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Huge real estate deal gets tongues wagging

Speculation has it the biggest property deal in half a decade has just been inked, dwarfing the Hongkong Land purchase made last spring.

Hongkong Land (Singapore) Pte Ltd, a subsidiary of Jardine Matheson, shelled out $35.7 million in April for a number of properties in Phnom Penh and Siem Reap from the ailing JSM Indochina, of course. But this new deal is supposed to be worth nearly US$100 million.

Media reports yesterday quoted Jardine country advisor John Brinsden, also vice chairman at ACLEDA Bank, as saying that ground would be broken on the Embassy project “early next year.” Still, it appears someone has made a bigger bet on the capital’s property market, this time the commercial sector.

Multiple outside sources, none of whom are quoted in this column, have confirmed that a certain bellwether international real estate company will buy a plot of land in southeast Phnom Penh for close to nine figures. Development of the land will result in a landmark shopping centre for the capital city, according to those sources.

The companies involved are, not surprisingly, mum. In fact, one of the suspected firms refused a Post reporter entry to its offices when he sought to confirm the deal. Regardless, everything seems to be in place for what will be the country’s latest mega-deal.

There’s a larger question at hand, though: Will the bet pay off?

Real estate insiders who were questioned yesterday seemed to think it would. They pointed to strong international demand for commercial space in the Kingdom, as well as a resurgent Cambodian economy.

“Do you want to know why everybody wants to come here? Growth,” said Daniel Parkes, country manager for CB Richard Ellis in Cambodia. “We could be looking at double-digit [GDP] growth again in 2013.”

That prospect continues to attract foreign investment, he said, including companies eyeing both office and retail space. He also pointed to the fact that Cambodia presently has no international-standard retail space. As a result, this new shopping centre will fill a noticeable demand gap.

While Parkes admitted the Kingdom was largely a poor country – 30 per cent of the population lived in poverty in 2007, according to the United Nations Development Programme – he doubted that would hamper consumer demand.

There is a growing middle class in Cambodia’s urban centres, expats continue to arrive and stay longer, and international businesses continue to set up shop here, he said.

He did note, however, the potential for high inflation to trip up the country’s economic growth and ripple out to the real estate sector. Still, he remained positive, noting the hard-won lessons the industry had learned following the popped real estate bubble of 2009.

“This is the end of speculation, and this is the start of getting on with the real business,” Parkes said.

Indeed, his points are valid. But there is at least one threat to the new entrants to Cambodia’s real estate market: competition. This shopping centre will not exist alone – there is already talk that other companies plan to enter the space as well. Just as there’s room in Phnom Penh at the moment for only one grade-A office tower – demand will support only the one – there is also room only for one shopping centre, at least for some time into the future.

Therefore, the winner among these companies may be the one who opens its doors first. And if the reputation of the firm that is believed to be making this massive acquisition is any indication, the remaining players may find it hard to compete.

Contact Tom at tom.brennan@phnompenhpost.com

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