The Real Estate Market: A Surging Wave of M&A Transactions
Actually, the M&A (merge and acquisition) transactions are not the only one factor that stirred up the real estate market up until now.
Indeed, since 2014, property developers such as Vingroup, Novaland, FLC Group, Him Lam and Dat Xanh have stimulated the real estate market with their merging and acquisition operations.However, since the beginning of 2017, the real estate market has become more and more heated as property projects are massively changing hands.
An Abundant Number of Large Projects
According to Savills Vietnam, since the start of the year, many foreign and domestic investors have remarkably established cooperating relationships with each other. For example, Hongkong Land formally became a strategic partner of Ho Chi Minh City Infrastructure Investment Company (CII) to work on the housing projects at the Thu Thiem New Urban Area in Ho Chi Minh City. In addition, An Gia Investment is on board with Creed Group from Japan to continue acquiring 5 blocks of apartments which belong to Van Phat Hung Corporation’s La Casa Project in District 7. The value of those blocks amounts to 910 trillion VND, approximately 40 million USD. Another resounding M&A transactions in the resort market is produced between Malaysian Berjaya Land Bhd (Bland) and Sulyna Hospitality. Bland transferred 70% of its stake in Berjaya Long Beach Phu Quoc Project to Sulyna Hospitality for approximately 14.65 million USD.
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Previously, during the first quarter of 2017, massive transactions between the Singaporean real estate developer Keppel Land and CapitaLand corporation attracted great curiosity and interest from people of the same industry and even outsiders. Keppel Land has acquired from its Vietnamese partner, Southern Waterway Transportation Corporation, an additional 16 percent stake in the joint venture entities for Saigon Centre in Ho Chi Minh City, Vietnam. The purchase amounts to 845.9 billion VND (approximately 37 million USD). Meanwhile, CapitaLand bought a 0.6ha prime commercial site in the CBD of Ho Chi Minh City to develop its first international Grade A office tower in Vietnam. The project will be financed by a 500 million USD investment fund initiated by Singaporean developers last November to focus on commercial properties in Vietnam.
Besides, CapitaLand made news headlines by announcing its acquisition of a 90% stake in a 0.8 ha project in Thao Dien, one of the most attractive residential areas in Ho Chi Minh City, to build more than 300 apartments. This move demonstrated a determined strategy to expand housing development in Vietnam of this enterprise.
The Aftermath of the M&A story
According to experts, M&A projects in the first 6 months of 2017 has put heat on the real estate market, not only revitalizing some inoperative and unfinished project but also saving time for buyers in finalizing legal procedures, smoothening the compensation and site clearance process. Subsequently, real estate stock prices have increased considerably. Especially some stock prices rise 3-4 times higher in comparison with the price at the beginning of the year, thanks to a high soar in revenue in the first Quarter of property developers and news of project transfer.
Recently, Quoc Cuong Gia Lai Company’s stock price (QGC) has been on a constant increase, around 5-fold from VND4,300 in March to VND21,200 in the 2nd week of June.
One of the reason for this galloping rise was mentioned in the firm’s audited consolidated statement in 2016. In particular, QGC had receive $50 million of deposit for 100% ownership transfer in the Phuoc Kien project (Nha Be, Ho Chi Minh city) to Sunny Island Investment.
“Ho Chi Minh city with its 13 million population, has great potential for real estate development. However, as the population is growing and available land plots are drying up, firms with greater land banks will have more chance to develop. Thus, real estate M&A is becoming an attractive choice for firm wishing to develop rapidly ” said Le Hoang Chau, Chairman of the Ho Chi Minh Real Estate Association.
A Chance for Foreign Investors
During a recent conversation on M&A, Stephen Wyatt, the country head of Jones Lang LaSalle (JLL) Vietnam, emphasized with the correspondents of the Economic and Urban Newspaper the opportunities offered to foreign investors. According to = Stephen Wyatt, the M&A real estate model is very attractive. The rich source of investment and a great amount of demands have provided various opportunities for inoperative projects to revive, and sluggish projects to be pumped up.
What are your evaluations on the real estate M&A situations in Vietnam during the first half of 2017?
Even though there are not any deals worth billion USD, the real estate industry is still the most attractive in the M&A market, particularly with the constant participation of domestic investors as well as international ones coming from Korea, Japan and Singapore. One of the outstanding deals worth mentioning is Muong Thanh Corporation’s willingness to pay 1.500 trillion VND (roughly 70 million USD) to buy 95% of Cienco5 Land’s stake. In addition, Gamuda Land acquired the stakes from domestic investors with regard to the Celadon City project in Hanoi. Moreover, CapitaLand successfully purchased a 0.6 ha commercial site located at Ho Chi Minh City’s downtown to construct the first international Grade A project in Vietnam...
In your opinion, what are the major reasons for M&A activities To target the real estate market?
Notably, the attention of the investors still increasingly focuses on the Vietnamese market. Indeed, millions of USD are ready to pour in the potential real estate market in Vietnam. Under the circumstance in which the source of capital in Vietnam is considerably expensive, countries such as Japan, Singapore and Malaysia are more patient and have relatively cheap capital resources. During this time, the price of real estate is constantly decreasing, so I think the M&A field is rolling through an exciting time. The Foreign Direct Investment (FDI) goes into real estate is immense. However, the real estate industry lacks facilities. Our infrastructure are not catching up with the development pace, which is a big concern for the foreign investors.
Currently, there is a trend in which various companies open an investment fund for real estate. Many investors are still in the process of evaluating the long-term potentials of real estate industry. If there are discounts in the future, they will have more opportunities. Before, many foreign investors encountered difficulties reaching out to property in good locations. However, in 2017, those properties are tendered to them, so foreign investors have more chances. As a result, the Vietnamese real estate market has recently presented the invaluable opportunity for foreign investors, particularly when they have capital resources, technologies and skills.
Thank you!
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