Developer’s towering ambitions for Thailand

Construction News

Sorapoj Techakraisri, CEO of PACE Development Corporation.

Standing at 314 meters, the 77-storey MahaNakhon building in Bangkok’s central business district will not just be Thailand’s tallest building when completed by year-end.

It will also be a representation of Thai building boss Sorapoj Techakraisri’s faith in his homeland’s ability to withstand the economic downwinds it faces.

The mixed-use development, which began construction in 2013 and will cost $500 million to erect, has been grabbing attention for its distinctive appearance, designed by renowned German architect Ole Scheeren.

Shaped like a square prism, the skyscraper is encircled by a three-dimensional spiral framed by cubical surfaces. Glass walls lining the mega-tower are divided horizontally and vertically, adding to the building’s “pixelated” exterior and increasing the complexity of the construction.

“It’s been very challenging. To create the pixelated view, every floor has to be different so it’s an extremely complicated building to build,” Techakraisri, CEO of luxury property builder PACE Development Corporation, told CNBC’s “Managing Asia.”

But the real test for the residential and hotel tower lies in the macro-environment of Thailand.

In a quarterly report released on Monday, the Southeast Asian economy expanded 2.8 percent in the April-June period, down from 3 percent in the preceding quarter, on the back of weak local demand and exports.

And when, later in the day, a bomb exploded at the popular Erawan shrine in central Bangkok, killing 22 people and injuring hundreds more, economists said the deadly blast could take a toll on the one bright spot in Thailand’s sputtering economy – tourism.

Following the tragedy, the benchmark SET index fell to its lowest since the start of the year, led down by tourism-related names, while the baht sank to a six-year low.

While the 37-year-old chief executive acknowledged, in an interview conducted ahead of the bombing, that plans to build the skyscraper couldn’t have “come at a worse time,” he remained optimistic on Thailand’s real estate market, particularly in the upmarket property segment.

“Both economically and politically, Thailand is facing the most challenging [period], I would say, in the past 20 years. To introduce the tallest building and the biggest project at such a time has [many] challenges,” the scion of the country’s prominent Techakraisri family said.

“But Thailand is still a growing economy. With the launch of the ASEAN Economic Community, the higher end of the market will continue to grow because there will be many expatriates and foreign companies [who] come to invest and set up their offices here,” he added.

Data from global property consultancy CB Richard Ellis (CBRE) seconded Techakraisri’s view.

In a March report, CBRE analysts said the outlook for Bangkok’s super-luxury projects remained bright, as factors such as continued demand from a growing middle class and expatriates offset a growing oversupply of condominium units. Around 80,000 high-end apartments are expected to be completed in 2015, the report said.

Further buoying the project is strong interest from overseas buyers such as a Dubai-based business group who invested $27 million in MahaNakhon’s Ritz-Carlton branded residences in 2013, according to a report by local media Pattaya Mail.

Prachanart Viriyaraks | Contributor | Getty Images
This pictures shows the Wat Saket (Golden Mountain) and Bangkok Grand Palace in Bangkok, Thailand.

Hence, it is little wonder that Techakraisri is banking on the landmark development to lift the real estate company into the black.

PACE posted a consolidated net loss of 474.6 million baht ($13.34 million) for the 3 months through June 30, well above the loss of 79.1 million baht in the same period last year. The premium developer attributed the accelerating losses to the operating costs of local branches it owns of U.S. gourmet food brand Dean & DeLuca and the continued sales and marketing expenses for the MahaNakhon project, as well as other projects such as the building of a 53-storey super-luxury development called Nimit Langsuan in Bangkok.

“We are already 70 percent sold [at MahaNakhon], we kept about 30 percent to sell when the building is actually completed. The economy has recovered from when the project started so we’ve been able to increase some of the prices … the company will make very good amount of profits,” he told CNBC.

On Thursday, shares of PACE lost 1.48 percent to end at 2.66 baht, outpacing the broader index’s 0.5 percent drop.

This interview with Sorapoj Techakraisri, CEO of PACE Development Corp., is the first of a five-part special series called “Managing Asia: The Next Generation”. CNBC’s Christine Tan will be speaking to leaders from the second- to fourth generation in Asia, to find out what it takes to transform family businesses to new levels of growth.