Property prime for acquisition boom

Duong Thuy Dung, senior director and head of professional services at CBRE Vietnam, predicted that in 2017-2018, the three segments that will attract the most mergers and acquisitions (M&As) include houses for sale in Hanoi and Ho Chi Minh City, hotels and condotels in coastal provinces, and industrial properties stretching from the north to the south of the country.

The optimistic forecasts were also shared by Nguyen My Phuong, CEO of Tien Phuoc Group, who foresaw more deals at increased values.

Masataka Sam Yoshida, senior managing director of Japan’s M&A consultant firm Recof Corporation, said that Japanese investors began showing interest in the Vietnamese real estate market in 2015, especially in the high-end residential, commercial, and hotel sectors.

“I have seen that Japanese firms are creating a wave of M&As in property in Vietnam, with a range of projects acquired. Outstanding names among those were Tokyu, Mitsubishi, Hankyu Realty, Nishi Nippon Railroad, and Meada Group.

“In the near future, we think that we [Japanese firms] should slow down our investments in Vietnam and be more careful about the fast development of the market. However, we are seeing many good projects with great potential and feasibility that would make good supply for M&A activities in Vietnam,” Yoshida told the 2017 M&A Forum organised by VIR recently.

Drawing on 25 years of experience in the Vietnam property business, Rick Mayo Smith, chairman of Ruby Asset International, said that M&As in real estate may be tricky. “The real estate market has grown by 20 or 30 per cent over the past two years, so it may flatten out soon. I believe that if investors want to conduct M&As, they need to be careful and vigilant, especially in terms of fair pricing.”

Smith said if foreigners could own a house for 99 years in special economic zones as proposed by the Ministry of Planning and Investment in a draft law, instead of the 50 years they were allowed currently, that would prompt significant foreign interest in the Vietnamese property market.

“The recent decree on non-performing loans, especially the clauses on collateral, will hopefully change the situation and push up the real estate market, as well as help the financial sector,” he added.

Chu Chee Kwang – general director of Nam Long Group, which has co-operated with Japanese investors on many projects – expects that real estate M&As will increase in the near future.

“We have experience in partnerships with foreign investors, like Keppel Land, Nishi Nippon Railroad, and Hankyu Realty, and they all highly appreciate the potential of M&A deals in the real estate sector,” Kwang said.

“Real estate M&As require a long-term partnership, as it takes many years to develop a project. The most crucial factor is to ensure the efficiency of operations.”

From 2016-2017, the real estate sector in Vietnam has seen an outbreak in M&As, with big names such as Vingroup, Bitexco, Novaland, Dat Xanh, An Gia, Phat Dat, and Tien Phuoc participating along with several foreign investors.

According to recent figures released by the M&A Forum Vietnam 2017, in 2016, the total value of M&A deals in Vietnam reached $5.8 billion – a record number, and an increase of 12 per cent year-on-year. Of this, the real estate sector was one of the most attractive and busiest sectors in terms of M&A, with an on-year growth rate of 9.63 per cent.

According to JLL Vietnam, there is currently strong interest in Vietnamese real estate from foreign investors, a theme that is expected to continue for the foreseeable future.

“There will continue to be a strong preference for income-producing assets. However given the shortage of this type, there will be a continued focus on development activity. We are seeing more partnerships and joint ventures forming between local companies and foreign investors; we expect this trend to continue,” said Stephen Wyatt, country director of JLL Vietnam.

“There are more foreign investors entering Vietnam, and opening new offices here. Typically, these investors were on a fly-in, fly-out basis on their first investment, while now for subsequent investments they have set up local teams comprising a combination of local and expat operators. Due to the strong focus on Vietnam from regional investors, we expect M&A activities to reach record levels by the end of 2017 and 2018,” he added.