Real Estate: M&A Rush

10:34:27 AM | 8/14/2014

As regulated, property projects left unbuilt will have their licenses revoked. Meanwhile, a lot of real estate investors are facing hardships due to capital shortage on waning market liquidity. This sparks a rising wave of mergers and acquisitions (M&As), making the Vietnamese property industry more vibrant than ever. Especially for foreign investors, this is seen as a great opportunity to reach the Vietnamese market.
From foreign investors…
Although Vietnamese real estate market performance is still lacklustre, it remains a potential market, according to international property experts. The interest of foreign investors in the real estate market is growing, as evidenced by recent M&A deals. For example, Alma Resort, based in Khanh Hoa province, was taken over by Israeli billionaire Igal David Ahouvi for US$300 million. Or, Vinaland, an affiliate of VinaCapital Group, sold its stake in Vina Properties Pte for US$16.1 million.
Nakheel Group from the United Arab Emirates marked its presence in Vietnam’s property market with the cooperation with Sovico Holdings to invest US$550 million in the 125-ha Ha Long Star urban - tourism site.
Besides, a series of M&A deals have been reached. Sun Wah Vietnam Real Estate Limited of Hong Kong spent US$200 million to acquire 48 percent of stake in a apartment project situated on No. 90 Nguyen Huu Canh Street, Ho Chi Minh City.
Meanwhile, long-term real foreign estate investors in Vietnam like Sembcorp, CapitalLand and Keppel Land still quietly bought into new projects, particularly big projects in prime locations with good infrastructure. Recently, Sembcorp - the investor of VSIP in Binh Duong province - obtained a permit to build US$200-million VSIP Sembcorp Gateway Township in Binh Duong and it was also allowed to raise US$120 million to its project in Haiphong City. Keppel Land, which is currently running 10 real estate projects in Vietnam with approximately 22,200 apartments, has made its presence in Hanoi with the US$140 million Hanoi Westgate Project.
Mr Le Minh Dung, Director of CBRE Vietnam, said foreign investors buy when the target projects meet certain criteria such as location, area and scale. So, it is not easy to transfer a project. Typically, the transfer of a large-scale project usually takes 1-2 years to complete.
Mr Timothy Horton, CEO of Cushman & Wakefield Vietnam, said, “Foreign investors in Japan, Taiwan, Hong Kong and many other countries which showed interest in the Vietnam real estate market from 2008 to 2009 have returned, because the Vietnam property market has certain advantages compared with other countries in the region and generates price advantages for them.”
Mr Neil MacGregor, Executive Director of Savills Vietnam, a property service firm, said Vietnam is at the bottom point of a real estate cycle. Many other Asian markets are located at the top point of the cycle and they may decline in the coming years. Therefore, Vietnam attracts foreign investors because they want to grasp recovery opportunities here when other markets have started to cool down.
... to Vietnamese big names
The M&A market is heated up not only by foreign corporations but also by domestic firms. FLC Group took over a property project at No. 36 Pham Hung Road (Cau Giay district, Hanoi). This project, covering a sizeable area of 3,600 square metres, is situated on one of the most beautiful locations in Hanoi, the capital of Vietnam.
Vietnam Infrastructure and Property Development Group Corporation (VIPD Group) also spent nearly VND10,000 billion (US$465 million) to acquire Vincom Centre A from Vingroup Joint Stock Company. VinaCapital resold Legend Saigon, Sheraton Nha Trang and Movenpick Saigon hotels. Novaland spent more than VND3,000 billion acquiring three real estate projects in HCM City. And, a private firm bought Ana Mandara Resort and An Lam Ninh Van Bay in Khanh Hoa province.
Not only financially troubled investors are forced to sell their projects, but powerful names with a strong foothold in the industry also joined the wave. Hoang Anh Gia Lai Group sold a 35-ha project to Him Lam Corporation for nearly VND1,100 billion (US$51 million). Thanh Hoa Construction corporation purchased the Sky Park Residences in Cau Giay district, Hanoi at a price of VND143 billion.
Mr Phan Xuan Can, Chairman of Sohovietnam, a property consultant and brokerage house, said widely-known property M&A deals are the tip of the iceberg. A lot of real estate transactions are being concluded silently.
He added that M&A deals are little known because they are relatively complex and require much time to complete procedures and calculate financial data. Hence, both buyer and seller are reluctant to disclose the deals unless the buyer or the seller is a publicly traded company legally obliged to disclose information. Otherwise, the deals are made public only when they are completely concluded.
"It is true that M&A activity has been quite busy recently and a lot of big M&A deals have been done. But, not all projects put up for sale are also of interest. Among successful property M&A deals in Hanoi, only about 10 percent are in business districts while the rest are in suburban districts like Nam Tu Liem, Bac Tu Liem, Cau Giay, Hoai Duc and Hoang Mai,” he added.
Luong Tuan