Director and president Suvait Theeravachirakul said the company would submit an official confirmation to the university for the extension by June 24, which would then require Cabinet approval.

He said the company expected to pay the first lease instalment by October, which is expected to be Bt2.45 billion.

MBK Plc plans to issue the first of its debentures worth Bt3 billion by the middle of next month. Proceeds from that issue will be used to pay for the first instalment, current debts and renovation of the MBK building and the Pathumwan Princess Hotel.

However, a minority of shareholders were not satisfied with the contract, given that MBK Plc could not guarantee high profits in the present period and would not be considered to have "first right" in negotiations for another lease extension when the contract ends in 20 years.

At the shareholders' meeting yesterday, they questioned the MBK committee as to why the company had to accept a rise in the lease extension fee but could not raise the rental fees for its commercial tenants.

MBK vice chairman Banterng Tantivit said the company had considered the potential scenarios. If it could not raise rental fees, MBK would gain no profit. If it were able to raise rental fees 3 per cent, then that would generate another Bt700 million to Bt800 million in profit. The best-case scenario would be to raise rents 5 per cent annually.

It usually raises the rental fee 3 per cent a year. Its current fee is Bt1,240 a square metre.

He said accepting the situation and continuing the contract would certainly benefit the company as a whole. First, its share prices would increase Bt24 on the current price or even as much as Bt47.93, which was considered the best-case scenario. Second, the company would not have to lay off a significant number of staff or spend a large sum of money to move from the current location.

MBK Plc's advisers also pointed out that it would be difficult to get another prime location like the present one. The company still has a good cash flow to cover all operations. Its executives also know how to manage the retail business in the area effectively, and it would be good for the overall continued operation of the company.

Banterng said the company did not worry about competition in the area. The only concerns were political uncertainty in Thailand and terrorism globally, and these factors could affect all businesses.

He said the company would offset reduced retail profit growth by investing in its other businesses that promise good performance, mainly hotels and resorts. It owns land on Koh Samui and in Phuket and Pattaya that will be developed into five-star hotels and resorts.

Revenues from its hotel operations currently account for 15-18 per cent of the company's total income, said Suvait. He estimates that will rise to 25 per cent in the next three years.

Nitida Asawanipont

The Nation