The project’s main backer, business tycoon Serge Pun, said last week that the delay was the result of successive personnel changes at the top of the ministry over the past year. However, he expressed confidence that the necessary paperwork will be completed in the coming months to enable construction work to begin and agreements to be finalised with prospective investors in the project.
Covering more than 10 acres, the mixed-use project will include a partnership with Hong Kong-based HK & Shanghai Hotels to convert the heritage-listed former Burma Railways headquarters building into the Peninsula Hotel Yangon. A partnership with Mitsubishi Corporation and Mitsubishi Estate will see a separate business hotel, serviced apartments, a high-end condominium, and retail and office space developed. It occupies a prime location at the corner of Sule Pagoda and Bogyoke Aung San roads.
While the project has planning approval in principle from Yangon City Development Committee, complies with its new zoning plan and faces no objections from heritage campaigners, the lease extension requires approval first from the Ministry of Railways and, later, from the Myanmar Investment Commission.
Mr Pun, the chairman of public company First Myanmar Investment (FMI), Serge Pun & Associates (Myanmar), and Singapore-listed Yoma Strategic Holdings, told The Myanmar Times in an exclusive interview that he has applied to the ministry to extend the original 1995 lease for the maximum 70 years – 50 years, with two 10-year extensions – allowable under current investment laws.
“The total investment is going to be around $400 million, and this is a great deal more than our original lease anticipated. Therefore in accordance with the foreign investment law today we have applied to extend our lease to the maximum permissible number of years,” he said on December 5.
Under the proposed deal, FMI and Yoma will become the majority equity partners in the project.
Once agreement is reached with the Ministry of Railways on the terms of the lease extension, the application will be submitted to MIC, he said. Amendments to bring the original lease into conformity with the Foreign Investment Law that was approved in late 2012 have also been submitted to the Attorney General’s Office.
“MIC is a body that only approves things when it comes to it. In order to get to MIC we have to get an agreement signed with the Ministry of Railways as well as an endorsement of the MIC application by Myanma Railways.”
This has been complicated by two changes of minister at the Ministry of Railways in the past two years. Most recently, on July 25, U Zeyar Aung was replaced by U Than Htay, while a long-serving deputy minister, Thura U Thaung Lwin, was moved to another position.
“When a new minister assumes a new post, it is understandable that he has to study and review the history of the case afresh. That naturally takes time. The same applies to the higher authorities in Myanma Railways. We just have to be patient about it,” a visibly frustrated Mr Pun said.
“Everybody knows what is going to be built and are supportive but until I have MIC approval major permits to allow construction to commence cannot be granted.”
He did not back away from his comments at the FMI annual general meeting on November 22 that the project would hopefully receive approval “by the end of the year”, although that prospect appears increasingly unlikely.
“I have been assured repeatedly by the government that it will be done and it’s only a matter of the process. Even a few days ago I was assured again by the president’s office that it is taking note of that and giving the right directions to get it done as soon as possible.”
The Landmark project could not move forward without resolving a dispute with Nawarat Patanakarn Public Company, the original majority investor in Meeyahta International Hotels Limited, the leaseholder of the site. Mr Pun said an “amicable settlement” was reached between minority partner SPA and the Thai company in August 2012 and its debts with the government cleared by SPA.
“We have fully paid them for [their shares] and settled all the debts that they owed the government.”
Three months later, on November 19, 2012 – the day Air Force One brought United States President Barack Obama to Yangon – Yoma announced its intention to undertake the Landmark project, including the renovation of the railways building, the demolition of Grand Mee Ya Hta Executive Residences and FMI Centre, and construction of four new buildings.
In April it reached an agreement to form a joint venture with Hongkong and Shanghai Hotels to restore the former railways headquarters into a Peninsula Hotel as part of the development of the site. The company will also manage the high-end Peninsula Residences, while US firm Starwood Hotels has been selected to run the business hotel.
The developers submitted the lease extension for Landmark almost immediately after the enactment of the rules for the Foreign Investment Law in late January, Mr Pun said. On June 16, however, Yoma announced the “long-stop deadline” – the deadline for SPA to acquire the new lease, as part of the sale and purchase agreement -–had been pushed back from June 30 to December 31.
In October, Yoma said it had signed a memorandum of understanding with Mitsubishi Corporation and Mitsubishi Estate, the largest real estate developer in Japan, to cooperate on the Landmark site. Mitsubishi is likely to have a minority stake, while FMI and Yoma will hold a majority. Around 50 percent of the cost will be covered by equity between the partners and the rest will be funded by debt.
However, neither the agreements with HK & Shanghai Hotels, Mitsubishi or Starwood can proceed until MIC approval has been received for the extension of the current lease. Even Yoma is not yet officially a partner and as a result SPA and Mr Pun have agreed to reimburse Yoma’s start-up costs, which are already several million dollars, if the project does not go ahead.
“We’re waiting for the final MIC approval,” he said, “before we can enter into formal agreements and move forward.”
An MIC member confirmed last week that no formal application had been received for Landmark.
“We think the companies are conducting discussions or meetings with the government for their project,” said MIC member and Directorate of Investment and Company Administration director Daw Khin Aye Tint.
“The commission is ready to consider this project according to the official channels if it receives an application,” she said.
The Landmark project is considered crucial for the future prospects of Yoma Strategic Holdings, which is trading at around S$0.75 (about US$0.60) on the Singapore stock exchange, about 25 cents off its peak in 2012.
In a company update issued on December 4, Singapore-based OCBC Investment Research said failure to meet a December 31 long-stop deadline for the Landmark site acquisition “may be a temporary speed-bump for the share price” and recommended a hold for investors. It has previously described the project as a “key catalyst” for the company’s share price.
“Now that it is less than a month away from the long-stop deadline ... we believe that the group will soon provide more colour regarding the site,” it said. [W]e continue to see good odds that the group will ultimately acquire the site successfully.”
source: The Myanmar Times
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