Realty M&A picks up foreign interest

Mergers-and-acquisitions in Vietnam in this year’s first nine months has seen continuously strong momentum, with a number of key transactions in commercial and residential sectors.

Property M&As in the year’s first nine months rose significantly over 2016’s corresponding period. Photo: Le Toan

One of the most active investors was Novaland, which conducted major transactions such as acquiring Palm Marina from Saigon Tourist and transferring Nova Phu Sa Resort and the Galaxy 9 apartment complex to other partners.

The ledger of merger-and-acquisition (M&A) cases in the first nine months was full, with 11 big M&As involving well-known firms such as FLC, Keppel Land, and VinaLand.

According to JLL, the residential segment remains the most attractive for both buyers and sellers. Apart from this, investors are now averting their attention to commercial Grade A office properties and hotels, which offer investment returns of 7-8 per cent.

In this year’s first three quarters, over $1.2 billion exchanged hands through M&As in the property segment.

This is quite a high figure, as the figure for the corresponding period last year was only $921 million.

“In reality, it was very difficult to conduct a successful transaction, especially if it involved foreign investment. Due to the complicated procedures for both sellers and buyers, each step of the transaction process was more risky, from land clearance and compensation to legal processes and the actual construction phase,” said Stephen Wyatt, general director of JLL Vietnam.

Wyatt, however, further added that since the country’s economy keeps growing, the Vietnamese property market is still one of the most attractive segments for foreign investors.

Chairman of th Ho Chi Minh City Real Estate Association Le Hoang Chau said that M&A could be a key trend for real estate developers in the coming years. This year presents golden opportunities for M&A deals, as Ho Chi Minh City has a stockpile of more than 500 projects that are stalled and unable to continue.

“We anticipate seeing strong demand from a wide range of investors in the following quarters. They are seeking to make the cut in the Vietnamese real estate market, with a particular focus on groups from Japan, South Korea, Singapore, Hong Kong, and mainland China. With fierce competition and limited supply of good quality stock, we will be keeping an eye out for further real estate M&A transactions as investors seek ways to deploy capital quickly and efficiently,” Wyatt said.

In addition to industrial M&As, residential transactions also trended higher.

In September, VinaLand Ltd., one of the real estate arms of VinaCapital, divested its entire stake in the Vina Square Project – a three hectare development site in Ho Chi Minh City’s District 5 – to Tri Duc Real Estate Company for approximately $41.2 million cash. This sum allowed VinaLand to repay shareholder loans, resulting in an internal rate of return (IRR) of 3.3 per cent.

Kinh Bac Corporation, another IP developer, has also decided to transfer 100 per cent of its ownership in Lotus Hotel Development Company – the developer of the Diamond Rice Flower hotel complex – to Sun Investment JSC.

Also near the Lotus Hotel, VinaLand Ltd. transferred the right to develop the $50 million Times Square Hanoi – on the market since 2015 – to Elite Capital Resources Ltd.

In a statement released recently, VinaLand announced that it had divested its entire stake in the Hanoi-based Times Square project for approximately $41 million, resulting in an IRR of 5.3 per cent.

Prior to this divestment, VinaLand sold its entire stake in Dai Phuoc Lotus, a residential complex in the southern province of Dong Nai, to foreign investors, bringing in about $65.3 million.

Berjaya Land Bhd., a leading Malaysian real estate developer, announced that it transferred its entire position in the Vietnamese four-star Berjaya Long Beach Resort Phu Quoc to Sulyna Hospitality Hotel Restaurant Travel Service Co., Ltd., at a price of VND333.25 billion ($14.67 million).

In the last weeks of October, South Korea’s Hanwha Life Insurance Co. was considering backing Seoul-based Koramco Asset Management Co. to acquire TNR Tower Nguyen Cong Tru for a purchase price of $62 million.

“The acquisition, if closed, will be meaningful in that there is no precedent for a Korean investor buying a 100 per cent ownership in a building in Vietnam,” said an anonymous source from Hanwah Life Insurance.

Duong Thuy Dung, senior director of CBRE Vietnam, predicted that in 2018, the three segments which will attract the most M&A will 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.

“In the near future, we think that we 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,” Dung said.

JLL also predicted that there will be 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 for subsequent investments, they set up local teams comprised of 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 in the end of 2017 and 2018,” Wyatt said.

By Bich Ngoc