An Island in Cambodia to Call Your Own

 SONG SAA, Cambodia — Approaching this modest outcropping of sand, rocks and tropical foliage off Cambodia’s coast, a local resident might assume the thatched-roof huts on the shore belong to yet another remote fishing village. But the thatch is decorative, and the huts actually are luxury villas owned by investors from a dozen countries.
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Villa resorts on private islands are increasingly common across the Asia-Pacific region, especially in the Maldives. But Song Saa, a $22 million project that opened last year, is Cambodia’s first.
Owners are entitled to spend 30 days per year in their villas. At all other times the property manager, Song Saa Hotels and Resorts, rents them for $1,336 to $5,153 per night. Some villas that were purchased before construction yield a guaranteed 10 percent return for the first three years, and the guaranteed yield for the other properties is 8 percent for five years from the date of purchase.
Rory Hunter, the company’s chairman, said the villas are a promising investment partly because they are considerably less expensive than similar-quality ones in the Maldives. And because Cambodia’s luxury real estate market is far less developed than neighboring Thailand’s, he added, reselling villas here will probably be easier.
“As the country grows and tourism grows and becomes more developed, the value of those properties should only increase,” Mr. Hunter said.
All of the planned 27 villas are completed, and 20 have been purchased since sales began in December 2009. The remaining seven — a mix of one- and two-bedroom villas — are on sale for $600,000 to $2 million. (Most investment contracts in Cambodia are written in U.S. dollars.)
By contrast, at Soneva Fushi, a villa resort in the Maldives, two-bedroom villas are selling for $4 million, said Edward Gibbons of Brocon Investment, Mr. Hunter’s land-holding company, based in Phnom Penh.
Song Saa lies 29 kilometers, or 18 miles, from the mainland and consists of two islands, one of which is uninhabited. Together they cover a total area of just seven hectares, or 17 acres.
Some guests arrive via a 35-minute ride in a private speedboat from Sihanoukville, a port city of about 235,000 that lies about 180 kilometers from the capital, Phnom Penh. Others come by helicopter and land on nearby Koh Rong Island.
Mr. Hunter and his wife, Melita, spotted Song Saa seven years ago on a tour of the Koh Rong archipelago. And in 2007, he said, his investment company signed a 99-year lease for the island. (Cambodia’s 2001 land law allowed foreign investors to control land through leases and concessions.)
He said they initially approached international luxury brands, including Aman Resorts and Four Seasons Hotels and Resorts, about managing the villas, but later opted to create their own company.
The resort, which is powered by generators and has its own sewage system and water supply, lies on the fringe of a marine protected area in a pristine corner of the archipelago. One curving boardwalk connects the two islands, and another leads to an over-water bar and restaurant serving contemporary Cambodian cuisine.
The villas, which are sold furnished, include elegant nautical décor, like wall displays made from boat hulls, and the staff strives to create an experience that offers luxury in an informal setting. Mr. Hunter said he and his wife, the island’s creative director, aimed to make the atmosphere sophisticated but not ostentatious.
“People are interested because of the numbers, but what we’ve found is that by and large our investors then fall in love with the idea,” Mr. Hunter said.
Leases for the villas fall under Brocon Investment’s 99-year master lease.
Matthew Rendall, managing partner at the Phnom Penh law firm Sciaroni & Associates, said the arrangement was legally secure, and that it was highly unlikely the Cambodian government would ever breach Brocon’s master lease.
The central risk for investors, he said, is that Mr. Hunter’s hotel management company is not an established international brand.
The occupancy rate for the resort’s first 10 months was 30 percent, and the projected 2013 rate is 42 percent, according to Brocon. A clause in the villa leases does allow investors as a group to choose an alternate property manager if they are not satisfied with Song Saa Hotels and Resorts.
Mr. Gibbons said the island’s first villa resale occurred recently but that details were not yet available.
This month, Cambodia Angkor Air increased its three weekly flights to daily service from Sihanoukville to both Phnom Penh and Siem Reap, home of the Unesco-recognized temple complex Angkor Wat. Mr. Hunter said Song Saa’s performance would improve in tandem with better flight access.
As Sihanoukville develops, other developers are drafting plans to build luxury hotels and resorts on nearby islands.
Royal Group, a Cambodian investment company, finalized a 99-year lease on Koh Rong about three years ago, said Mark Hanna, the company’s chief financial officer. The island, which is adjacent to Song Saa, is roughly the size of Hong Kong Island and over the next 15 to 20 years will have a number of luxury hotel and residential projects, Mr. Hanna said.
“We anticipated developing faster, but the world became a different place in 2009,” he said, referring to the financial crisis. No specific projects have been announced.
Koh Puos Investment Group, a Cambodian company, is advertising planned luxury villas and apartments on Koh Puos, or Morakot Island, which is connected by bridge to the mainland. The company’s Web site lists Interstate Hotels and Resorts, a hotel management company based in the United States, as its property management partner. Both companies declined to comment.
And Alila Hotels & Resorts, a luxury brand based in Singapore, is planning to introduce in 2015 a hotel and resort project on Koh Russey, about six kilometers from the mainland.
“Today Cambodian tourism is pretty much restricted to Siem Reap with a little bit of spillover to Phnom Penh,” said Alila’s president, Mark Edleson. “But I have no doubt that in 20 years, Sihanoukville and the coast will be the premier destination in Cambodia.”
The first phase will include 36 rooms and eight villas, and six of those planned villas already have sold, said Etienne Chenevier, Asia director at CityStar, the French investment company behind the project. A second phase will begin preconstruction sales this autumn, with 54 planned villas ranging from $500,000 to $2 million, he added.
David Simister, Thailand chairman at CBRE, a real estate company based in Los Angeles, said Cambodia’s government should better market Sihanoukville as a tourism destination and encourage more airlines to fly there.
However, he added, Song Saa already has blazed a trail for other luxury hotel and resort operators to introduce new projects around greater Sihanoukville, which he said eventually could tap into Siem Reap’s large tourism industry. According to government figures, about two million international tourists visited Siem Reap Province last year, accounting for nearly 60 percent of all international tourist arrivals in the country.
“I don’t think the kettle is boiling,” Mr. Simister said of the Sihanoukville area. “But certainly, the temperature has risen.”

Sourced: Cambodia News