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De Castle Royal launches leaseback program

De Castle Royal’s new leaseback program, offered in partnership with SBI Royal Securities, provided a guaranteed return for one to three years.
De Castle Royal’s new leaseback program, offered in partnership with SBI Royal Securities, provided a guaranteed return for one to three years. PHOTO PROVIDED

De Castle Royal launches leaseback program

In a first for Phnom Penh, South Korean condominium developer Nury D&C has teamed up with SBI Royal Securities to offer condominium buyers a leaseback arrangement on the remaining condo-miniums and condo-minium blocks for sale at De Castle Royal.

The 32-storey De Castle Royal has a total of 414 condominium units. According to Nury D&C, a total of 90 per cent have been sold so far, with construction slated for completion in the coming months of this year.

Senior associate of SBI’s Corporate Finance Division, Leng Vandy, says that the leaseback program will bring positive financial benefits to buyers who take advantage of the arrangement.

“The buyer will get a guaranteed return that is relatively higher than most of the alternative property investments in Phnom Penh,” says Vandy. He adds, “In addition, the buyer will not be responsible for payment of management fees and utilities.”

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An arrangement in which the buyer leases a property back to the seller in return for guaranteed returns, leasebacks are common overseas, but are being pioneered by Nury D&C in Cambodia. Other condominium developers that are currently considering leaseback arrangements are, according to SBI, still too far from completion to act on such plans.

The De Castle Royal leaseback program offers a one-year high annual return of 8 per cent, with available investment possibilities ranging from a single condominium unit to blocks of five units.

The leaseback arrangement is limited to De Castle Royal’s three-bedroom condominiums.

At a block investment of five three-bedroom condominiums for approximately $2 million (or about $400,000 each), the annualised return on a one-year leaseback is $160,000, or 8 per cent, $155,000, or 7.75 per cent over the space of two years, and $150,000, or 7.50 per cent over three years.

“It solves the problem of buyers having to worry about finding tenants, and with Asean economic integration approaching next year, it’s the right time,” says SBI’s Vandy.

The leaseback program also offers buyers significant savings in terms of interior design and furnishings, “Interior decoration is inclusive in this leaseback arrangement,” says Vandy. “The seller will lease the unit back from the buyers and furnish the unit to be ready to move in. After the leaseback period the furniture and the interior decoration become the property of the buyers.”

The program is structured, says Vandy, to encourage one-year leasebacks, but three-year arrangements are also welcomed. The same, he says, applies to the number of units a buyer can purchase and leaseback.

“The leaseback arrangements are flexible,” says Vandy.

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