A senior Yoma Strategic Holdings official has hailed as “hugely significant” a recent agreement signed with the Ministry of Rail Transport that paves the way for work to start on a US$400 million-plus development project in downtown Yangon.
The company announced yesterday that it signed a framework agreement on December 31 with the ministry regarding its Landmark Project. The project is spread over more than 10 acres of prime downtown land, and includes plan to turn the heritage-listed Burma Railways headquarters building, constructed in the 19th century, into a luxury hotel. The project had been delayed for two years while Yoma sought lease extensions that it said were needed to make the project viable.
Under the new framework agreement, the rail ministry has agreed to extend the master lease on site one for 50 years, with a start date of January 1, 1998. The lease on site two will be extended by the same length of time and from the same date but is contingent on approval from the Myanmar Investment Commission. Fifty years is the maximum lease length allowed under Myanmar’s 2012 Foreign Investment Law, but MIC can allow two extensions of 10 years each.
The agreement was “hugely significant” for Yoma and its income prospects, Cyrus Pun, Yoma’s head of real estate, told The Myanmar Times. “It’s what we’ve been looking for from the ministry for the last two years,” he said. Investors have also been waiting for the project to proceed, and the agreement had a “substantial impact on the value of the company”, he added.
Yoma’s share price was up 5.38 percent to S$0.490 yesterday afternoon.
The leases for sites one and two will be combined into one master lease, which will then be split into two separate master lease agreements: one for the proposed hotel development and the other for the proposed mixed-use development, subject to the approval of the MIC.
The parties involved have agreed to finalise both master lease agreements within three months of the December 31 framework agreement. The March 31 deadline is the day that the National League for Democracy is scheduled to take power, following its election victory in November 2015, and this would likely result in a change of leadership in the railways ministry. But Mr Pun said there was no concern about starting construction on the project under the new government.
“We’ve followed international best practice and the highest guidelines throughout the whole process,” he said. “Everything has been done transparently, so the project very much stands up to scrutiny. We’ll be working closely with the new government, and I’m optimistic about the future of the country.”
Among the investors are the International Finance Corporation and Asian Development Bank, which have each agreed to invest US$70 million in a separate portion of the project, comprising $50 million in debt and $20 million in equity. The Burma Railways building will be developed into the Peninsula Hotel Yangon in partnership with Hong Kong-based HK & Shanghai Hotels (HSH Group).
But the participation of all entities and the entire funding structure hinges on certain conditions – of which the lease extension was among the most important.
“The IFC is keenly awaiting the signing of the lease agreement which would allow for the IFC investment to happen,” Vikram Kumar, IFC Myanmar country manager, told The Myanmar Times.
Although the MIC needs to approve the lease extension on site two and the project in general, Mr Pun said he thought this was likely to be a formality following the master agreement with the rail ministry.
HSH Group, meanwhile, has agreed with Yoma to extend their existing shareholders agreement until June 30, so that all conditions can be met.
Yoma announced in June 2014 it would purchase 80 percent of the Landmark site from Serge Pun & Associates with a first payment of $43.2 million.
Serge Pun chairs public company First Myanmar Investment (FMI), Serge Pun & Associates (Myanmar) and Singapore-listed Yoma. The latter firm announced yesterday that it had agreed with SPA that the remaining payment – of up to $38 million – would not be triggered until the extension for the lease on site two had been obtained.
Yoma raised the cash for the first payment through a rights issue in 2014, and will make the second payment using a mixture of internal funds and debt, Cyrus Pun told The Myanmar Times.
With a lease extension agreement in place, the firm will aim to start work on the project early this year, but still has other administrative preparations to undertake, including applying for a construction permit, he added.
Source: Myanmar Times
