Stephen Wyatt, country head for Jones Lang LaSalle Vietnam, said that in 2017 M&A in real estate may increase very sharply and reach record levels. As the company observed, billions of dollars are just waiting to be poured into the market in most segments, with a focus on apartments, offices, hotels, and industrial real estate.
Since the beginning of the year, there have been several big M&As in the field. In March, Singaporean company Keppel Land bought the enitre stake (16 per cent) of Southern Waterborne Transport Corporation (Sowatco) in Saigon Centre for US$37.3 million through subsidiary Krystal Investment Pte.,Ltd.
Also in the same month, Hong Kong Land from Hong Kong became the strategic partner of Ho Chi Minh City Infrastructure Investment Joint Stock Company (CII) in developing residential housing in Thu Thiem New Urban Area.
Japanese investors are also increasing involvement in Vietnam. Last September, Kajima, one of the four biggest contractors in Japan, set up a 50:50 joint venture with Indochina Capital to invest $1 billion in 10 years. At first the joint venture is going to focus on residential units, hotels, and resorts in Hanoi, Ho Chi Minh City, and Danang. Keisuke Koshijima, senior executive officer and general manager of the overseas division at Kajima Corporation, called Vietnam Kojima’s key market in the region.
Besides the residential and commercial segments, industrial real estate also attracted heavy interest from foreign investors. CFLD Vietnam Real Estate Development Co., Ltd. (CFLD Vietnam), a subsidiary of China Fortune Land Development Co. (CFLD), said it plans to build dozens of industrial cities mostly in Southeast Asia, where Vietnam is an important destination.
Last January the company worked with the Dong Nai People’s Committee to find investment opportunities. In September, CFLD Vietnam signed a memorandum of understanding with Tin Nghia Corporation to build a New Industry City (NIC) in Ong Keo Industry Park, which is located in Dong Nai, east of Ho Chi Minh City.
In April 2017, the company spent $65 million through subsidiaries CFLD Investment 27 Pte., Ltd. and CFLD Investment 28 Pte., Ltd. to buy over 70 per cent of Dai Phuoc Lotus, also in Dong Nai, from VinaLand Limited and VinaCapital’s Vietnam Opportunity Fund.
Masataka Sam Yoshida, senior executive for Vietnam at Tokyo-based M&A consultancy company Recof, said that Japanese investors are now more interested in the Vietnamese real estate market and are more willing to accept associated risks. Many experts said that the newfound propensity to take risks is due to the optimistic macroeconomic outlook of the country. Also, political stability and the stable currency are further incentives.
Meanwhile, the profitability of commercial projects is higher in Vietnam than in other countries. For example, office space rental in Vietnam can return a profit of 8-10 per cent a year, while the figure is 4-6 per cent in Singapore.
Duong Thuy Dung, CBRE Vietnam’s head of market research, said that the most popular way for foreign investors to join the Vietnamese real estate market is through setting up joint ventures with domestic companies to take advantage of their land reserves and connections in the field.
They will contribute to the joint venture with their financial capabilities and experience gained in more developed markets. Another method is to set up a 100 per cent foreign-owned subsidiary then buy a project or stake in a Vietnamese real estate developer.
Observers say that M&A is the way to increase liquidity for the market as well as save costs and time for investors.