Flashes of action in a slow market
Flashes of action in a slow market
Local investors are venturing into real estate project acquisition despite a moribund economy.
The biggest-ever deal in the real estate market was announced last week, with the transfer of Ho Chi Minh City’s Vincom A Centre from Vingroup to Vietnam Infrastructure and Property Development Group (VIPD) for VND9,823 billion ($470 million).
Vingroup claimed it reaped an estimated profit of VND4,300 billion ($205 million) from the transfer.
The deal was carried out in the form that Vingroup transferred its entire stake in Future Investment and Trading Company, a Vingroup member.
Vincom Centre A Ho Chi Minh City represents the most luxurious, high-end class of properties in a prime location in District 1, featuring a 16,000 square metres of shopping centre and a 300-room hotel.
Another concluded deal is the local firm Hanel taking over a 70 per cent stake in the five-star hotel, office and serviced apartment complex in Hanoi - the Daeha Business Centre from the Korea chaebol Daewoo E&C.
Hanel had beaten another Korean cheabol, Lotte, to win this deal.
Many other deals have been transacted in recent years that show the strength of domestic investors in real estate industry.
Outstanding transactions include the domestic BRG acquiring the Hilton Hanoi Opera - one of the most famous five-star hotels in Hanoi, Sovico Holding buying Furama Resort Danang from a Hong Kong group Lai Sun and Thien Minh Tourism Company buying the Victoria chain of resorts and hotels.
The mergers and acquisitions (M&A) in the real estate market have been increasing, especially with many companies narrowing their portfolios by selling non-core projects, to concentrate on core and important projects.
According to investment consulting company Stoxplus, real estate was among the hottest fields in M&A last year, with 29 deals in total of $400 million.
Aside from the Vingroup case, Dat Xanh Group had six M&A cases in which it took over other projects at total value of $65 million.
Meanwhile, VinaCapital is offering the sale of its 50 per cent stake in the 365-room Sofitel Legend Metropole Hanoi and Vinaconex is finding partners to sell its 50 per cent stake in the An Khanh joint venture which is developing Splendora urban project in Hanoi.
Neil MacGregor, managing director of Savills Vietnam, said while in the past many developers were reluctant to seek finance from the banks, projects were now leveraged at unprecedented levels.
“There are a number of options open to developers requiring capital to move their projects forward, none of which necessarily require financing from banks, if the right partner can be found,” MacGregor said.
Although facing a number of challenges such as an immature legal framework, low market transparency, complicated licencing procedures and differences in price expectations, MacGregor believed that the next few years would see the conclusion of a rising number of M&A deals.
“Whilst the lack of bank finance is troublesome for many in the real estate industry, it also creates an unprecedented period of opportunity for others, particularly those with cash,” he added.
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