HAGL eyes multibillion-dollar revenue from Myanmar

Jan 7th at 12:50

07-01-2013 12:50:43+07:00

Hoang Anh Gia Lai Group (HAGL) is expecting to earn billions of US dollars in the next 5 years from its $300 million initial investment in Myanmar this year.

The realty developer will give priority to the development of its $300 million complex in Yangon in 2013 following the groundbreaking of the project after the Lunar New Year, said HAGL chairman Doan Nguyen Duc.

HAGL and Myanmar’s Ministry of Hotels & Tourism on December 18 closed a BOT (build-operate-transfer) contract and a land leasing agreement to build the complex, the Hoang Anh Gia Lai Myanmar Center, consisting of a five-star hotel, shopping mall, office building, and apartments for lease.

HAGL said it had been granted permission to lease an 8 hectare land plot in downtown Yangon, adding that all legal procedures on the Myanmar side have been completed.

“If we hurry it [the project], we can pocket billions of US dollars when the real estate market of Myanmar gets hot over the next five years,” Duc said.

“Over the last 3 years, the real estate markets in Ho Chi Minh City and Hanoi have been at freezing point, 0 degrees Celsius, but the newly-opened Southeast Asian market is at 18-20 degrees Celsius.”

“It will be around 80 degrees Celsius by 2018, an ideal temperature for real estate developers,” he added.

Initially, the first phase of the project was planned to be finished in 2013-2015. However, Duc has changed his tactics so that HAGL can complete the first phase in 2013 and put it into operation in 2014.

Currently, HAGL is gradually exporting building materials from Vietnam to Myanmar. The project is expected to consume 30,000 tons of iron and 200,000 tons of cement and other building materials including wood, stone, glass, aluminum, and bricks sourced from Vietnamese firms.

Duc, the second richest man on the Vietnamese stock exchange, said it is cheaper to transport necessary building materials from HAGL’s headquarters to the building site than to Ho Chi Minh City, and the average wage for unskilled workers in Myanmar is half of what they are in Vietnam.

However, the appeal is not in the cost of construction material shipping, but in the high real estate prices there, which are 3-4 times higher than Vietnam’s due to scarce supply, according to a 2-year survey in the country.

Specifically, the rents for Grade A and Grade B offices in Yangon were $100 and $80 per m2 per month, 3.3 times and 4 times and higher than in Ho Chi Minh City.

The rent for a 60 m2 one-bedroom apartment is $5,000 a month, about 2.5 times higher than in Vietnam. The rate for 2-3 bedroom apartments for lease is up to $8,000 a month.

A stay at an old 4-star hotel costs $300-400 per night, and they are always fully booked due to a supply shortage.

With such rates, HAGL can earn $300 million annually from leasing 1,000 serviced apartments in the complex. It can rake in $100 million from a block of office buildings annually after the first project is completed.

A block of office buildings can be exploited over 7-10 years, so the income from this alone is some $700 million to $1 billion in total, he added.

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