Investor Holidays: See, Smell, Hear, Touch and Buy…

Local and internationally-based real estate agencies, as well as new development sales teams, are using investment junkets to encourage foreign investment into Cambodian real estate, especially for bigger developments that largely depend on cash from overseas. “Investment tours provide a unique opportunity for personal interaction to close the gap between the investor and the opportunity,” says Grant Fitzgerald, general manager of IPS Cambodia. “This can range from professional meetings with local fund managers and banks, development company headquarters, showrooms, law offices, accountants and even local government representatives.” These tours, aimed to grease the wheels and spur investment, are typically subsidized by the agency or developer, and can last from as little as a few days to a week. They will always include visits to popular development corridors, such as Chroy Changvar and Diamond Island, says David Kim, CEO of Informax Real Estate Service. Imtiaz Panjwani, chairman of Seer Realty India and Ivanna Capital London, who consults on London and Dubai properties, as well as overseeing various international investment accounts, is one investor who joined a tour earlier this year. “Living and working in London real estate, few investors venture all the way to Cambodia,” he remarked. “But the chance to relax in a tourism hotspot such as Cambodia has recently become, and also survey the rising property market was, irresistible.” Yet, while the tours are focused on bringing in cash, one of the main goals is to present Cambodia as a whole. Investors generally undertake trips to main attractions, and spend nights out on the town with their fellow investors. “While I came as investor, I had to check out Angkor Wat while I was here and try the local bar and cuisine scene,” said Panjwani. Ly Senleap, CEO of Furi Real estate and F.U.G.I Investment, said that investor tours seek to defeat an outdated mindset. “Honestly, before I came to Cambodia, I expected to land in little more than a large village,” said Panjwani. While Cambodia’s construction boom continues, and the country grapples with wrestling itself out of least-developed country status, many perceptions of the wealth of the country have been overlooked, despite nearly two decades of swift economic growth. Kim recalls when one group of investors brought boxes of Coca Cola to their Cambodian partners as gifts when they arrived. “They thought this would be a novelty for Cambodian people. Little did they know, Cambodia already has its own Coca Cola factory. This is just a funny story, but it is true that many investors are genuinely surprised by the level of wealth among local people when they first arrive.”   “Due to Cambodia’s history and lasting international image, buyers need to witness the growth of the nation for themselves and see just how far from reality the stigma actually lies,” Ly said. With this in mind, Ly’s company, F.U.G.I Investment, is currently planning an investor’s seminar to be held in Phnom Penh in early 2016. Due to fluctuating investment conditions in their home economies,Kim says most tours bring potential buyers from Singapore, Taiwan and mainland China. Meanwhile, few Japanese and Western investors currently make the trip. While these tours aim to wine and dine investors by ramping up a hands-on sales pitch as many sales are sold on speculation, Ly notes that for developers who offer guaranteed rental returns, these tours can legitimise a development. “If the area is growing fast, and current price increases reflect the estimated potential of the proposed Guaranteed Rental Return (GRR) - buyers will have confidence that promised GRR will, in fact, come once the project reaches completion,” he says. However, some think that it takes more than just a stroll around the block to prove if an investment will pay off. "Finding a property with good capital growth profit and positive rental yields is like finding a rare gem,” says Edwin Low, general manager of Axis Residences. “You can research on the rental yields from the surrounding properties but you need real foresight to recognise the growth potential. Investor holidays provide at least a start." While these tours aim to bring a superficial understanding to a burgeoning market, Chee Yap, project director at Grand Phnom Penh International City, believes that a short holiday tour does not provide a true insight into local business and consumer behavior, “or undefined regulations and policies in Cambodia.” “Investors must also meet with investors already settled in the country who are aware of these less obvious risks, and their country’s embassy representatives. Always obtain third party perspectives and advice,” he advised. Kim suggests investor tours are not seeking to sidestep risks by painting a rosy scenario, but rather to put Cambodian property risks into perspective. “As high risks always come with high returns, it is important to let investors visit Cambodia to see what the market’s risks really are and how best to control them.” Many investors eyeing Cambodia already understand that poorer countries have bigger potential for investment, he explained. While many foreigners have concerns over Cambodia’s political stability, he says “if they visit here they will soon see the market is stable for economic growth.” After one visit, Panjwani views the boom in Cambodian construction as the start of something much larger. He plans to enter investment opportunities in 2016. “Phnom Penh brought flashbacks of the development of the Indian property market of the 1990s and early 2000s. The potential is here,” he said, noting that the heavy construction on Diamond Island was also reminiscent of Dubai in 2002 when freehold ownership laws for foreigners were allowed. “The government of Cambodia should market Cambodia very aggressively as a destination for travel and investment,” said Panjwani. “It is of paramount importance to get people to visit Cambodia and change its perception.”