, Sena Development has adjusted its estimated income down from Bt1.2 billion to Bt1 billion. This is still double its total sales of Bt500 million last year. In the first half of this year it recorded total sales of Bt300 million.

Kessara said the company believes it will achieve its sales target when it launches its two new residential projects at Rangsit in the second half of the year.

Somluck Srimalee
The Nation