Serge Pun has had luck and good timing in his property business – as he told the FT a couple of months back – and Monday is no different.
One of his companies, the Myanmar based, Singapore listed Yoma Strategic Holdings, on Monday launched an $80m-plus capital raising and announced plans for the redevelopment of a 10 acre site in downtown Yangon just as the US president was in town.
Barack Obama may say his visit to Myanmar is no endorsement of the reformist regime, but for some investors the recognition afforded by a president making a first ever visit to the country is enough to stoke the animal spirits.
The strong demand for Yoma’s private share placement, which ended up raising a net $99.5m according to bankers involved, is not just about Obama’s visit, but is more driven by the fact that there are still very few ways for international investors to gain direct exposure to Myanmar. The placement is ahead of a much bigger rights issue expected early next year.
The proceeds from Monday’s placement will be used for “working capital”, while land purchase will be funded by the rights issue in which the group could sell about 290m shares and raise another S$120m-S$140m ($100m-$115m) at Monday’s share price.
The eventual Yangon site runs from 372 to 380 Bogyoke Aung San Road and includes a former Railway headquarters building that dates from 1877. It is also next to the big tourist draw of Bogyoke Aung San Market.
The red-brick colonial railways building will be restored and turned into “a landmark 5-star hotel to rival the greatest historic hotels of the region such as Raffles Hotel in Singapore” according to the company. The redevelopment of London’s St Pancras station also comes to mind.
There is a lack of top quality hotel space in Yangon, according to a report released on Monday by Jones Lang LaSalle. The company said that of roughly 8,000 hotel rooms in Yangon “it is estimated that 1,500 – 2,500 are of international standard”, and only 20 per cent are run by internationally branded hotels.
Pun’s companies expect to spend some $350m on the hotel and the roughly 2m square feet of mixed use residential, retail, hospitality and office space in steel and glass towers that will surround it. Singapore’s DBS and Switazerland’s UBS are the lead advisers on the deal.
“We believe the converted Railway Headquarters will become a unique landmark which will signify the transformation of Yangon into an international, cosmopolitan capital,” said Andrew Rickards, Yoma’s chief executive. “The provision of first-class hotel rooms, offices, apartments and retail is badly needed in the capital to cope with the dramatic increase of interest in the country.”
If that’s not “hope” and “change”, then beyondbrics does not know what is.
We initially stated that the capital raising was a rights issue – in fact, it was a private placement of shares ahead of a much bigger rights issue expected early next year. We also stated that the share sale would be used to purchase land – any land purchase will be funded by the rights issue, not the share placement which is for working capital. The article has been edited to reflect these changes.