Commercial property developer UHG continues its acquisition of prime plots of land, leasing a one-rai site on Soi Ekkamai currently occupied by an apartment complex in order to invest 600 million baht in the development of a mid-tier hotel, prompted by enforcement of the land and building tax.
Wutthiphon Taworntawat, managing director of UHG, said opportunities for commercial property developers, especially those focused on hotels, to lease land in prime areas remained strong.
"Many landlords in prime locations who do not wish to sell their plots and find their existing properties to be unprofitable have offered their land for rent," he said.
These landlords often prefer long-term tenants who can develop their properties into valuable assets, such as office buildings or hotels, which ultimately revert to the landlords once the lease agreements expire.
Since the implementation of the land and building tax in 2020, even with discounted rates during the early years, more prime plots have been listed for sale or lease to reduce tax liabilities.
Prime city-centre plots are typically purchased by developers for condo projects, which yield higher returns compared to other types of development.
However, with the condo market slowing since the pandemic, leasing land has become a more attractive option for landlords, said Mr Wutthiphon.
Over the past few months, UHG signed a 30-year lease with a property owner for a plot exceeding one rai near Soi Ekkamai 14, previously occupied by the four-storey Lalivan Court apartment.
The company plans to invest 600 million baht to develop a mid-tier hotel with two eight-storey towers and 200 rooms to be offered at a rate of 2,500 baht per night, targeting young independent travellers from Thailand, Japan, Korea, China and Europe.
Construction is set to begin in January 2025 and should be completed by mid-2026. The project aims to break even within 10 years, which is a longer period than usual due to high leasing costs and the project's distance from access to the BTS line.
Earlier this year, UHG signed a 30-year lease for Karnmanee Hotel on Pradipat Road, which will be renovated into The Quarter Saphankwai, a 208-room hotel, which will be opened on Dec 16 this year.
During the first 10 months of 2024, UHG recorded total revenue of 3.5 billion baht, marking a 10% increase year on year.
The growth driver was hotel revenue, which increased 15% with an average occupancy of 95%, while office and retail spaces saw a growth below 10%.
UHG aims to achieve 4 billion baht in revenue by the end of 2024, a 10% increase over 2023.