Golden Return: Serge Pun Constructs A Real-Estate Empire In Myanmar

This story appears in the September 2, 2013 issue of Forbes Asia.
    
The road to Star City is a rutted two-lane highway that threads past the ragtag outskirts of Yangon, crosses two rusted bridges and ends, almost an hour later, at a slick showroom on a grassy riverbank. A roadside billboard welcomes me to “A Model City of Tomorrow.” After a bumpy ride in monsoon rains the real estate showroom comes as a relief and something of a mystery. As a salesman clicks on interactive screens showing condominium designs and floor plans, I wonder who would choose to live out here in the boondocks.
Later I step outside and, as the rains pause, look upriver toward the city. And there, shimmering above the grimy streets, is the golden spire of Shwedagon, the Buddhist temple that is a symbol both of a nation’s ancient riches and popular resistance to five decades of military rule that ended in 2011.
Only then do I grasp the shiny promise of Star City and why local buyers are snapping up units aimed at middle-income families. The 400-acre site will eventually be linked by ferry to downtown and by road to a Japanese-backed port farther downriver. With a planned community of 25,000, it’s a self-contained commuter belt for a city with a population of 5 million that may double in the next 20 years, driving up land prices and pinching public services. It’s a bet on a promise of peace and prosperity.
The man behind Star City is Serge Pun, a former exile who returned to Myanmar in the 1990s to build a property-to-banking empire that came close to collapse a decade later. Reinvigorated by the political thaw, Pun is now tapping foreign capital and talent to double down on holdings like Star City that lay fallow during the dictatorship. Other Burmese tycoons are sitting on prize assets but could struggle to unlock their value compared with Pun, who is Myanmar’s top residential developer and among its richest men.
An ethnic Chinese, Pun is both an insider and a curious outlier in an opaque political economy geared to crony capitalism. He styles himself as a principled businessman who says no to corruption and isn’t afraid to make enemies. This dualism, the insider and outsider, is reflected in his penchant for gated suburban communities that circle the city. That said, his next big project, running in parallel with Star City, is a mixed-use redevelopment of 9.6 acres of prime downtown land that he’s sat on for two decades and is conservatively valued at $100 million.
His ambitions don’t end with real estate: First Myanmar Investments (FMI), his flagship, has interests in agribusiness, auto distribution, tourism, civil aviation and retail. Barely a month goes by without a new venture or spinoff. Pun’s impeccable image and overseas exposure have made him a go-to guy for Asian and Western firms seeking partners in Myanmar, a bridge between worlds. He has permanent residency both in Hong Kong, where he founded his first venture, and in Singapore, where he has a listed company, Yoma Strategic Holdings. “International companies consider us as foreign. Burma’s government consider us as a Burmese company,” he tells me.
Pun isn’t in Yangon when I visit Star City, so we meet instead in a hotel lobby in Beijing. With a shock of silver hair over an unlined forehead and rimless glasses the 60-year-old has a modest, avuncular air. During breaks he pops outside to smoke Al Capone-branded cigarillos. His reputation, though, is that of a shrewd and dogged bargainer. “He’s a great closer,” says a party to a recent transaction. When he pays for our drinks, he chides the Chinese waitress at length over an unwarranted charge on our $34 bill and vows to talk to the hotel manager. I’m left unsure if he’s putting on a show of frugality for me or is truly ticked off.
To his family and friends he’s Serge, an affable workaholic. “There’s no difference between personal life and work life; it’s always the same thing,” says Melvyn Pun, his eldest son and chief executive of FMI. Ken Mandel, an American who worked for Pun in the 1990s, says: “He loves what he does. It’s obvious.” Inside the company he’s known as S.P., perhaps to avoid confusion with the other Puns. His Burmese name is Theim Wai. But he’s proudest of being called Burma’s Mr. Clean, the man who dared to say no to the grasping generals. “I’ve never paid a cent. But I’ve never been short of opportunities,” Pun avers.
This reputation set him apart from tainted tycoons like Tay Za, one of dozens of individuals subject to U.S. financial sanctions. Most analysts agree that Pun is scrupulous in his governance and didn’t consort with the hated junta that stepped down in 2011. But “you don’t get where Serge is today without having some friends in high places,” says a foreign consultant, who discussed Pun on the condition of anonymity.
Analysts point to Pun’s extensive land holdings and a banking license acquired in the 1990s, when Myanmar’s corruption was rife. Yoma Bank would later have a near collapse during a run on private lenders. In 1997 FMI acquired a minority stake in a now-defunct joint venture between the regime and Suzuki Motors to assemble cars and motorbikes for a near-captive market.
Pun says that he works with pragmatists in government and that land and other concessions were awarded on the basis of performance, not favoritism. “We do things properly. We don’t cut corners,” he says. By refusing to compromise, Pun says he lost out on crony deals. “We paid a high price during the dark years, at the brink of elimination. We stood firmly to our principles,” he insists.
Pun is upbeat on Myanmar’s economic prospects after decades of stagnation and misrule. In the last 18 months he’s hired dozens of expat managers and returning Burmese, including three of his four foreign-born sons. This investment in foreign talent, and their willingness to relocate, is another aspect that sets him apart from local entrepreneurs and gives him credibility with multinationals.
However, it also jacks up his costs. Yoma Strategic reported an 81% drop in profits in the three months to June 30 on a doubling in administrative costs and a modest 12% year-on-year rise in revenues. A small net profit for the full year is forecast, but investors seem undeterred: Yoma’s stock is trading at over 80 times future earnings.
Myanmar doesn’t have a stock market, so shares in FMI, which Pun founded in 1991 and owns 70% of, are traded over-the-counter in Yangon. Both FMI and Yoma, which reverse-listed in Singapore in 2006, have issued new stock as investors dive into Asia’s newest frontier. These include George Soros, whose fund invested in Yoma and later teamed up with Pun and Jamaica’s Digicel to bid unsuccessfully for a wireless telecom license in Myanmar.
Yoma’s main revenue comes from property sales in Yangon, where prices have soared since 2010. “The demand is there. And the supply continues to fall short,” says Tan Ai Teng, vice president of DBS Vickers Research in Singapore. That makes Yoma, as Singapore’s only Burmese stock, a proxyplay on the market.

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