Vietnam’s M&A market exceeded the US$10-billion landmark for the first time last year, a nine-fold increase against 2008, and continued to rise 55 percent year-on-year to reach US$3.55 billion in the first six months of this year. A report of the Vietnam M&A Forum 2018 showed that real estate M&A deals ranked second last year, accounting for 27 percent of the country’s total M&A value. However, in the first six months of 2018, the sector rose to top position with a 66.75 percent share.
The rise in the first six months of the year was attributed to the success of many major M&A deals. Right in January, the country’s M&A market started off with the acquisition of the Sun Wah office tower project by Nomura Real Estate Development. In this deal, Nomura acquired a 24 percent stake in the Grade A office building located in a prime location of District 1 in Ho Chi Minh City.
The market then continued to see CapitaLand’s CVH Nereus Pte. Ltd. acquire a 99.5 percent of the charter capital of Hien Duc Tay Ho Joint Stock Company, for a total cash consideration of approximately VND685 billion (US$29.8 million).
The market also witnessed Frasers Property enter a conditional share purchase agreement with Tran Thai Lands Company Limited to acquire a 75 percent of the issued share capital of Phu An Khang Real Estate Joint Stock Company.
In June, another major mixed-use residential development deal was the divestment of Keppel Land’s stakes in Quoc Loc Phat JSC’s development project in District 2, Ho Chi Minh City. The month also saw Malaysia’s Berjaya Leisure Limited divest its entire resultant 32.5 percent of the capital contribution in Berjaya Vietnam Financial Center Limited to Vinhomes Joint Stock Company and Can Gio Tourist City Corporation for a cash consideration of VND884.9 billion (US$38.4 million).
“In the first half of 2018, the Vietnamese real estate market continued to show irresistible appeal to foreign investors and continued to witness high-value M&A transactions in a variety of segments such as residential, commercial, and industrial,” said Khanh Nguyen, associate director of Capital Markets at Jones Lang LaSalle (JLL) Vietnam, a real estate services firm.
Steady growth market
The Vietnam M&A Forum report forecasts that real estate, consumer goods, and banking and finance sectors will lead the Vietnamese M&A market this year, adding that investors are most interested in property projects in big cities or new urban areas with a high population density, resorts and hotels in the downtown areas.
The demand is rising while supply is limited, the fees of real estate transfer transactions in Vietnam are getting higher and higher with valuations of 30-50 percent higher than those a few years ago.
Representatives of Savills Vietnam stated that Vietnam’s real estate market has chalked out bustling M&A trend in recent years with many successful deals. South Korean and Japanese investors are very interested in Vietnam's M&A market in all aspects of real estate such as housing, industrial real estate and resort. In the future, this trend will continue to grow strongly.
JLL Vietnam also expects foreign investors to continue showing a keen interest in the Vietnamese real estate market.
Incoming foreign investors are actively hunting for “clean” and “clear” projects that can meet their required returns and conditions, Khanh said, adding that due to the strong focus on Vietnam from regional investors, JLL anticipates M&A activities to reach record levels in 2018.
Nguyen Huong, general director of Dai Phuc Land Real Estate JSC, said that the legality of the project is the first thing which domestic and foreign investors take into consideration when they are called for investment. In addition, prolonged project investment procedures also concern investors.
Therefore, relevant ministries and departments should facilitate the project procedures to enterprises and investors in order to further promote the real estate M&A market, Huong said.