M&As in Real Estate Getting Heated

Some come, some leave; this indicates that M&As will be active at the end of 2013, especially in the field of real estate.

 

Since the beginning, the real estate market has seen many large M&A contracts, for example the Vietnam Infrastructure and Property Development Group Corporation (VIPD) purchased Vincom Centre A of Vingroup at a price of nearly VND10,000 billion; the Malaysia – based Perdanna ParkCity bought the capital contribution of Vinaconex - Hoang Thanh to entirely possess Hanoi Park City project; the FLC Group spent nearly VND300 billion acquiring Alaska project of the Alaska Land; and Coma 18 sold VP6 Linh Dam project to Lai Chau Construction Company No.1 of Muong Thanh Group.

 

Of all, the largest M&A deal must be Vincom Centre A that the Vingroup assigned to the VIPD, the deal is worthy nearly VND10,000 billion. This deal has brought the Vingroup an after tax profit of VND4,300 billion. Moreover, the Vingroup also has an agreement with Warburg Pincus investment fund, accordingly the fund will spend US$200 million buying 20 percent of Vincom Retail. It is considered the largest investment of non state joint stock company for a Vietnamese company.

 

Besides, there are many M&A deals in which purchasers are investors from Singapore and South Korea, and the sellers are mainly Vietnamese companies, for example Lotte Hotels & Resorts Group purchased 70 percent of the Legend Hotel (district 1, Ho Chi Minh City) from the Vietnam Opportunity Fund of VinaCapital with an agreement worth US$62.5 million.

 

With nearly US$53 million, Mapple Tree has successfully bought the office building of CentrePoint (Phu Nhuan district, Ho Chi Minh City). A company from the South Korea also signed a memorandum to purchase the office building of Gemadept (Le Thanh Tong, district 1, Ho Chi Minh City).

 

And there are also many “under the sea” transactions that are little known. These transactions immensely influence the real estate market, as well as create a huge pressure on project owners without large capital capacity.

 

In the context of larger capital pressure and low market liquidity, there is an opportunity for capable investors to purchase potential projects at bargain prices. Therefore, many real estate experts estimated that from date to year end, M&A activities in the market will be very effervescent.

 

Mr Adam Bury, Associate Director, Capital Markets at CBRE Vietnam shared that, currently the number of foreign investors interested in Vietnam real estate market is rising. The second half of 2013 is forecast to see the market receive a new wave of investors, especially in the field of project assignment.

 

Mr David BlackHall, CEO of VinaCapital Real Estate also said that, the real estate market in Vietnam has much potential to develop. Vietnamese enterprises have many advantages in purchasing projects with good position at reasonable prices. In the context of “frozen” market, many real estate companies lack capital to maintain activities and they are currently underestimated. They will be a magnet to many foreign investors. Many foreign investors, especially those who from Japan, the South Korea, Singapore and China are searching for opportunities of purchasing offices for rent, commercial centre, while domestic investors are concentrating mainly on buying and selling living house projects.

 

Assessing M&A in the following time, the Vietnam’s one stop financial portal Stoxplus judged that in 2014, the supply and demand in the real estate market is still large. Of which, foreign investors are still interested in the retail sector. Projects with good location, transparent documents and competitive prices will be their target.