The real estate market has experienced an active year in merger and acquisition activities, according to property consulting company JLL.
The year 2018 of Vietnam’s real estate market starts off with the acquisition of Sun Wah office tower by Nomura Real Estate Development. According to their press release, Nomura acquired a 24 per cent stake in the Grade A office building located in the CBD of Ho Chi Minh City.
As for the residential sector in March 2018, CapitaLand announced the acquisition of 0.9ha development site in Tay Ho district, Hanoi, for approximately $29.78 million.
Later in the third quarter of 2018, CapitaLand bought a six-hectare development site in Binh Trung Dong Ward, District 2, Ho Chi Minh City for about $60 million. The development is expected to yield more than 100 landed residential units, targeted for completion by 2021.
Another Singaporean company, Frasers Property has publicly announced last year that they entered into a conditional share purchase agreement with Tran Thai Lands Company Limited to acquire 75 per cent of the issued share capital of each Phu An Khang Real Estate JSC and Phu An Dien Real Estate JSC. It is intended that these companies will undertake the development of a residential-cum-commercial project in District 2 and Thu Duc district of Ho Chi Minh City, respectively.
One more of the notable transactions includes Keppel Land’s divestment of its stakes in Quoc Loc Phat JSC’s development project in District 2, Ho Chi Minh City.
Malaysia’s property group Berjaya Land Berhad also announced in a filing that it divested its entire resultant 32.5 per cent of the capital contribution in Berjaya Vietnam Financial Center Limited to a local corporation. The project would comprise office building, a five-star hotel, service residences and shopping mall on a 6.64-ha land in District 10, Ho Chi Minh City.
In conjunction with the disposal, the corporation and its affiliates will potentially acquire Berjaya Vietnam International University Town One Member Limited Liability Company and have injected capital and raising its stake in the firm to 99.2 per cent.
Berjaya’s, through its subsidiary, initial stake in BVIUT has been diluted from 100 per cent to 0.8 per cent and the company intends to dispose the remaining stake in the near future.
As of December 2018, Berjaya announced that it divested its entire 75 per cent stake in T.P.C Nghi Tam Village Ltd. to Hanoi Hotel Tourism Development Company for a cash consideration of about $54.13 million.
Real estate transactions in 2018 were diversified with a good variety of asset and property types. In May 2018, one of Japan’s largest management companies specialising in real estate properties for logistics operations CRE Inc. – through subsidiary CRE Asia – agreed to invest $6.2 million in Sembcorp Infra Services in the share subscription agreement. The new capital from CRE Asia and bank borrowings will fund the development of an additional 30,000 square metres of warehouse space in Vietnam by SIS.
Within the same month, global private equity fund Warburg Pincus and industrial real estate developer Becamex IDC Corp officially launched their joint venture BW Industrial Development JSC. With over 200ha of projects under development and an initial investment of more than $200 million, BW Industrial is the largest “for-rent” industrial and logistics developer in Vietnam, according to their announcement.
Another industrial transaction in 2018 is the sale and leaseback of a warehouse in VSIP 1, Binh Duong province in the last quarter of 2018. Mapletree Logistics Trust has entered into a conditional asset transfer agreement with Unilever International Company Limited (Unilever Vietnam) to acquire the warehouse unit for approximately $31.5 million. Upon completion of the acquisition, the property will be leased to Unilever Vietnam for 10 years with annual rent escalations.
Industrial market will be the hottest sector in 2019
According to Khanh Nguyen, Senior Director of Capital Markets, JLL Vietnam, mergers and acquisitions activity is growing across Asia Pacific’s real estate market, a sign that institutional investors are continuing to increase their allocations to the industry.
Vietnam has become an attractive destination for many foreign investors largely due to the country’s friendly policies encouraging foreign direct investment, its political stability and strong economy.
Furthermore, the country has been taking initiatives to improve its transparency to the next level, according to JLL’s Global Real Estate Transparency Index.
When looking at the market as a whole, Khanh expects continued growth through most asset types, including industrial and other growing sectors such as hospitality alternatives like education.
According to JLL representative, industrial market will be the hottest sector in 2019, backed by continued movements from China and a positive impact from the Comprehensive and Progresive Agreement for Trans-Pacific Partnership and the EU-Vietnam Free Trade Agreement.
"We expect foreign investors to continue showing their keen interest and strong commitment to the Vietnamese real estate market. 2019 will be a reforming year for the market with more regulations and reconciliation taking place. The prolonged approval process may impact new developments in 2019," said Khanh.
Therefore, sourcing for “clean” and “clear” projects that are ready for development would be a challenge for investors for the upcoming year. However, JLL believes that the reform of regulations would help improve transparency, making the Vietnamese real estate market even more attractive to foreign investors.