Jatuporn to build on UK success story

October 16, 2000

Thanong Khanthong looks at the impending third London property acquisition by the Landmark Group.

Having successfully acquired the Royal Lancaster Hotel London in 1994 and the Regent Hotel a year later, renaming it the Landmark London, the Landmark Group is now zeroing in on its third London hotel.

For Jatuporn Sihanatkathakul, who heads the Sihanatkathakul family, snapping up his third London property should be a smooth undertaking.

The Landmark Group is a private company 30 per cent owned by his immediate family and 70 per cent by the rest of the Sihanatkathakul clan. The Group has already gained a firm foothold in the London hotel industry, enjoying good cashflow at a time when most Thai hotel developers are in financial distress.

The Royal Lancaster and the Landmark London are generating Bt4 billion in combined annual sales, split roughly between the two. They are also getting high occupancy rates of around 80 per cent, attracting guests from the US, continental Europe and Asia.

To give a rough comparison, the five-star Regent Hotel Bangkok is recording annual sales of only Bt800 million.

Jatuporn said it is too early to reveal the name the 300-room property the Group intends to acquire over the next two to three months. But hotel industry observers say the target property is one of the luxury hotels in the expensive Kensington area.

Jatuporn, in a November 1995 interview, told Thailand Tatler that while he was growing up he had no ambitions to do anything special.

"Accounting and finance seemed as good an idea as any. After graduating I joined Shell as an internal auditor and that was interesting as one learns everything. Then my father who was a textile merchant, realising that travellers had limited places to stay in Bangkok, decided to build the Siam Hotel on Petchburi Road and asked me to run it. Later in 1987 we opened the Landmark, which is how I became a hotelier," he said.

In the early 1990s Jatuporn made what then seemed a big gamble to diversify the family's hotel business into overseas markets. He was astonished at the madness of the property market boom in Thailand, with developers rushing to build new hotels without any consideration for the demand/supply situation. In the first year of the Board of Investment's promotional privileges to hotel developers, there were 100 applicants.

Sensing that trouble lay ahead, Jatuporn turned his attention to the UK market. He was interested in the Royal Lancaster, one of the finest hotel properties in the UK. The hotel

was named the best UK hotel for conferences and banqueting in 1992 and 1994. However, it was impossible for him at that time to get financing from UK banks as the British economy was a shambles. The property market was also in trouble.

He was forced to turn to banks in Southeast Asia.

Oversea Chinese Banking Corporation of Singapore was the lead bank of a syndicated loan worth £40 million (Bt1.6 billion at the 1994 exchange rate of Bt40 to £1), to acquire the Royal Lancaster for £75 million. Bangkok Bank, Siam Commercial Bank and Thai Farmers Bank also participated in the syndicate. The balance of the acquisition funding came from the Landmark Group's own financing.

The purchase proved to be an immediate success. This encouraged Jatuporn to acquire the Regent Hotel a year later in 1995.

"Incidentally, I first visited the then Regent Hotel without any intention to buy it. The owner, a Japanese entertainer, had acquired the hotel for £70 million and spent another £70 million on renovations. If the hotel were to survive, it had to charge a room rate of £400 a night with an average occupancy rate of 70 per cent. As it turned out, the hotel was offering its rooms at £150 a night and averaging an occupancy rate of just 50 per cent," he said.

Consequently, the financially troubled Regent Hotel was taken over by Hazama Corp (UK) Ltd who sold it to the Landmark Group for half price, or £70 million. It sounded like a good deal to Jatuporn. The Regent Hotel was voted best business hotel in the world in 1994 by Gallivanter's Guide Magazine. Subsequently renamed as the Landmark London, the hotel was reconstructed behind a 19th century façade. It still retains many of its original architectural features while providing 309 guestrooms and luxurious facilities.

Again, Jatuporn went to Oversea Chinese Banking Corporation of Singapore to arrange another syndicated loan. After the purchase, the British economy began to improve. The timing could not have been better.

The success of both the Royal Lancaster and the Landmark London confirmed Jatuporn's business acumen at a time when most Thai property developers were rushing to build new properties to take advantage of an economy that was to collapse a few years later.

The Royal Lancaster and the Landmark London were doing so well that a few years ago, Hongkong Shanghai Banking Corporation and National Westminister Bank agreed to help Landmark Group refinance its syndicated loans. As a result, the group is paying a lower premium for its borrowings. But to acquire the third London property, Jatuporn said the Landmark Group would approach UK banks to help it finance the deal.

After the baht devaluation in 1997, the Landmark Group immediately ran into financial difficulties due to its offshore borrowings.

"The foreign exchange incomes generated by both the Royal Lancaster and the Landmark London helped the group to avoid a financial disaster," Jatuporn said.

"We were lucky not to have become an NPL statistic adding to financial cost to the country."

Most of the local hotel developers who had borrowed offshore loans went bust when the financial bubble burst. As a result, about 20,000 rooms in four and five-star hotels out of a total of between 40,000-50,000 rooms, are in the hands of creditor banks.

Recent property appraisals have doubled the value of both the Royal Lancaster and the Landmark London, which are now worth about £140 million each.