SC turns to hotels and the US as new condos wallow
SET-listed developer SC Asset Corporation is diversifying into hotels in Thailand and apartments in the US while eyeing the low-rise segment but freezing new condo launches.
Chief executive Nuttaphong Kunakornwong said the emergence of uncertainties this year include the recent coronavirus outbreak, bleak economic growth forecasts and consumer confidence falling to five-year low.
“Negative factors have carried over from last year,” he said. “Despite positive signs such as lower interest rates and a relaxation in the loan-to-value limits, new supply this year will continue to drop by 15-20%. New sales will be lower than in 2019.”
In 2020, SC aims to have 17.8 billion baht in revenue and 18 billion in presales, slightly up from 17.7 billion and 16.8 billion in 2019, respectively, which grew by 15% and 14% from 2018.
About 20% of 2019 revenue was from the rental of office spaces, with a total lettable area of over 120,000 square metres.
To sustain revenue growth, SC plans to diversify into hotels in Thailand and apartment rentals in Boston in the US to capitalise on Thai tourism growth and low-vacancy apartments in the US.
SC’s new subsidiary, SC Expedition, will invest in the hotel sector, aiming to set down roots in five locations with a total of 1,000 rooms by 2023.
The first one will be a renovation of an old office tower owned by the Shinawatra family, who are SC’s majority shareholders. The hotel will have 70-80 rooms targeting mid to upscale independent travellers. The hotel business will be operated under the SC brand.
Other possible locations for the other four hotels comprise Ratchadaphisek, Sukhumvit and Vibhavadi Rangsit roads in Bangkok, as well as Pattaya.
Mr Nuttaphong said SC set up a new subsidiary, SC Alpha, to operate apartments in Boston, which is one of the rare cities that has low vulnerability to earthquakes and tornadoes.
The apartment vacancy rate of under 3% on average is attributed to it being a hub of technology, healthcare and academics with apartments.
SC plans to spend US$30 million per year to acquire existing apartments that will be renovated and operate them for 3-5 years before selling when the initial return rate is more than 12%.
SC has set a total investment budget of 4 billion baht, which entails 2-3 billion for plots for low-rise development and 900 million for apartments in the US. The rest is for its first hotel in Ratchawat.
“We don’t have the budget to buy land for condos as there is still a glut,” he said.