Dec. 12 (Bloomberg) -- Facing eviction from her home of six decades, Amporn Pannarat personifies the dilemma facing the fund supporting Thailand’s monarchy as it seeks to boost returns and regenerate Bangkok with its first commercial development project.
The 78-year-old watched over the years as office towers and Four Seasons and St. Regis hotels went up around her aging concrete house near Lumpini Park, now one of several dozen left on land about the size of Manhattan’s World Trade Center site. The Crown Property Bureau’s plan to build condominiums on the location puts it at odds with an image of altruism maintained by a fund that eschews profit as its central objective.
The shift to build commercial properties, instead of just leasing land to private developers, risks exposing the CPB to scrutiny it has largely avoided because of laws used to shield the monarchy from criticism. The bureau, which has a portfolio estimated at $41.3 billion -- more than three times that of the British throne -- provides few details of its earnings and how they are spent.
“I never thought they would ask us to move out,” Amporn, who rents her home for 496 baht ($16) a month, about 240 times less than leases for luxury flats on the same street, said last month in her two-story home, where pictures of King Bhumibol Adulyadej adorn the walls. “If we have to move it will be trouble as houses now are very expensive. I don’t know how much compensation they would give but it won’t be enough to buy a new house.”
While the CPB is one of Bangkok’s biggest landlords and controls two of Thailand’s most valuable publicly listed companies, its annual reports emphasize helping society over making profits.
“This is not a profit-maximization organization, but they have to survive,” said Chan Bulakul, chief executive officer of The Brooker Group Pcl, a Bangkok-based financial and real estate consultant. “I don’t think the development will be on a big scale. If you don’t step on other people’s toes, then nobody screams. Once you start taking away all the profits from other property developers, everybody will scream and they will do a street fight. That’s the last thing they can afford.”
Many shop-houses are leased out at rates averaging about 1,500 baht per month, according to Aviruth Wongbuddhapitak, an adviser to the CPB who sits on the board of two of its subsidiaries.
It’s necessary to develop the plot where Amporn lives, which is among the 7 percent of the bureau’s land that is considered commercial, because the area “deteriorated so much,” he said in an interview.
“When we want to take the land back it’s very sensitive,” said Aviruth, who holds a master’s degree in business administration from New York University. “This is always the weak position of the CPB. We can lease them really cheap, but whenever we increase the price, whenever we want to take the land back, we have to pay them more than what they have paid to us during the last 30 years.”
Bhumibol, the world’s longest reigning monarch who turned 85 on Dec. 5, met both U.S. President Barack Obama and Chinese Premier Wen Jiabao last month at the Bangkok hospital where he has lived since 2009 while receiving treatment for various illnesses. The monarch appeared last week with his family at a birthday celebration in Bangkok before hundreds of thousands of people who waved royal flags and shouted “Long Live the King.”
Thailand’s constitution says the king “shall be enthroned in a position of revered worship.” State-run television channels air broadcasts on royal activities each night, and an anthem praising him is played at movie theaters. Thailand’s lese-majeste law mandates jail sentences as long as 15 years for defaming, insulting or threatening the king, queen, heir apparent or regent.
The property bureau’s origins date back to the days of absolute monarchy, when all the country’s land belonged to the king and all revenue flowed to his coffers. That changed in the late 1800s with the creation of a finance ministry and direct taxation that separated the crown’s revenue and expenses.
After a 1932 revolution that ended absolute monarchy, the civilian leaders passed a law setting up the Crown Property Bureau with a government-appointed board to manage the monarchy’s assets, which were separated from the king’s personal holdings. A military-installed administration changed the law in 1948, giving the monarch control of the CPB’s board and allowing income to be “paid at the king’s pleasure in any case.”
“The palace’s biggest coup was getting control of the CPB back,” said Kevin Hewison, a professor in the Department of Asian Studies at the University of North Carolina. “Because it is opaque, we know little about how its profits support the monarchy and the royal family.”
The monarch now picks all of the bureau’s seven board members except for the sitting finance minister, who serves as chairman. Chirayu Isarangkun Na Ayuthaya has signing power as the bureau’s director-general, a position he’s held since 1987 through about 20 different finance ministers. Bhumibol’s role is limited to appointing the board and endorsing the annual budget that it submits, Aviruth said.
Sulak Sivaraksa, a 79-year-old Buddhist activist who has faced several lese-majeste charges since 1984, is among those calling for the law to be changed to allow for greater transparency at the CPB. Parliament should account for the bureau’s revenue and expenses, he said.
“Nowadays there are a lot of attacks on the monarchy,” he said by phone. “If they are really sincere about saving the monarchy, they themselves should be transparent.”
Thaksin Shinawatra, the billionaire brother of Prime Minister Yingluck Shinawatra, who was ousted in a 2006 coup, said in a Sept. 24 interview that his sister’s government supports the CPB and wouldn’t initiate changes to the lese majeste law. Yingluck’s party controls a majority in parliament. Finance Minister Kittiratt Na-Ranong declined to comment, while deputy government spokesman Pakdiharn Himathongkham said the cabinet hasn’t discussed the CPB’s plans and has no plans to change the law governing the bureau.
Thailand’s government routinely denies reports linking the bureau’s assets with Bhumibol’s personal wealth, which is managed by the Privy Purse Bureau. The CPB’s assets pass down to whoever becomes the next king, Aviruth said.
The lack of clarity regarding royal property became apparent last year when German liquidators seized Crown Prince Maha Vajiralongkorn’s Boeing 737 airplane to force payment on a claim against the Thai state. The government, which said the plane was the prince’s personal property, provided a letter of guarantee for 38 million euros ($49 million) to secure its release.
Bhumibol’s personal holdings include shares valued at $63 million in companies including Minor International Pcl, Thailand’s biggest hotel operator, which runs local franchises for Burger King Worldwide Inc., according to data compiled by Bloomberg. Privately held land includes the sites of Siam Paragon and Siam Center malls in central Bangkok, Aviruth said.
The extent of the Privy Purse’s landholdings and revenue are unknown to the CPB because they aren’t disclosed, said Aviruth, a former vice president of Siam Cement Pcl who has sat on the boards of other palace-linked companies. He spoke in an Oct. 19 interview at the CPB’s Bangkok office and answered questions in an e-mail received on Nov. 5.
While the bureau invested over the decades in dozens of companies, including Firestone Tires and Kempinski AG, Aviruth said most of its income comes from a 23.73 percent stake in Siam Commercial Bank Pcl, Thailand’s biggest by market value, and a 31.94 percent stake in Siam Cement. Including subsidiaries, the companies account for about a 10th of the Stock Exchange of Thailand’s value.
The CPB’s push to earn more from its landholdings accelerated after the financial crisis that started in 1997, when the baht’s devaluation caused Asian currencies to tumble and half the loans at Thai banks went bad. Siam Commercial stopped paying dividends from September 1997 until January 2004, while Siam Cement omitted payouts for more than four years, leaving the CPB reliant on rents for income.
“At that time we didn’t have a chance to increase the lease value because everything collapsed,” Aviruth said.
The CPB owns about 41,300 rai (66 square kilometers) of land across the country, about a fifth of which is in Bangkok, Aviruth said.
“We don’t know if in the future the government might not be able to support the monarchy, so the monarchy has to support itself,” Aviruth said. “This is a group of assets and funds that we need to keep for the long term.”
The government allocated 7.4 billion baht in tax money to fund travel, security, development projects and agencies related to the palace in the fiscal year ended Sept. 30, a 10 percent increase from a year earlier, according to the budget.
The bureau has moved to increase transparency, issuing annual reports for the past two years that include some financial information and divulging previously unreleased figures in the 2011 book King Bhumibol Adulyadej: A Life’s Work, part of which is posted on the CPB’s website.
Aviruth dismissed calls for more transparency, saying the CPB has undergone a voluntary government audit and strictly follows the 1948 law, which doesn’t require it to issue financial statements. The statute remains relevant today, he said.
“You cannot go into the bedroom of the king,” Aviruth said. “This is unlike in the U.K. -- you can take the picture of the naked someone in the palace. That’s not our culture.”
The British monarchy posts detailed financial information on its website accounting for everything from electricity usage to asbestos removal. The British Crown Estate is valued at more than 8 billion pounds ($12.9 billion) and mandated by law to make a commercial return on assets. It pays all profit to the government, an amount that totaled 240.2 million pounds in the last fiscal year ending March 31, according to its annual report.
Public disclosures show the Crown Property Bureau earned income of at least 11.1 billion baht last year. Of that, rental income provided 2.7 billion baht, the bureau’s annual report said, while dividends from Siam Commercial Bank and Siam Cement provided 7 billion baht, Bloomberg data show. Holdings of CPB Equity Co., CPB Property Co., Deves Insurance Pcl and Siam Sindhorn Co. yielded another 1.4 billion baht, according to Commerce Ministry filings.
The bureau’s stakes in those companies were valued at about $9.3 billion. Porphant Ouyyanont, who has written scholarly articles on the CPB and contributed to the book posted on its website, estimated the bureau’s landholdings at 987 billion baht ($32 billion) in 2005. Using that estimate, the CPB would have a net worth of at least $41.3 billion. That compares with an enterprise value of $45.8 billion for state-run PTT Pcl, Thailand’s biggest listed company, according to data compiled by Bloomberg.
Aviruth declined to reveal how much the bureau held in cash reserves or to detail how the money was spent, saying he doesn’t have access to that information. He rejected land value estimates that use market rates, including those by Porphant, saying they are “not relevant” because the bureau leases most of its land to poor people and has no plans to sell, which by law requires the king’s approval.
The CPB’s prime spots include CentralWorld, one of the country’s biggest shopping malls, which was torched during 2010 protests held by a Thaksin-backed group calling for an election. It also has the site of a former military school across the street from Lumpini park in central Bangkok.
“All resources within the country should be put to the best social and economic use,” Korn Chatikavanij, a former finance minister and deputy leader of the opposition Democrat party, said by phone. “For property which is obviously in commercial areas, or is already being used commercially, for the crown to expect commercial returns from other people using those properties is perfectly reasonable.”
The bureau plans to develop the 28-rai property on Langsuan road in two phases before expanding it to include the rest of the land plot extending to the park, which includes Amporn’s house, according to Aviruth. It decided to use its own developer, Siam Sindhorn, to better manage traffic in the area and because it promised tenants they’d be able to return, he said.
“We don’t have the long-term objective to become the developer ourselves,” he said. “But because of a number of factors, an environment that permits us to do it, we’ll do it.”
The bureau has offered to give tenants on Langsuan road a coupon worth 5,100 baht per square meter that can be used to buy a leasehold unit in the new building, according to Aviruth. In 2006, the British Embassy sold a plot of land down the street for more than 200,000 baht per square meter.
Aviruth said the leasehold units would sell at the prevailing market rate, which may be as much as 200,000 baht per square meter. It’s too early to say how many tenants would take up the offer to stay in the area, he said.
One house remains on the plot where the first phase of the project will be built after most people moved out last year. Amporn, who lives across the street and has seen surveyors take measurements of her house, said she doesn’t know anyone who is planning to use the bureau’s coupon to return to the area because the price is too high even with the discount.
“It is their land,” Amporn said of the bureau. “If they want us to go, we have to go. I will be sad as I’ve lived here for almost 60 years and have a deep bond with this house.”
While the CPB’s leadership has remained steady since Chirayu became director-general a quarter century ago, Aviruth said he didn’t know how the bureau’s operations would change under a different monarch. Either way, he said, the CPB is now in a “good position” to handle unforeseen events.
“We have a lesson that we learned a lot from the crisis,” Aviruth said, referring to the 1997 baht devaluation. “We have to be sure that we are secure financially to meet with the unexpected storms in the future.”
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