Vietnam’s real estate thirsty for M&A deals
Vietnam’s real estate thirsty for M&A deals
Mergers and acquisitions between domestic and international real estate developers were down in the first half of the year, but could be a future bright spot with Vietnam boasting attractive economic fundamentals and investors biding their time.
Gamuda Land, the property arm of Gamuda Bhd from Malaysia, is one of the latest foreign developers expanding its portfolio by acquiring a third project in Vietnam in the last two years.
The New Strait Times on July 20 said that Gamuda Land signed a share transfer agreement to acquire Tam Luc Real Estate Corporation, which owns a 3.68-hectare project site in Thu Duc in Ho Chi Minh City, for $315.8 million.
On its dossier submitted to the Malaysian Stock Exchange, Gamuda said the site was a shovel-ready mixed-use high-rise project site with all requisite planning approvals, ready for immediate development.
This acquisition has seen Gamuda Land become one of the top foreign developers in the last two years, partly due to its strategy of quick turnaround projects, developing two big townships in Hanoi and Ho Chi Minh City during the last 20 years. Two other projects acquired recently by Gamuda Land were located in Ho Chi Minh City and Binh Duong province.
In recent times, the market has recorded a number of merger and acquisition (M&A) transactions from segments affected by the pandemic such as retail, hotels, and residential projects.
Pham Anh Khoi, director of Dat Xanh Real Estate Services, said that M&A and cooperation expansion were a trend of domestic and foreign investors in Vietnam. “Foreign investors have clear strategic directions for development and are well-prepared, and they have financial resources ready to cooperate when provided the opportunity. Meanwhile, domestic investors have ready land but a shortage of capital. Therefore, M&A is one of the feasible strategies for both of them,” Khoi said.
Examples include, Khang Dien cooperating with Keppel Land to develop sustainable urban areas in Ho Chi Minh City.
Building a track record
Finance and real estate expert Tran Khanh Quang said that previously, large domestic investors mostly hunted for projects from small businesses to acquire. However, M&A activities are entirely different when large enterprises and corporations themselves face difficulties. In this scenario, partners are mostly investment funds and real estate corporations with foreign capital.
“There are a number of businesses outside the industry, with financial potential that want to expand and redirect more investment into the real estate business and their fastest way is making transactions to develop,” Quang said.
Bui Trang, country head of Cushman & Wakefield Vietnam, told VIR that the interest of many foreign investors in Vietnam was huge, thanks to the attractive economic fundamentals.
“According to our assessment, in the current quiet status of the real estate market, M&A is a great opportunity for foreign investors with cash flow. Moreover, the Vietnamese market is gradually becoming more open about negotiation processes and this will be an extremely key factor in promoting access to foreign investment capital,” Trang said.
However, the market still faces many challenges for investors in finding good opportunities and highly qualified projects. “In fact, although there are many assets being offered, the list of projects for foreign investors to buy back is quite limited, due to legal issues, a price expectations gap, and complicated compensation process. Meanwhile, at present, most projects have many problems that still need to be solved,” Trang said.
Transactions recorded so far this year include many real estate investment and M&A deals, but there is still a lack of large deals. The market is currently slowing down, plus there is a global economic crisis, so investors in the past six months have waited for development in the market. Besides this, the current approval process for projects is lengthy, leaving developers and investors frustrated.
Waiting for large-scale deals
The market is waiting for large-scale M&A cases in the second half of the year. Among those, one of the most awaited cases is the $1.5 billion transaction of the Asian real estate giant CapitaLand Group to acquire assets from Vietnam’s biggest listed property firm, Vinhomes JSC.
This deal was in the last phase of negotiation in which CapitaLand is considering buying part of the Vinhomes’ Ocean Park 3 project, a 300-ha resort city-style development near Hanoi, and another project in the northern city of Haiphong.
Meanwhile, the Vietnam Association of Realtors (VARS) said that foreign investors are increasing their interest in acquiring domestic real estate projects towards the year’s end.
Nguyen Chi Thanh, vice president of VARS, said that the foreign investors mostly come from South Korea, Singapore, Japan, Taiwan, Malaysia, and Thailand, and that there are only a few Vietnamese enterprises who had enough capacity to join the game.
“Keppel Land, Frasers, WHA, and Central Retail are a few foreign names that are actively looking for M&A opportunities in the commercial, residential and industrial real estate segments,” said Thanh.
The main M&A transactions are still in the format of transferring shares of certain projects. Some deals are reported for separate projects that foreign partners bought outright, this is also an option preferred by foreign partners.
“The number of investors looking for partners to transfer or buy projects is considerable. Instead of maintaining price expectations, they now are gradually showing their willingness to negotiate with the hope that they will soon be successful,” he added.
Thanh said that M&A activities will continue to be exciting. The deals that complete the exploration and survey in the second quarter will continue to move to the negotiation stage in the last two quarters of the year and even into 2024.
“When cases are successful, they contribute to improving the supply in the market. Unfinished projects that were acquired by strong financial capacity investors will quickly be restarted. Business owners who receive capital sources from deals also have a flow to implement their remaining projects,” Thanh said.
According to RCA and Cushman & Wakefield, the value of real estate investment and M&A deals in the first half of 2023 was $711 million, down 45 per cent over the same period of last year due to a lack of large deals.
