Quality of assets, rental growth, deal size, and land tenure are decisive for investment choices.

Many M&As in Vietnam real estate sector in H1/2019 

Vietnam’s strong economic growth in the first six months of 2019 has fueled the real estate sector through a series of merger and acquisition (M&A) deals. 

The good sight results from good macroeconomic fundamentals in the first half (H1) namely GDP growth rate of 6.8%, inflation stable at 3% against the same period last year, pledged foreign direct investment (FDI) at US$18.47 billion, and record import-export turnover at US$245 billion.

 In addition, strong sentiment from the recently-signed the EU – Vietnam Free Trade Agreement (EVFTA) has enhanced Vietnam’s position in its international integration process and competitiveness.

 In that context, Vietnam’s real estate market starts off with Keppel Land’s divestment of Dong Nai Waterfront project. 

 According to a recent report by JLL Vietnam, Keppel Land divested a 70% stake from Dong Nai Waterfront City (DNWC) with total proceeds of VND 2.3 trillion (US$100 million). After the move, Keppel Land and Nam Long Investment Corporation will jointly develop a 170-ha residential township located in the southern province of Dong Nai.

 Recently, Keppel Land has also announced its acquisitions of three land parcels in Ho Chi Minh City. Through its wholly-owned subsidiary, Keppel Land has entered into a conditional sale and purchase agreement with Phu Long Real Estate Corporation to acquire a 60% interest in the three sites with proceeds of VND1.3 trillion (US$56 million). 

 Spanning 6.2 hectares in the Nha Be District, the three sites are situated along Nguyen Huu Tho thoroughfare. The partners plan to develop a total of 2,400 premium apartments with ancillary shophouses, which will offer around 14,650 sqm of commercial space, on the sites. The total development cost for the project, inclusive of land cost, is expected to be in excess of VND7.4 trillion (US$320 million).

 Meanwhile in Hanoi, Lotte FLC Joint Stock Company, a joint venture between FLC Group and Lotte Land (a subsidiary of Lotte Group), has been formed with registered capital of VND556.5 billion (US$24.1 million) to focus on real estate projects, according to the National Agency for Business Registration. 

 Lotte Land will own 60% of Lotte FLC and the remaining stake is held by FLC and its affiliates. Local media reported FLC Chairmain Trinh Van Quyet said at a recent general shareholders meeting that the joint venture will be developing a 6.4-ha land plot in Dai Mo ward, Nam Tu Liem district, Hanoi. 

 Investors’ next moves: shifting to neighboring provinces 

 The recent crackdown on corruption might leave some impacts on real estate sector as local authorities have launched some investigations into property projects. 

 The moves, as a whole, help improve transparency in the sector, ensuring fair practices in the market and boosting both foreign and investors’ confidence in Vietnam’s real estate market, according to Khanh Nguyen, senior director, Capital Markets, JLL Vietnam. 

 In addition, the lack of “clean” and “clear” land reserves for residential and commercial projects in the central business district (CBD) or in the city’s well-known areas has resulted in a shifting towards provinces outside Hanoi and Ho Chi Minh City, said Khanh Nguyen. 

 The notable cases include Novaland with their Aqua City township project in Long Hung, Dong Nai province, Nam Long with Dong Nai Waterfront and their last year’s acquisition of 45-hectare Dai Phuoc Paragon township in Nhon Trach, Dong Nai.

 Khanh Nguyen forecast an increasing number of investors looking for industrial and logistics investment would form joint ventures with local developers and/or acquisition of land through M&A deals. 

 The lack of high specification, modern logistics warehouse space, and strong demand from regional occupiers are supporting the potential growth of this industry, she said, adding that quality of assets, rental growth, deal size and land tenure are crucial factors for investors’ investment decisions. 

 The movement becomes visible in the context of escalated US-China trade tensions which shift away manufacturing locations from China to Southeast Asia, mostly Vietnam, she noted. 

 JLL Vietnam predicts that M&A activities might potentially occur at a slower pace and lower frequencies in the remaining two quarters due to lack of “clean” and “clear” projects available for investment.