Nature of Business

CPN's core businesses comprise the development of shopping complexes and other complementary mixed-use projects, which include residences, office buildings and hotels, to add value to the shopping complexes.

CPN's core businesses comprise the development of shopping complexes and other complementary mixed-use projects, which include residences, office buildings and hotels, to add value to the shopping complexes. By the end of 2018, CPN manages 32 shopping centers, 14 in Bangkok Metropolitan Area and 18 in prime provincial areas (includes Central Phuket: Central Phuket Festival and Central Phuket Floresta); seven office buildings in Bangkok; two hotels, namely Centara Hotel and Convention Center Udon Thani and Hilton Pattaya; Hotel and one residential project in Bangkok. Furthermore, CPN invested in CPN Retail Growth Leasehold Investment Trust (CPNREIT) and CPN Commercial Growth (CPNCG), the properties under both of which are also managed by CPN.

CPN's project development starts from securing strategic locations at reasonable prices and onto conducting feasibility studies, controlling design and construction processes, overseeing lease progress, and finally managing shopping complexes and office buildings after commercial openings, which extends to the provision of utilities, security and cleaning services at each site. Furthermore, CPN operates certain complementary businesses, such as food centers, multi-purpose convention halls, entertainment and leisure attractions at some shopping complexes to accommodate customers. Regarding the hotel business, CPN has employed expert hotel management companies to manage its hotels and maximize benefits from the properties.

CPN's business

Categorized based on sources of revenue in six business groups described as follows:

32
Shopping
Complexes
CentralPlaza Nakhon Ratchasima

CPN's main source of revenue, the shopping complex business accounts for more than 76% of the total revenue. Revenue is derived from rental of retail space, utility and security services, cleaning services, rental & services of convention halls, and onsite media services at 32 properties – 14 in Bangkok Metropolitan Area and 18 in prime provincial areas – of which 27 projects are owned by CPN and the other 5 projects leased out to CPN Retail Growth Leasehold Investment Trust ("CPNREIT") in which CPN is the property manager.

CPN continues to develop and expand the shopping complex business through opening new shopping centers domestically and internationally, renovation of existing shopping centers to contemporary standards, and enhancing the space utilization in shopping centers to sustain revenue generation. These initiatives resonate CPN's vision to become the "Center of Life" to better address consumers' dynamic lifestyle preferences by offering a wide range of products and services, as well as through the implementation of various destination concepts that match the lifestyle desires of customers at all ages and interests. Moreover, CPN shopping centers integrate iconic local heritage and identity as part of their designs. The interior of the shopping center creates an attractive ambience for customers to have enjoy shopping experiences. These distinguished features continue to elevate CPN's shopping center as the leader in the shopping complex business.

In September 2018, CPN opened Central Phuket Floresta, connected to Central Phuket Festival, making Central Phuket the largest shopping complex in southern Thailand. In 2019, CPN plans to open Central i-City in Malaysia, its first international 48 retail project, and Central Village, the first international luxury outlet in Thailand. As for the asset enhancement initiatives in 2018, CPN has undertaken a major renovation at CentralWorld to become a global lifestyle destination, as well as a major renovation at CentralPlaza Rama 3 to become the lifestyle destination of local communities.

According to its estimated data as of December 31, 2018, CPN has 20% market share of the retail industry in Bangkok Metropolitan Area based on gross floor area, excluding parking space.

7
Office
Buildings
CentralWorld

The Offices at CentralWorld is a grade A office building located in the heart of the business district. Its tenants are, therefore, leading Thai and multinational companies

CentralPlaza Pinklao

The office building business involves the development of office buildings for rent not only for their complementarity with the shopping complex, but also for their value accretion from the optimization of land use and efficiency of car park management.

The decision to develop an office building in any shopping center area is based on the strategic location together with the demand and supply of office space in that area. The revenues from office building include rental of office space, rental of retail space within the office building, and revenue from utilities services.

At present, CPN runs 7 office buildings on the premises of 1) CentralPlaza Lardprao, 2) CentralPlaza Pinklao (2 towers), 3) CentralPlaza Bangna, 4) CentralWorld (The Offices at CentralWorld), 5) CentralPlaza Chaengwattana, and 6) CentralPlaza Grand Rama 9. For office buildings, CPN owns 4 projects and manages the other 3 projects, 2 of which are under CPNREIT (Pinklao Tower A and B Office buildings at CentralPlaza Pinklao) and the other under CPNCG (The Offices at CentralWorld). Tenants of office buildings in CentralPlaza Lardprao, CentralPlaza Pinklao, CentralPlaza Bangna, CentralPlaza Chaengwattana, and CentralPlaza Grand Rama 9 projects are mostly operators of businesses that benefit the shopping mall business, such as tutorial schools, language and music schools, beauty parlors, and securities brokerage firms. In contrast, The Offices at CentralWorld is a grade A office building located in the heart of the business district. Its tenants are, therefore, leading Thai and multinational companies.

2
Hotels
Hilton Pattaya Hotel

The hotel business on the same premises as shopping centers complements the shopping center business in terms value accretion to the overall project by making the most use of properties for the maximum return on investment. Key consideration factors of hotel investment include project location, demand and supply, surrounding environment, and the project's growth potential. The hotel business comprises guest rooms, food outlets, seminar rooms and convention centers to serve the growth of the MICE (Meeting Incentive Convention and Exhibition) industry. Revenue from the hotel business comprises room revenue, sale of food & beverage and rental of units in buildings and service income.

CPN owns two hotels:

  1. Centara Hotel & Convention Centre Udonthani (formerly known as Charoensri Grand Royal Hotel, a part of Charoensri Complex, acquired by CPN in April 2009) comprises 259 rooms. CPN has employed an expert otel management company, namely Central Plaza Hotel, to manage the hotel.
  2. Hilton Pattaya Hotel consists of 302 rooms (situated in the same complex as CentralFestival Pattaya Beach and launched in November 2010). In December 2017, CPN leased it to CPNREIT for 20 years and employed Hilton Hotel Corporation to manage the hotel.
7
Residential
Building
CentralFestival Chiangmai

Three condominium projects started since the second quarter of 2016 and should take about two years to complete and be ready to transfer and realize revenue in 2018

CentralPlaza Chiangrai

Recognizing the potential of mixed-use development of shopping complex projects, CPN has developed residential projects to maximize the benefit of its core shopping-complex business. Hence, a specialized team of executives, experienced personnel and experts was set up to conduct feasibility studies on the development of residential projects and execute other relevant tasks.

The development process of CPN's residential projects starts from selecting strategic locations; conducting feasibility studies from market information and other impact factors to analyze and decide on suitable types of housing project for each location; procuring construction and decorative materials directly from suppliers through fair bidding processes to compare prices and quality and benefit from the economies of scale; setting delivery prices in advance to avoid price fluctuation; and selecting contractors who are skillful, experienced, and reputable in their respective types of work under CPN's procurement procedures and standards. CPN's control systems are also in place to ensure that construction work proceeds as planned and their quality is strictly controlled. Besides undertaking environmental impact assessment (EIA) to address environmental impacts potentially caused by the construction of residential projects and their utility systems, CPN requires that all projects comply with the Building Control Act and minimizes their environmental impacts.

As of present, CPN launched 7 condominium projects adjacent to the shopping malls under the brands "ESCENT" and "ESCENT VILLE". Amongst these projects, there are 3 that have been completed and are in the process of transfer to customers, namely at 1) CentralFestival Chiangmai; 2) CentralPlaza Khonkaen and 3) CentralPlaza Rayong. The other 4 projects are under development and are located next to 1) CentralPlaza Nakhon Ratchasima; 2) CentralPlaza Chiangrai; 3) CentralFestival Chiangmai (second project) and 4) CentralPlaza Ubonratchathani. Moreover, CPN has 2 residential development projects outside of the shopping mall area, namely 1) "NIYHAM" single-detached housing project and 2) "PHYLL" condominium. These projects are developed and managed by CPN Residence Company Limited, a subsidiary of CPN. Additionally, CPN manages a residential building project called Central City Residence Condominium, a 11-unit condominium on the premises of CentralPlaza Bangna.

3
Entertainment and
Leisure attractions
Pororo Aquapark Bangkok

The entertainment and leisure attraction business is supplementary to the shopping complexes through adding a variety to features and services. Not only can they attract more customers to shopping complexes, but they also bring satisfaction to customers and people in surrounding communities. For the parks to materialize, the size of land and space availability in the project are key considerations.

At present, CPN operates the following entertainment and leisure attractions at shopping complexes:

  • Pororo AquaPark Bangkok, the water park located on the 6th floor of CentralPlaza Bangna decorated with the theme of a famous Korean cartoon series "Pororo: The Little Penguin" and offers new, exciting and memorable experiences to all family members.
  • Central Park, a large recreational park located in the same area as CentralPlaza Rama 2 open to the general public and comprises a health park, children's playground, activity zone and famous food vendors.
  • TRIBHUM: The Mystic of Three Worlds, located at Central 50 Phuket and will open in 2019, is a 3D interactive walk through theme park as a result of a joint venture investment by CPN and a partner with accredited expertise.
28
Food
Centers
Red Sky Bar - Centaragrand @ CentralWorld

CPN developed and improved food centers under the concept of Food Destination, which includes a wide selection of restaurants to serve various lifestyles

Red Sky Bar - Centaragrand @ CentralWorld

Food centers are considered an essential element that complements shopping complexes. Intended to provide convenience for customers with a wide variety of affordable, quick and ready-to-serve dishes, food centers at CPN shopping centers generate return from the sale of food and beverages at food centers.

CPN developed and improved food centers under the concept of Food Destination, which includes a wide selection of restaurants to serve various lifestyles, including casual dining, family restaurant, cafe, bakery or take-home food.

2
Investment in Property Fund and REIT
(Real Estate Investment Trust)
Red Sky Bar - Centaragrand @ CentralWorld

CPN developed and improved food centers under the concept of Food Destination, which includes a wide selection of restaurants to serve various lifestyles

Red Sky Bar - Centaragrand @ CentralWorld

CPN is the major unit holder of CPNREIT and CPNCG, representing 26.69% and 25.00% of total ownership respectively. It also serves as the property manager and receives monthly fees under management contracts and profit-sharing agreement based on investment proportions. The details are as follows:

  1. CPNREIT was listed on the Stock Exchange of Thailand on December 14, 2017, after CPNRF had been converted into CPNREIT according to the resolution of the Board Meeting No. 4/2017 on May 31, 2017. It approved the conversion based on the interest of CPNRF unitholders, who would enjoy the income tax incentive and VAT exemption for property fund, specific business tax and stamp duty. Moreover, the privileges on the registration of related right and juristic acts due to the conversion will end on December 31, 2017.
    CPNREIT was established on November 29, 2017, with an indefinite expiration date. It received assets transferred from CPNRF, namely CentralPlaza Rama 2, CentralPlaza Rama 3, CentralPlaza Pinklao and CentralPlaza ChiangMai Airport. It also invested in CPN's two additional properties, namely CentralFestival Pattaya Beach (certain parts) and Hilton Pattaya Hotel. The transfer was completed on December 1, 2017 and the lease for the two newly acquired properties will expire on August 31, 2037, for a net asset value of Baht 11.908 Billion.
    CPNREIT is managed by CPN Management Company Limited, a subsidiary of CPN, as the REIT manager. It appointed CPN as property manager. CPN Pattaya Hotel Co., Ltd., a subsidiary of CPN, is a sub-lessee of Hilton Pattaya Hotel, which remains under the management of Hilton Hotels Corporation. Siam Commercial Bank Asset Management Co., Ltd., acts as the trustee and the Thailand Securities Depository Co., Ltd. (TSD) acts as the registrar.
  2. CPNCG was registered on September 13, 2012, with an indefinite expiration date. The purpose of the fund is to raise funds from unitholders to invest in properties or leasehold properties and seek benefit from properties. CPNCG has invested in parts of The Offices at CentralWorld.
    SCB Asset Management Company Limited (SCBAM) acts as the management company, Kasikorn Public Company Limited acts as the mutual fund supervisor, the Siam Commercial Bank Public Company Limited acts as the registrar, and CPN acts as the property manager.
    As the property manager, CPN is entitled to monthly management fee from the fund according to the contractual agreement between the fund and the property manager.
    Additionally, CPN has a 10.13% indirect ownership in GLAND Office Leasehold REIT (GLANDRT), through the acquisition of shares in GLAND. The REIT is managed by GLAND REIT Management Co., Ltd., a subsidiary of GLAND.