The Bay project has shrugged off the Sok Bun controversy that temporarily overshadowed the prestigious $500 million condominium development, announcing it will officially start construction on the project next month and will concurrently step up its marketing efforts by establishing franchises to drive sales.
Singapore-based TEHO International formally launched the ambitious project in February last year, and had hoped to kick start construction at the end of 2015. However, the development soon made headlines for the wrong reasons because of its association with property tycoon Sok Bun after footage emerged showing him viciously attacking a local female TV host.
While Bun’s holding in The Bay has since been transferred to Yim Chhay Line, daughter of Deputy Prime Minister Yim Chhay Ly, market conditions turned unfavourable for The Bay in late 2015 when it witnessed an increase in proposed condo development plans in Phnom Penh, placing downward pressure on prices.
According to a CBRE Cambodia report for Q3 of 2015, eight condominium projects, including mixed-used projects, were announced and launched in the third quarter of 2015, compared to the launch of four projects in the second quarter. The report predicted the eight projects will deliver 3,787 condominium units to the market over the next five years – a 439 per cent increase compared to the number of units launched in Q2 of 2015.
ECG Cambodia, which is owned by parent company ECG Property – a wholly owned subsidiary of TEHO International that handles The Bay’s marketing and promotional activities – is aware of the large number of units scheduled to come online but is confident The Bay’s fundamentals and strategic river location will enable it to stand out from the crowd.
Armed with a renewed marketing and sales strategy, and with Bun now out of the picture, the situation is looking better for The Bay project located on the Chroy Changvar peninsula, said Dr Michael S Nhim, ECG Cambodia regional country head for Cambodia, Laos, Myanmar and Vietnam.
Talking to Post Property this week, Nhim said he is confident all seven buildings of The Bay, which comprise upscale residential condos and a hotel, would reach its 2020 completion timeline.
“The Bay is still on its way,” he said. “We’re very hopeful of getting along in the next four years.”
Having received the appropriate building and construction permit last month, Nhim said The Bay Suites – along with the Okura hotel – will be the first to begin construction, with initial piling work expected to begin next month.
“It’s selling well,” he said. “Bay Suites is the first project we are selling and right now we have sold more than 50 per cent,” Nhim continued, adding that he is confident it will be able to fulfil its 100 per cent sales target.
Under a tendering process, ECG parent company TEHO Development Cambodia, together with The Bay architect Ong & Ong, have shortlisted three Singaporean companies for the subcontracting duties of The Bay Suites. Nhim said the preferred subcontractor will be finalised next week ahead of construction in May.
Nhim said his in-country staff of ten are already starting marketing and sales for the next development in line at The Bay, which is expected to be The Bay Residence. The residence comprises four 55-storey buildings that will hold a “couple of thousand” one, two and three bedroom units.
Nhim is confident ECG Cambodia will sell all the units at The Bay Residence within the next year. However, he feels there is significant interest for an international buyer purchasing a sole tower at the complex in the coming months, which would reduce the number of units ECG Cambodia are required to sell.
“We have networks in Kuwait, Qatar and elsewhere in Saudi Arabia,” he said.
“I believe in the next three or six months there will be an international investor who will buy one building. That is my hope.”
Preparation for ECG Cambodia franchise underway
While Nhim admits franchises are not ECG Cambodia’s “first priority”, the company is in the early stages of interviewing prospective ECG Cambodia franchise owners. Nhim plans to establish three ECG franchises in Cambodia to boost the company’s ability to sell The Bay.
“The main job of the franchises will be to sell The Bay,” he said.
“There are many thousands [of condos] to be sold. I think I only need three franchisees who I regard as [close and trustworthy as] my son.”
Nhim said the selected franchisees would be equipped with training set by ECG’s international standards and be mentored on an ongoing basis. Unlike Century 21 which has 14 franchise offices in Phnom Penh, he said there is no need to establish so many franchises in an already saturated market.
“Century 21 will not be the same as my [franchises],” he said. “The difference is that Century 21 is the selling agent and not the developer. ECG does not sell products of other developers.”
“I believe the three franchises can coordinate with my country sales and marketing team here in Cambodia and they will push sales,” he added.
Nhim said he has received much interest from applicants keen to join ECG Cambodia.
“Three Century 21 franchise owners have come to apply for my franchise.” So far, Nhin said he has one serious contender, and would continue interviewing.
“I’m in no rush,” he said. “I need to select the right three sons.”
In addition to selling The Bay to international and local buyers, Nhim said the three ECG Cambodia franchises will be able to sell any other ECG project around the world, giving the team a broader scope of potential sales.
Challenges arise in competitive market
Despite its international appeal, Nhim is under no illusion about the challenges ECG Cambodia have in selling and marketing The Bay to prospective buyers in a competitive market. At the low end, prices for a condo at The Bay start at $150,000 but surpass $1 million for a condo within The Bay Sky Villa building.
“For the company [ECG Cambodia] we don’t worry about the capital, but we are a little bit challenged on the selling side of things,” Nhim admitted.
“As you have seen in Cambodia right now there are many developers and condo projects. There are more than ten projects, so buyers can have more choice to go around checking prices so it’s not really a good opportunity for developers to make fast sales.”
“The Bay is targeting the high-end class. It would be fitting for the high class people and there are small amount of high end people of total population [Cambodia].”
Furthermore, he said about 30 per cent of condo purchases for The Bay to date have been from international buyers wanting to be an owner/occupier while the remaining 70 per cent have purchased for investment purposes.
While Nhim counts The Bay’s river location as a unique selling point that assists in luring buyers, Maxem Property managing director Saraboth Ea said this is unproven.
“Chroy Changvar is unproven in terms of having robust existing project sales,” he said.
“The developer will need to show that they are properly capitalized and financed to ensure completion of the project and if possible, provide company guarantees from their listed parent company.”
While being near the riverside will appeal to foreign investors in the Asian region, Ea said ECG Cambodia, more importantly, will need to convince these foreign buyers that “Cambodia is a country for real estate investment, has a good foundation for growth, that the political and social situation is stable, and that the market is well balanced between supply and demand.”
“This will be one of their main challenges as we know that the market currently will have a surplus of units but the demand in 2020 is far less certain,” Ea said.
While there are challenges ahead, Nhim said he will find a way to tackle these challenges, as they did with the Sok Bun incident.
Nhim said the incident hurt the company’s brand at the time, but it was now all in the past.
“There is no association with Sok Bun anymore which people understand,” he said.
“The Bay is going in the right direction.”