REITs could offer investors a piece of the real estate boom
Speed Pay has plans for cash in a digital age
SPEED Pay Plc, a newly licensed electronic payments service provider (PSP), is gearing up to join the ranks of mobile platforms tapping into Cambodia’s nascent digital payment sector.
While not yet operational, the company held a launch ceremony on Friday to announce its licensing under a recently overhauled set of laws that put in place new minimum capital requirements for PSPs.
“We inaugurated the company now because we want to prove that we are really a licensed company that complies with the law,” said company Chairman Lim Sambat, who declined to provide details on the firm’s operations citing confidentiality. He also declined to give a timeframe for when the Speed Pay would be available to the public.
“The market is a bit crowded right now, but we still see opportunities and will have a clear strategy once we enter the market,” he said.
Chea Serey, director-general of the National Bank of Cambodia (NBC), said during the company’s inauguration that the central bank had provided Speed Pay with a licence to operate in March, with the Bank for Investment and Development of Cambodia Plc (BIDC) acting as a guarantor.
With smartphones more common than bank accounts in Cambodia, the NBC is hoping digital payment platforms can increase financial inclusion and reduce reliance on cash.
Serey noted that while digital solutions for the banking and microfinance s ect or had improved over the last decade, the reach of PSPs was still fairly limited to urban centres in Cambodia.
“In order to boost financial inclusion, the NBC will provide more licences to payment services providers to allow these financial ser vices to reach rural Cambodians, or those who do not have access to traditional financial services,” she said.
In June, the central bank strengthened regulations for PSPs, requiring all firms to have at least $2 million in registered capital with 5 percent of that deposited with the NBC.
Additionally, PSP licences are now only valid for six years with an annual licensing fee of $5,000.
THE Kingdom’s property sector is booming, but investment in commercial real estate and high-grade rental assets is capital-intensive, providing few opportunities for smaller investors. However, a new investment tool may be on the horizon that will allow a pool of individual investors to earn income from commercial real estate without having to actually buy the assets.
Lamun Soleil, director of market operations at the Cambodia Securities Exchange (CSX), said the bourse operator is looking into the possibility of creating a mechanism for real estate investment trusts (REITs) to list on the exchange.
“We have already started to do some feasibility research on REITs, but it is in a very early stage,” he said.
A REIT is an investment vehicle that operates similar to a mutual fund by pooling the capital of individual investors to purchase – and often to manage as well – income-generating real estate properties such as apartment complexes, hospitals, warehouses, hotels and shopping malls. Investors receive a share of the income generated by the REIT’s portfolio of properties as a dividend, allowing them to enjoy the benefits of real estate ownership without the capital costs and headaches of being a landlord.
Like other securities, REITs are often listed and traded on an exchange. Their initial public offerings (IPOs) have come to dominate the global real estate IPO market, as many investors perceive them to offer relatively stable yet attractive yields.
Soleil said the addition of REITs could improve the market visibility of Cambodia’s stock market, which has just five listed companies. He added that listing REITs on the exchange could interest investors seeking high yields, as REITs typically distribute all of their taxable income as dividends to shareholders.
“For the financial market, it will help promote the market’s visibility and liquidity since the real estate industry is booming,” he said. “Also, the REIT’s dividend yield is usually higher than other exchange-traded products.”
Reid Kirchenbauer, manager of Khmer Ventures, a Cambodia-based closed-end property fund, said REITs could make the Kingdom’s booming real estate market more accessible to investors.
“REITs will allow investors to buy property in Cambodia in a hassle-free manner, with a much lower minimum investment,” he said. “Companies will gain from being able to find a greater variety of investors in a more passive way.”
However, while REITs operate similar to property funds and can be listed like equities, Cambodia would need to develop a proper regulatory framework before introducing them in the local market.
“There aren’t currently any laws in Cambodia to govern a REIT as opposed to a standard publicly listed company,” he said. “The proper framework would need to be in place before the country is ready for REITs.”
According to Soleil, one of the requisites for launching the first REIT in Cambodia is that the market regulator must first establish regulations for operating a collective investment scheme (CIS).
“[REITs] can be launched once CIS regulations are ready by Securities and Exchange Commission of Cambodia,” he said.
While it could still be many years before the first REIT lists on Cambodia’s exchange, several international REITs are already considering Cambodian properties for their portfolio.
Thai REIT manager Strategic Property Investors Co has announced plans to set up a closed-end REIT, Strategic Hospitality Freehold and Leasehold Real Estate Investment Trust, and is aiming to raise up to $160 million in an IPO on the Stock Exchange of Thailand later this year. It will use the proceeds and borrowing to invest in five foreign luxury hotels, including two Cambodian properties – Raffles Le Royal Phnom Penh Hotel and Raffles Grand Hotel Siem Reap.
Eakapong Tungsrisanguan, chief financial officer of JWD Group, a Thai logistics and supply chain management company that is planning its first REIT, said that financial regulators in most countries permit REITs to include foreign assets in their portfolio, making Cambodian prop- erties a potential asset for investment.
“Cambodia assets are interesting options for REITs since the regulation and investment policy of most REITs, such as in Thailand, allow for investment in overseas assets,” he said.
However, he said even in the case of a REIT that includes Cambodian properties in its portfolio, it would make more sense to list the REIT on a foreign exchange.
“If the REIT is to be listed in the CSX, it is likely to have a liquidity problem, which will significantly affect investors’ interest,” he said. “In my opinion, it will be preferable to establish and list the REIT in another country and purchase Cambodian assets as part of that REIT.”
Eakapong said JWD Group currently has no plans to add its properties in Cambodia, including a 4,400 square-metre refrigerated warehouse, into its REIT’s portfolio. However, that could change.
“No Cambodian properties will be included in JWD REIT in the early phases,” he said. “But we may consider including overseas assets [to build a REIT portfolio] in the future.”