Yoma bucks the trend with big projects

Yoma Strategic Holdings has carved its own niche with large-scale township developments.

It currently has three ongoing developments in Yangon’s outskirts, and one more large downtown commercial project planned.

Yoma Strategic also won the award for Best Developer at the first Myanmar Property Awards held in Yangon last month.

Cyrus Pun, executive director and head of Yoma Strategic’s real estate, said in an interview the company takes sites and works to add value to them. He pointed to the company’s Star City project in Thanlyin township as an example, which is slated to eventually have 20,000 people living in 9000 units. There are about 500 residents at present.

The large local population allows the company to add in amenities to its township developments, not only swimming pools and sports facilities but restaurants, a school run by Dulwich College, supermarkets and a clinic.

“The key is that most developers don’t do it because, one, it costs a lot of money to put all this infrastructure in, and two, it requires a lot of effort and planning,” said Mr Pun.

“We take a very different view. We take a much longer view and approach to this, because by putting in those facilities and infrastructure, it really creates long-term value and enhances the whole value of the estate.”

Mr Pun said that at the beginning, this can be a lower-margin enterprise. Yoma also takes a different tact in that it may earn a lower margin at the beginning, but hopes to generate more income over the longer term. It has also consciously focused on the large-scale satellite town projects, including Star City as well as Pun Hlaing Golf Estate and FMI City, partly as they assist with generating this long term income.

These three projects are also located some ways out of town, and a common complaint is that the distance is too great for a regular commuter. Mr Pun said for many it is a matter of lifestyle.

“You can choose to be downtown, and be in the centre of the hustle and bustle, so you can just get out of your apartment and cross the street and there are all sorts of markets and restaurants and bars that you can go to. Some people can’t get away from that and that’s fine – those people may not be our target market. We’re not trying to grab those young bachelors who want to come to nightclubs every night to come to Pun Hlaing,” he said.

Yoma instead offers a different set of advantages to those locating to its projects in the outskirts.

“Why do people want to live outside the urban centre, across the river, and live further away?” he said. “The benefit it will bring to residents is we’re providing an environment, a lifestyle, that’s very different from the centre of Yangon.”

Mr Pun also said the commute is not as long as one may think, but added that traffic congestion is an issue across all of Yangon.

The firm is also working to start passenger ferries. It will have one running from Pun Hlaing in Hlaing Tharyar township, to a downtown pier in the next few months, and also plans to start a Star City-downtown ferry, though that is somewhat further away from launch.

Another part of the company’s strategy is to provide the services on-site that people need, such as supermarkets and schools, thereby reducing the need to travel into the city.

The prices are also cheaper – Mr Pun said Star City is right now selling at US$210 per square foot, when the same apartment nearer to downtown may be $300 or $350.

Still, it hasn’t always been easy for the company. Mr Pun said that especially with the group’s first project, FMI City, in 1995, a lot of people had questioned the wisdom in building in an area where no one went at the time.

“There was no one living there because there were no houses there. It was a chicken and egg question,” he said. “A lot of developers think well you can’t build a product where no one lives. But our thinking was reversed. We said, ‘Well, by building something that will attract people to move there, they will move.’

“You create your own market rather than following where the existing market is,” he said.

He said this willingness to take on these projects makes the company fundamentally different than its competitors. Over 80 percent of the firm’s current revenues – which totalled S$110.9 million (US$81 million) in FY2015 – come from property, but by 2020 it expects that number to be closer to 50pc. Of that 50pc, half again will come from sales and the other half from stable rental income.

It has one more large project in the works, which has a much different focus than Star City, Pun Hlaing or FMI City.

The Landmark project is to sit at the heart of Yangon at the intersection of Bogyoke Aung San and Sule Pagoda roads. It has much more of a commercial focus, and will be built with a number of partners, including Mitsubishi from Japan, the Peninsula Hotels, the International Finance Corporation and Asian Development Bank, and involves international-grade office towers, hotels and a condominium, centred on the revamped former headquarters of the Burma Railways, which was first built in 1877.

While the company is continuing to prepare the roughly $500 million project, its current leases are for about 23 and 25 years. It is aiming to negotiate a longer lease for the project with the railways ministry, and received support from Myanmar Investment Commission earlier this year.

It will be flagship project for Yoma, and aims largely to service the office-space needs of the multinationals coming in. Most of the space will also be leased out, which means it is necessary to take a longer term view.

“Our vision is not to say what’s the best position in the market today – it’s to do with designing a project that’s sustainable, that will remain one of the top buildings for the next 20 or 30 years,” he said.

Concern is also building that Yangon’s real estate market is overvalued, with many warning of a property bubble.

Mr Pun downplayed this concern, saying that bubbles start to grow when prices of apartments are 30 or 40 times the value of rental income per year. In Myanmar, buying an apartment and leasing it out can generate income of 7pc to 10pc a year, must higher than 2pc in places like Japan and Hong Kong, or perhaps 6pc in China, he said. “The second thing is asset bubbles, property bubbles, you usually see it when there’s a lot of debt in the market that fuels the speculation,” he said. “Now, Yangon is not that. Everyone is buying with cash.”

Whether or not the market is overvalued in the short term, Yoma is bullish on the country’s long-term prospects. As more people move to Yangon, they will need housing – and people may flock to communities on the outskirts as the downtown core grows busier.

Source: Myanmar Times

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