Cyrus Pun, Executive Director of Yoma Strategic Holdings Ltd, says the Yoma Central is considered one of the largest foreign direct investments in Myanmar’s real estate sector with an investment of more than US$700 million.
In a recent interview with Mizzima, Mr Cyrus Pun said the landmark project is important for the real estate sector and the company can bring world-class civil and engineering expertise to develop this flagship Yangon property.
Yoma Central is an integrated real estate development with a total gross floor area of approximately 2.44 million square feet. Designed by prominent architect, Cecil Balmond OBE, it will feature Peninsula-branded luxury residences which will be sold on an exclusive invitation-only basis, two Grade A office towers, a business hotel, and serviced apartments, all of which are connected seamlessly by a retail podium. The project comes under Meeyahta Development Ltd, a joint-venture between Yoma Strategic (48%), First Myanmar Investment Company Limited (12%) (“FMI”), the Mitsubishi Companies (30%), the International Finance Corporation (5%) (“IFC”) and the Asian Development Bank (5%) (“ADB”).
Mizzima: First and foremost, can you tell us the key purposes behind developing the Yoma Central project and Peninsula project?
Cyrus Pun: First of all, we look at the market opportunity. This Yoma Central and Peninsula project will be the flagship project for Yoma Strategic and FMI as well. This is the project that we see as the very long-term investment for us. And we see these would be one of our major projects and flagship projects for us. Besides, we also see great future demand that will be growing in Yangon. With top properties, we would like to offer the high-end premium office building, premium retail, business hotel and luxury hotel as well.
We have been conceiving the conceptualising project for a long time back from 2012-2013, we have already been conceptualising the project, and we have also been discussing the potential partners. And finally, we have an agreement to implement the projects with our partners; Mitsubishi Corporation, Mitsubishi Real estate as well as IFC and ADB to develop these projects together. By the time we looked for partners to work on Peninsula development site, we had also been seeking and looking at the list of potential partners that will be suitable for this project. And we have many, many suited partners and other investors certainly for high quality coming in and then after they asked us wanted to invest in this project. By the end, they were very selective of our partners, and we decided on Mitsubishi, we decided on Peninsula being the main co-developer for these two projects; Yoma Central and Peninsula projects.
They bring a lot of strategic value. They also bring a lot of expertise that would be very useful for this project. Both of them are very much top of the class in the areas that they are specialising. Mitsubishi states similarly in terms of having the mix-used development of a highest standard that serves multinational as well as a local company very well. Mitsubishi Real estate has a good experience.
What type of building will be included in these two projects? Can you introduce them?
The project includes two hotels; one is the luxury hotel entitled Peninsula Hotel, and one is a very upscale business hotel. We aim to create these two hotels because we see there are two segment markets and we also think that the tourism industry in Myanmar has a huge potential to grow. Right now, the number of tourist arrivals in Myanmar is still very low compared to neighbouring countries, but Myanmar has a bulk potential of a tourism destination that has still yet to be untapped. So, tourism is very confident for us, and therefore Yoma Strategic Holdings plans to expand the tourism business, and the separate company is about to list in Singapore. This is the one view of our projects.
For the purpose of the office building, right now, the existing stock of office supply in Yangon is still a very small fraction compared to the cities in both neighbouring and regional countries. Of course, we also see that there are not enough office buildings to supply demands in the medium term. That is why we feel very, very confident about this project. We have much experience in dealing with international talent, the multinational talent of a high standard. We know of course there are some new office buildings coming into Yangon which are much decorated in quality too. And I think those projects will very quickly also fill the need. So eventually, we will have enough office buildings here when the time flies, and we complete this project. We will bring an improved business environment in Myanmar which will be bigger than now, today.
Another component of this project is luxury residences. We have one building that would be a branded residence, which will be managed by the Peninsula Hotel and Peninsula residences. And this will be the first new branded residences in the market. That will suddenly serve the segment of the market and people will appreciate quality, sophistication, and the level of service staff that is provided by a very prestigious hotel and company of Peninsula. In fact, we are creating new products in the market that will be much more prestigious than anything you have seen in Yangon. The level of quality and materials specification and the level of services will be available in Yangon. It will be by far the cheeriest residential development in Yangon. So, people will be willing to pay for this type of premium accommodation.
The projects will be finished by late 2020. So now at what stage is the project?
Right now, there is a lot of construction happening on the sites. The first part which is ongoing started sometime before the groundbreaking in February 2017. We have done a lot of site preparation on site already. This year from February until now, we have been working on the heritage building on the engineering site. So, we have done quite a lot of underpinning and piling around the heritage building. We are now erecting the reinforcement frames around the heritage building so that the existing heritage can be preserved. That would allow us to start the excavation under the building across the whole site as well. We are also now doing the piling work on the rest of the sites where Yoma Central will be set up. So now we are doing a lot of work with engineers.
How would you say the US$ 700 million landmark project is important for YSH and its affiliate, FMI?
Of course, it is a substantial investment for YSH as well as FMI. It also fits very well with our plan to invest in more long-term recurrent income business. We want to target at least 50% of our income coming from the rental and real estate. That means that every year this amount of money coming in, so that establishes a solid foundation for cash flow for the company to further expand investment in other businesses. Yoma Central is a key part of that to bringing stable income for the company. Right now, the biggest that we have made today, so it is a very substantial and very important part of the company.
Are you confident about the long-term revenue for the company?
Definitely, we are very confident that this project will really help our company or developers to a new level by having substantial income generated from rental and recurrent income that will give us a very solid base. As you know, we are a listed company, every year, every quarter, so we have a stable income, and it is very important.
I believe that when this project is finished, the economy, of course, will be very different. The business opportunities will grow more as we see a growing economy, with companies coming to invest in Myanmar. There are local companies that are looking for an opportunity to expand. We are also creating a lot of employment through this project as well as the other business of the YSH as it improves and expands. We continue to be very positive about business opportunities in Myanmar. The location of the project is so strong for a company wanting to move their offices, or people wanting to buy property to live in high quality near the city centre. So we are very confident about this project.
Are there any changes in terms of policy compared to the previous Thein Sein government?
That has not really caused a big impact for us. Of course, new policy changes and new regulation changes that the new government brought in will not so much change regulations and policy, and it is more about the enforcement of regulations and policy that already exist.
Definitely, we support the government initiative to better enforcement or better regulation across the city. Luckily for us, they did not really affect us hugely because a lot of the existing work on site did not breech any of the regulations. Traffic control, traffic design to alleviates traffic. Flood control all these are to international standards anyway. So, in many ways I have to think that the better enforcement of regulations in many ways is beneficial to us because we have already complied with these standards, many of other builders did not comply. It brings a more level playing field that we benefit from.
Can you share your land leasing process?
The land arrangement is according to the foreign investment law. We have the land for a long time already. So the land agreement itself dates back to 1990, so we have already had the land for a long time. We have renewed leasing according to the foreign investment law. What is now allowed under the foreign investment rules-is 50 years plus two ten years extension.
Yangon is the country’s business concentration area, and it is also one of the tourist destinations. How does Yoma Central collect international interest on both of these issues as a landmark project?
I intend to develop Yoma Central very strongly. It is a huge commitment for us going back a long time. We first started conceiving this project back in 2012-2013. A lot of forces, a lot of work, and a lot of investment has gone into the planning this property. Besides, we were working very closely with the authorities. So, it has taken a long time it is also important to plan these things correctly as well. Nonetheless, of course, it is very difficult and challenging with delays to the project, and the costs and there are uncertainties too from the government side on how to proceed. So, it is challenging for us: how to really start this project, our partners also supported us and I think this also indicates the choice of partners because I do believe that some other foreign investors could have walked away after such a long delay. Our partners support us very strongly and they always look into the long run which is one of our key criteria of selecting our partners. For investors, they will have a much shorter investment horizon. Mitsubishi is a long-time investor, and they have been in the country for twenty years. Mitsubishi Corporation has endeavoured twenty years also. They look at Myanmar as long term potential. They are willing to stick by us. Similarly, they also have a long term ambition for the Peninsula Hotel Yangon.
YSH has 48 percent of the investment in this project, nearly half of total investment amount of US$700 million. So, do you have any problems with financing this project in terms of YSH’s participation?
No, of course, the project itself is very robust in project financing. We have strong support in financing. Asia Development Bank (ADB) and International Finance Corporation (IFC) have committed funds for us on both debt and equity. And YSH is a listed company in Singapore, so we can access many different types of financing from equity or debt and so on. Yoma Strategic stands out in the investment community as a solid, reliable company to invest in Myanmar. I think we have the support of our banks, support of our partners and shareholders and so on.
YSH has developed a strong reputation in the Myanmar residential market by offering through an emphasis on design innovation, product excellence and high building standards like Star City and Pun Hlaing estate, now the company is seeing the next opportunity in the centre of Yangon, the tourism and commercial city. I would like to know how Yoma Central and Peninsula project will make dreams come true?
Yoma Central will have high-end commercial retail and hotels, right now in our portfolio we do not have this in Yangon. It will actually fill a big gap in our whole plan. It will also provide substantial rental income. When you look at the residential component of it, right now we have existing projects like Star City, Pun Hlaing Estate and they serve different types of the market segment. Star City is a high-mid segment of the market; the apartments are appropriate for the middle class while the Pun Hlaing Estate is the luxury type of living, premium type of living in which you will have a lot of space with a great environment.
Yoma Central will provide the best premium residences which will be more expensive and targeted at high net worth families that cannot buy anything at this standard in Yangon right now. They want to buy into an international life style. Some think it is comparable to the best property in Bangkok or Singapore. So, this is very, very special, not just for Yangon, but it will gain a name in the whole region as well. For people who appreciate that level of quality and also appreciate the level of prestige.
How do you feel about the current Yangon real estate market which has slowed since the end of 2014?
In general, the residential market is fast. Definitely, there has been a slowdown in the market, and that is symbolic of the fact that a lot of buying in Yangon in the past few years has mostly been speculation. That means a lot of people are buying for future growth and they may not be people who are buying because they need to live in those apartments.
In the sort of political environment becomes is not so good sales slow very quickly. But I am very positive about the residential market in general because if you look at the needs of the population, there is not enough housing. People need to go and find new places to live. So, we also are looking at areas where we want to build homes for that segment of the market. We are closely working with the bank to explore opportunities there.
For Yoma Central, we are not worried because this level of quality cannot be found in Yangon. It is just a matter of finding people who can afford to buy this type of property. In terms of luxury and prestige brands, you will find buyers to buy. So I am not worried about Yoma Central.
What do you think of Yangon’s transformation in terms of its economy and tourism when Yoma Central has been totally completed?
I think a lot of things will happen in the coming year. I think it is a very exciting time for Myanmar and Yangon as well. I also see the investment being put into infrastructure and city planning. And hopefully, there will be an investment in public infrastructure and public transport as well. That also helps the growth of the economy. I see a focus on bringing manufacturing and industries to Myanmar. So, there will be a lot of employment for the country that should be of importance for growing the middle and consumer classes.
How would you deliver this good news to the world?
First of all, the fundamentals of Myanmar are very strong in terms of the abundance of labour so that will attract a lot of manufacturing to come. The government has a strong focus now on private sector development in order to encourage investors in the manufacturing and industrial sector.
In fact, for the new Yangon city development, what we understand from the regional government is that they are very much putting higher priorities on the development of Yangon that would help the economic development of Yangon and Myanmar as well. As long as you have the right policy, Myanmar has the potential to really develop well. Right now, I do see the government wishing to make lives better for the population of Myanmar.
Is there anything else would you like to add?
My only message for local and foreign companies here is that “Be positive, be optimistic.” And I would like to say don’t worry about the difficulties of the current situation. The government wants to deliver change, they want to deliver reform and also want to fix business. And thus, they need us to help, and they need us to stay positive and need us to support them. As long as we are willing to help, as long as all have the best intentions to build a better nation for Myanmar, I think collaboration between the private sector and public sector will be an important tool for us.