Vietnam 2016: Real estate sees spate of M&As, investment platforms

Vietnam 2016: Real estate sees spate of M&As, investment platforms

Investments into Vietnam’s real estate market saw a fillip in 2016 buoyed by stable economic conditions, a rising middle class and improved legislation climate. New foreign direct investment (FDI) in the real estate sector is estimated at $1.3 billion for 2016, declining 44 per cent over the prior year.

However, real estate was still the second largest industry in terms of attracting foreign investment, and the disbursement of capital was also higher than last year, according to the local association of foreign invested companies. Developers from Japan, South Korea and Singapore were the most aggressive investors.

The association explained the higher interest from overseas was because the market opened up with the government allowing foreigners to own properties in Vietnam.

Towards the last couple of months of the year, a spate of investment consortia were formed, namely the joint ventures between Warburg Pincus and VinaCapital, Kajima and Indochina Capital, and Sunwah and Saigon Asset Management, and the $500 million fund by CapitaLand.

A hotbed for M&A

M&A deals were dominated by Asian groups such as Keppel Corporation, Mitsubishi, Frasers Centrepoint, CapitaLand, Chow Tai Fook, Mapletree and AON Holdings.

Notable big ticket transactions include AON Holdings’ $382.5 million acquisition of Landmark 72 – Hanoi’s tallest building, Mapletree’s $215 million acquisition of Kumho Asiana Plaza, and Chow Tai Fook’s significant enrollment in the $4 billion casino project Hoiana. In March, Keppel said it had spent $93.9 million on a 40 per cent stake of Empire City, a project in which Gaw Capital Partners was also a joint venture partner. Despite an absence of Keppel’s later-on update, the organizers of the Vietnam M&A Forum in August then revealed that the Singapore investor had taken full stake at the at the mixed-use complex for $234 million.

Lotte, which has developed a spate of commercial assets in Vietnam, is reportedly targeting to expand its footprint in the Southeast Asian country via M&A activity. Foreign investors also participated in market transactions, notably the stake sale worth $120 million by Novaland to 18 investors, considered the biggest share sale of a Vietnamese property firm in 2016.

Some significant domestic acquisitions include BRG Group purchasing the Quang Ba Royal Park from Keppel Corporation, and TNR Holdings’ purchase of Vingroup’s complex in Hanoi for $110 million.

The Ho Chi Minh City real estate business association has said, in a recent workshop, it expected the M&A market to expand in 2017, riding on the growing trend of foreign investment and remittances. Overseas institutions dished out more than $1.8 billion through M&A to invest in the Vietnamese real estate sector, the association said, adding that the figure in the first half of 2016 already galloped to some $3.8 billion.

Promising landscape

The newly established investment consortia promise a year of vibrant real estate deals for 2017 as investors committed almost $2 billion both to develop new projects as well as to acquire existing assets.

While there were four new platforms involving overseas players as lead investors announced in the previous year, local developers such as Phu My Hung, Nam Long and An Gia have all recently co-operated with Japanese partners on a number of development projects.

“We continue to see a growing number of overseas investors seeking strategic partners with experience in the Vietnam market. Often this involves investment platforms in which the investor can diversify their risk over multiple real estate projects, rather than investing the same amount of capital in a single project,” commented Neil MacGregor, managing director of Savills Vietnam, which has been mandated to seek third party investors to build more hotels and other facilities within the $4 billion Hoiana project.

Kajima, Indochina Capital join forces in $1 billion JV Over the next decade, Vietnam will see new investments made by Indochina Kajima Development (ICC-Kajima), the astonishing $1 billion joint venture by Japan’s Kajima Corporation and Vietnam-based Indochina Capital.

The JV will initially support urban in-fill accommodation projects, in the three largest cities of Vietnam: Hanoi, Ho Chi Minh City and Danang. It will be focused on providing permanent and temporary accommodations in the form of hospitality-serviced apartments-hotels and residences for sale. Indochina Capital is one of the only real estate development funds in Vietnam.

Kajima entered the country in 1994 and has since been focusing on building factories and offices for Japanese-affiliated companies. It also won bids to work on a terminal at the Tan Son Nhat International Airport in Ho Chi Minh City, which was completed in 2007.

$300 million hospitality platform by Warburg Pincus and VinaCapital

VinaCapital, a Vietnam-based fund manager known with a lot of investments in hospitality projects, and Warburg Pincus – the global investor which had earlier funded a total of $300 million into Vincom Retail, jointly said the platform will do both development and acquisitions of tourism properties across Southeast Asia.

While the consortium will deploy investments not only in Vietnam, the country is seen as a major ASEAN beneficiary of China’s increasing outbound tourists. “The new venture is mandated to grow its regional asset base through acquiring, repositioning and enhancing well-located hotels in key tier-1 cities, and developing luxury resorts in top tourism destinations across Southeast Asia,” DEALTREETASIA earlier reported the formation of the platform.

HK Sunwah Group to disburse $100m Hong Kong-based Sunwah Group has set up a subsidiary called Sunwah Vietnam Investment Company (SVIC) to disburse its new $100 million commitment to Vietnam. Louis Nguyen, CEO of the Ho Chi Minh City asset management firm, is investment advisor for SVIC.

Louis Nguyen, CEO of the Ho Chi Minh City asset management firm, is investment advisor for SVIC. The subsidiary will look into the sectors of food and beverage, real estate, e-commerce, media, education, healthcare, and green technology.

The subsidiary will look into the sectors of food and beverage, real estate, e-commerce, media, education, healthcare, and green technology. In conjunction with the capital injection, Saigon Asset Management and the Hong Kong investor have also founded the 40:60 Sunwah Kingsway Vietnam joint venture, which will provide advisory services for both local and international enterprises in Vietnam. On exits, SVIC said it targeted Hong Kong or overseas IPOs for portfolio companies.

CapitaLand announces $500m fund for Vietnam

After using up the $200 million first fund dedicated for the Vietnam market, Singapore property major CapitaLand is set to launch a bigger vehicle of $500 million. The new fund will continue to facilitate the group’s investment of commercial properties, mainly in Ho Chi Minh City and Hanoi. Meanwhile, it plans to acquire more land sites in Vietnam for residential projects that would potentially yield between 2,000 to 2,500 units. CapitaLand, which marked its presence in Vietnam in 1994, has developed 2 projects in Hanoi and 9 others in Ho Chi Minh City, according to its Vietnam-based subsidiary’s website.

The new fund will continue to facilitate the group’s investment of commercial properties, mainly in Ho Chi Minh City and Hanoi.

Meanwhile, it plans to acquire more land sites in Vietnam for residential projects that would potentially yield between 2,000 to 2,500 units. CapitaLand, which marked its presence in Vietnam in 1994, has developed 2 projects in Hanoi and 9 others in Ho Chi Minh City, according to its Vietnam-based subsidiary’s website.

$2 billion from Japanese group of investors A group of Japanese corporations are exploring the possibility of injecting up to $2 billion in big mixed-used complexes in major cities of Vietnam, local media reported in October. The company, named Sao Khue, is reportedly said to include Japanese corporations Mitsubishi, Sumitomo, Taisei, Nomura, Haseko, Sanyo Homes, Daiwa House, Aeon and Toshin.

Source: DealStreetAsia