Vincom Retail's strategy pivoting real estate projects as spear to cash in shopping centers
By Minh An
November 07, 2017 | 06:49 AM GMT+7
Vincom Retail, a Vietnamese mall operator under the Vingroup JSC corporate umbrella, was listed as VRE on the Hochiminh Stock Exchange (HOSE) on November 6, 2017 and its share price was traded at a peak level beyond expectation.
The launching of a commercial center of Vincom Retail
On the first trading day, VRE’s highest trading price reached VND40,000 (roughly US$1.764) per share, raising the total assets of the company to about US$3.6 billion.
Receiving US$300 million investment from Warburg Pincus Investment, the New York-based private equity firm and Credit Suisse AG, a leading global financial services company headquartered in Zurich, Switzerland from 2013 to mid-2017, Vincom Retail currently has 40 trade centers in 21 cities and provinces across the country with a total area of 1.1 million square meters. The company is building 22 other centers and aiming to develop 200 trade centers in the coming years.
According to Colliers International, a Canada-based global commercial real estate services organization, Vincom Retail holds 60 per cent of the market of operating and leasing retail space in both Hanoi and Ho Chi Minh City.
In the first half of this year, Vincom Retail’s revenue from leasing space reached VND2,123 billion (roughly US$93.63 million). Last year, the company gained a total revenue of VND3,805 billion (roughly US$167.81). According to Vincom Retail, the average shopping center occupancy rate in the past three years was 82 per cent. The figure for the first six months of this year was 89 per cent.
Vingroup’s other subsidiaries such as Vinmart and Vinpro often contribute 35-40 per cent of the leased space of newly opened trade centers during the opening of these centers.
Besides leasing space, Vincom Retail also develops shophouses around some of the commercial centers, most of which are located in the centre of provinces. It also develops office towers and apartments for sale near the commercial centers in the centres of Hanoi and Ho Chi Minh City.
"The cash flow from the sale of real estates has given the company more money to develop its commercial centers," as cited in Vincom Retail’s listing introduction papers.
Revenue from real estate contributed to 55 per cent of the company's revenue in 2015 and 40 per cent in 2016. This revenue mainly came from the sale of apartments at Vincom Center Nguyen Chi Thanh in Hanoi and shophouses.
The development of real estate for sale alongside with commercial centers is a difference between Vincom Retail and other companies in the retail industry such as BigC, Aeon, and Lotte.
This strategy comes with the need to increase debt to invest in new projects, which may increase the company's financial risk. Currently, Vincom Retail is mobilizing capital from banks through two bonds worth VND5,800 billion (roughly US$255.79 million) in total.
Doan Van Binh, Chairman of CEO Group and Vice President of the Vietnam National Real Estate Association, introduced his latest book, “Vietnam Real Estate for Foreigners,” at a launch event in Hanoi on Friday.
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