After more than a decade of expansion, the two main investors in the parent company of Phnom Penh’s storied Foreign Correspondents’ Club will restructure or even end their partnership as the company’s finances suffer under burdensome real estate debt arising from the purchases of high-value property in Cambodia, one of the investors said yesterday.
The FCC, with its panoramic views of the Tonle Sap and Mekong rivers, opened in 1993 near the end of the Untac era and has long held a place as a key tourist must-see and resident expatriate staple. Its success spawned ventures by the FCC’s owner, Indochina Assets Limited, which now operates the Cafe Fresco chain, the Spanish tapas restaurant Pacharan, the Quay Hotel, FCC Angkor in Siem Reap, and the Visaya Spa & Pool also in Siem Reap. In turn, Indochina Assets owns Food and Beverage Solutions Co Ltd, which manages their small businesses empire in Cambodia.
While one of the two main investors, FABS chairman Mark Ashall, could not be reached for comment, Indochina Assets Chairman Steve Haywood said by telephone yesterday that acrimony has arisen among investors due to the debts from the $2.2 million purchase of the French colonial era building dubbed “the Mansion” on Sothearos Boulevard, in 2007, as well as a property adjacent to FCC Angkor in Siem Reap.
With the onset of the financial crisis in 2008, the group’s restaurant and hotel profits have largely been used to cover debt, stifling company growth, Mr Haywood said by telephone from Bangkok.
Indochina Assets “is not unprofitable but it has a lot of debt obligations which are sort of nooses around our necks,” he said. “We probably took on too much in the end…. It’s been a problem. We don’t have enough money to develop.”
Mr Haywood said he will negotiate with the FABS chairman, Mr Ashall, who owns about one third of Indochina Assets, about the possibly of buying each other out or splitting the assets of their well-know company.
Discord within the company boiled over publicly when Mr Haywood, who also owns about a third of Indochina Assets, fired FABS Chief Operating Officer Raphael Guillien on Friday and published a newspaper notice about it.
Matthew Rendall, a partner at Sciaroni & Associates who is representing Mr Ashall in the dispute, said that Mr Haywood’s decision to fire Mr Guillien is invalid.
“He made a unilateral decision to dismiss Raphael but he has no autonomy to do that,” Mr Rendall said yesterday. “There is clearly a dispute about the direction of the company,” he said,
Reached by telephone, Mr Guillien declined to comment and also said he had spoken to Mr Ashall, who is currently in Phnom Penh, who did not want to comment for this story.
Mr Haywood said that he had spoken with Mr Ashall yesterday in an attempt at reconciliation.
“We agreed as gentleman and old friends to have a truce,” Mr Haywood continued. “We are at a crossroads. We are trying to find the best way forward so we can sustain our business and our name,” he added.
Mr Haywood founded Indochina Assets and opened the FCC in its colonial-era building in 1993 as Cambodia opened up to the outside world and as visitors to the country reached only little more than 100,000 people per year, about 5 percent of 2009’s foreign arrivals. Mr Ashall joined Indochina Assets in the mid-90s and now the company has more than 40 shareholders, many from Hong Kong, according to Mr Haywood.
As an early investor in Cambodia, Indochina Assets also purchased much of its property, when real estate was a fraction of today’s costs. The group went on to buy several other properties in the first half of the last decade, opening FCC Angkor in 2002. They also opened the restaurant and bar “50 th Street” in Rangoon, Burma, but that is no longer part of their assets.
Still, the company’s purchase of the much-envied Mansion building in 2007 has borne little fruit and the dilapidated building, once owned by Prince Norodom Ranariddh, has been the location of occasional parties, photo and art exhibitions but little else. The company also opened the luxurious boutique hotel The Quay on Sisowath Quay just before the global financial crash.
Steve Nyirady, owner of S and A Enterprises, which owns the Riverhouse Lounge nightclub and restaurant on Sisowath, the Sarika restaurant in Tuol Kok district, and the Noodle House and Lemongrass restaurants near the riverfront, said that he has long envied FABS for buying property in the city when it was still cheap.
Mr Nyirady added that restaurants are notoriously unstable and not the best way to pay off debt, particularly in the current climate.
“I do think it’s a good move to buy real estate in Cambodia. It’s a good move but I don’t know how they structured their debt,” he said of Indochina Assets’ apparent woes.
But he added that competition among hotels and restaurants has increased in Phnom Penh, even as some of the FCC’s main customers, western tourists, have decreased with the financial crisis.
“The competition is increasing not only in volume but also quality,” he said.