Nov 20, 2012

Yoma to Buy 80% Stake in Myanmar Land Parcel

Yoma Strategic Holdings Ltd. said Monday it will acquire an 80% stake in a plot of land in Myanmar's largest city from its affiliate, giving it access to land in the developing country's tightly regulated real estate sector.

The deal comes as U.S. President Barack Obama became the first sitting U.S. president to visit Myanmar when he arrived Monday as part of a wider Asian tour, and could signal the beginning of a property boom in a country where there has been little economic development.

Yoma will pay US$81.3 million to Serge Pun & Associates (Myanmar) Ltd. for an 80% stake in its unit Meeyahta International Hotel Ltd., which is seeking approval from Myanmar's government to develop a 10-acre site in downtown Yangon, the Singapore-listed company said in a statement to the Singapore stock exchange.

Myanmar national Serge Pun has a 50.01% stake in Yoma, which is the Singapore-based affiliate of unlisted Serge Pun & Associates that was founded by Mr. Pun in Hong Kong in 1983. In 1991, he formed Serge Pun & Associates (Myanmar) Ltd., or SPA Myanmar, with a few partners.

Yoma, which has businesses ranging from real estate to plantation development, will jointly develop a mixed-use residential and commercial property development at the site with SPA Myanmar. The development will have a combined gross floor area of 2 million square feet and cost between US$330 million and US$350 million to build.

Yoma Chief Executive Andrew Rickards said Meeyahta is seeking to extend the lease of the land to 70 years, and the deal hinges on government approval for the lease extension and the project.

The two companies are "open minded" about bringing in more partners, he said.

"International partners may be interested in parts of the project," Mr. Rickards told the Wall Street Journal in a telephone interview, but didn't specify whether the company was in talks with potential investors.

The development, which is one of the biggest in Myanmar's real estate sector in recent years and will house hotels of an international standard, could provide relief to foreign visitors who often complain about the lack of good quality hotel rooms in Myanmar.

Yangon has about 8,000 hotel rooms, of which between 1,500 and 2,500 meet international standards, according to a report from Jones Lang LaSalle Hotels issued Monday.

"The provision of first-class hotel rooms, offices, apartments and retail is badly cope with the dramatic increase in interest in the country. The availability of land in central Yangon is extremely limited," said Mr. Rickards.

Myanmar was ruled by a military junta for almost fifty years, until a nominally civilian government took power last year following a broad set of political and financial reforms in the last two years, which convinced U.S. and European nations to drop most economic sanctions against the country.

The site, which houses an old hotel and a former railway headquarters built in 1877, is situated between Traders Hotel, which is owned by Shangri-La Asia Ltd. (0069.HK), the Sakura Tower, which is one of the few skyscrapers in the city, and Bogyoke Aung San Market, a popular tourist destination.

Under the plan, the Victorian-era railway headquarters will be restored and converted into a heritage five-star hotel. A luxury condominium, a four-star hotel, a serviced apartment complex and two office towers will also be built on the site, Yoma said in the statement.

It didn't specify when construction would begin or provide other details, but Mr. Rickards said the two companies are conducting preparatory work and construction will begin after it receives approval from the government.

To fund its investment, Yoma plans to sell shares in a one-for-four rights issue in the first quarter of next year. It will seek shareholders' approval for the deal before selling up to 241 million new shares that represent roughly 25% of the company's paid up equity, and said the rights issue has the backing of major shareholder Mr. Pun.

Yoma's shares, which were halted from trading in Singapore Monday, closed 0.9% higher at S$0.560 on Friday, while the broader market was flat.

Source: Dow Jones Newswires