In the middle of November, Sam Kandil appeared on US television channel, TVOne USA, to chat to Saleem Rzivi. Sam was interviewed to promote CPIC’s mega US tour to inform potential investors about the positives of CPEC and the significance of Pakistan becoming an emerging market, in particular the port of Gwadar.
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We’ve transcripted the highlights below. The video comes courtesy of TVOne USA.
Interviewee: Sam Kandil / Interviewer: Saleem Rizvi
Interviewer (Saleem Rizvi): Welcome to this segment of TV One USA. In this programme, the focus of our discussion is real estate investment in the Port City Gwadar in Pakistan. The moment we talk about Gwadar, it captures the imagination of all people from different walks of life. Is the picture as rosy as it appears to be? What are the challenges? What are the opportunities? What are the risks? In today’s discussion, I’m very fortunate to have a global leader in real estate investment finance, Sam Kandil. Kandil has 30 years of experience, and he has been travelling all over the world. He has taken up many projects all over the world, more particularly in Asia, in Australia, and the Middle East.
Thank you so much, Sam, for the coming to this show.
Interviewee (Sam Kandil): My Pleasure!
Interviewer: I know that you’re busy. You’re travelling all over the United States, going from one area to the other. I can understand that you have a special interest in CPEC project, which is the China-Pakistan Economic Corridor. This is the lifeline for new infrastructure projects in Pakistan, and I can also understand that this project is crucial in the backdrop of the bigger project, the Belt and Road initiative of China.We are talking about 62 billion dollars which is coming into Pakistan.Let’s talk about CPEC first. Why is your company interested in CPEC? What is your connection with your organization? We have a lot of time, and you can answer it is by piece.
Interviewee: I’m the Chief Commercial Officer of CPIC, which is China-Pakistan Investment Corporation. We are involved and focusing on investment opportunities within the 62 billion China-Pakistan Economic Corridor, most specifically within Gwadar, which is set to become a global port. This will be very similar to what happened in Shenzhen in 2006.
We see that as a very promising investment opportunity. You would find that because of the China Pakistan Economic Corridor, the Financial Times, in 2017, announced that China is trying to invest 62 billion dollars in the Pakistan energy infrastructure, which would create around 2 million jobs in over the next five years create a massive shortage in accommodation. In late 2017, Morgan Stanley upgraded Pakistan to an emerging market. And once a country gets upgraded to an emerging market, economically it grows.
Interviewer: Absolutely, and many economic development projects are going on in Gwadar, including the Free zone, the oil refinery City, Airport, Pearl of Gwadar, and particularly the international Port City and China-Pakistan Gold Estate where your company is heavily involved. So, tell us a little bit about these projects. When were these projects started? How they are going and what is the endgame you have in mind?
Interviewee:Well, they are the first of a lot of projects that we are interested in launching in Gwadar. International port city is a master development of land subdivision. It was released 18 months ago and sold out within six months of the release. And today we have found over the first couple of stages of the project which has made CPIC the first private developer in the history of Gwadar to deliver a completed project.
Our second project is that we are going across the United States conducting investment seminars, making people aware of the opportunity, and what they can get in return by investing in those projects, which is the China Pak Gold Estate. And at the moment we’re standing at around 70% – 75% sold, with only 25% left, and this will be sold as well.
Interviewer: Let’s say I come to you after your presentation. I have money which I want to invest in Pakistan, especially in Gwadar City. What would be the investment like? Where would I start? How would you accept that investment, and how would it go forward step-by-step?
Interviewee: Today NOCs are much harder to obtain from the Gwadar authorities. So, we don’t sell the land on a filing system. So, when you come and buy from CPIC, you choose your plot. You know the plot number; you get a plot certificate and then once you’ve completed your payment, we start the process of giving you a title, just like in Australia and the United States. It is also very secure for investors. The Gwadar authorities have a condition where the investor is required to hand over a certain percentage of the land as security until we complete the infrastructure and we hand over the plots to our customers. So most recently we have started receiving back the security that we handed over 18 months ago on International Port City. We have begun to hand over the plots to our customers complete with infrastructure, water, sewage, gas, all connections done.
Interviewer: Well as compared to Sydney, obviously, Pakistan has different potentials altogether. There are some aspects of risk involved. In that context, how does the documentation look like, and what are the things a buyer must keep in his mind before jumping into it?
Interviewee: First of all, they need to go on to the website of the Gwadar authorities and check that the company has a registered NOC. So, CPIC owns the two projects, and they have a NOC for them. It’s also essential to know the fact that GWADAR is getting established in a way that will make it a city, unlike any other city in Pakistan.
Interviewer: Well, the people who are investing do not know anything about the investors who are coming into Gwadar investing money, about their integrity, about their experiences. So how would you convince an investor to invest into your property?
Interviewee: Well, they can go into our website as well. They’ll see the board of directors and our chief executive officer Zeeshan Shah has got a very long track record in property over the last 18 years. And the fact that we’ve delivered in today’s market in Gwadar is the biggest proof.
Interviewer: In the context of Pakistan trade and China trade, where do you see the future Market? How is it going to change the potential in the future?
Interviewee: Well, over the last 20 years, developing cities have out-performed established ones. So, if you invested in Sidney, New York, Paris, London, or in any of those established cities over the last 20 years, you realize that you would have made about 200 to 250 per cent capital gain. But if you invested in Shenzhen, Hong Kong, Singapore, Dubai, during those 20 years, you would have made about 350 to 400%, because these cities went through an emerging-market status. There was a lot of infrastructure happening in those cities. There was a lot of government contribution to infrastructure. And therefore, they produced higher returns.
Interviewer: Well, that’s the long-term projection so let’s cut down to some short-term projection. What is the financial projection for the next eight years?
Interviewee:It takes ten years to develop a city. Dubai and Shenzhen were established in 10 years. If you look up the financial trade in 2017 for Pakistan, there has been trade worth 72 billion dollars. Karachi is the only port relied on about 65 billion dollars, i.e. 90% of that trade. So, you’ve got a city like Karachi with 25 million population trading in 65 billion dollars. Now the Chinese trade is about 4 trillion dollars per year, and China relies on four main ports. If they have leased Gwadar for 40 years and let’s assume that they just passed 5% of that trade through Gwadar in the next eight years. That means Gwadar is going to trade 200 billion dollars, which is three times the size of Karachi today. So, there’s going to be a lot of opportunities over there. According to the Bureau of Statistics, there are about 6-7 people per household. This trade of 200 billion is going to create two and a half million population in Gwadar. This means that Gwadar will need over 375,000 homes to accommodate the people.
Any country that is being transformed into an international city has witnessed an increase in population of about two and a half million. Dubai saw a two and a half million increase in population between 2000 and 2010.
Interviewer: So, you know the worst now we see there is sand, water, buildings being erected, but in the next eight years you are projecting a complete city.
Interviewee: I’ll give you a tiny example. Shenzhen was producing about 10% capital gain between 1995 and 2005. In 2006 it was announced the fourth busiest port in the world. Within two years properties went up by a hundred per cent and later it went up by 187 %. Ten Years After it became a global port, and properties went up by 375% in ten years because of the demand increase.
Interviewer: You have given us a very rosy picture and as I you are the second person who has said that. Now for Gwadar itself in the next eight years what are the financial projections?
Interviewee: In Gwadar, if you buy, for example, one of the smaller plots, the 125 square yards. You will realize that the price is about $20,000, including infrastructure cost. Within 18 months, we are projecting the price to be around $38,000. And I get to this figure from the 90% capital gain that happened in Shenzhen within the first two years of it becoming a global port. If you end up holding that plot for a further period, within eight years, you are looking at $60,000 to sell that plot. It is being developed completely different than what you would normally expect in the streets of Karachi or the streets of Lahore. So, the city itself is bringing in a lot of expats. Therefore, you would be able to get a higher yield on your investment. You will probably get about 30% yield because you brought in the emerging market. If I was to buy from you in 2030 or 2028. I will end up paying you $190,000 for that house.
Interviewer: A caller questions whether investing in engineering will be good or an investment in real estate be better?
Interviewee: I won’t be able to comment whether engineering is going to be a better investment than real estate. Gwadar is going to become an iconic city, and it’s going to become weapon-free. It’s going to become highly secure to accommodate the expats that are coming in. Pakistan government has offered a 23-year tax exemption to all Chinese firms that are going to operate in the Free Zone. You have Saudi Arabia and United Arab Emirates committing to spend 15 billion dollars in an oil refinery city inside Gwadar.
Interviewer: Even if I have to invest in Manhattan real estate, there are risk factors. Do you see any substantial risk going into the Pakistani market? Because this question is going to come up.
Interviewee: Absolutely, and for me to say that there’s no risk will be unrealistic. But the thing is that it’s calculated risk. The only risk that I see is maybe if we are saying that this would happen in 8-9 years, it may happen in 12-15 years. That’s the risk that we will anticipate. A plot of land that’s going to cost you $20,000 today is likely going to sell for 38000 by the time it’s handed over. It might end up selling for $35,000, and also it might end up selling for $40,000. We do as much homework as we can, relying on the performance of other cities. I’ve got documentation to show what happened in Singapore when it became a global port back in 1977. And we always rely on the performance of the cities over the period, and that’s how we would like the performance of Gwadar to be.
Interviewer: And also, the process of due diligence is reliable.
Interviewee: It’s not only due diligence. We have Emerging Market seminars across the United States at the moment. Anybody interested in attending one can go on CPICglobal.com and they will have the list of all the seminars across the United States. The presentation that we do is of about 45 minutes, but it took me 12 months to prepare the due diligence for that presentation. Every single slide has the source of where we got the information from. People can do the research.
Interviewer: So, you provide the opportunity to verify the info you are projecting, and once the trust is developed, they can come in and invest.