Big deals still went down to defy real estate downturn

While the real estate market was generally a wipe out, the wily still managed to turn a trick

The Vietnam Infrastructure and Property Development Group Corporation (VIPD) struck the biggest deal last year, spending $470 million on the acquisition of Vincom Centre A from the Vingroup. Vinaconex - Hoang Thanh reached a deal to sell the ParkCity residential project in Hanoi’s Ha Dong district to Malaysia-based Perdanna.

Many other domestic developers have taken over projects, such as the FLC Group which spent nearly VND300 billion ($14 million) for acquisition of Alaska Land project and the Muong Thanh Group’s Lai Chau Construction Company No.1 which bought the VP6 Linh Dam project from Coma 18.

Several deals involved investors from Singapore and Korea.

Lotte Hotels & Resorts Group purchased 70 percent of the Legend Hotel in Ho Chi Minh City from VinaCapital’s Vietnam Opportunity Fund for $62.5 million.

Maple Tree successfully closed the purchase of the CentrePoint office building, located in Ho Chi Minh City for $54 million.

Korea’s CJ bought the Gemadept office building in Ho Chi Minh City for more than $45.5 million.

Experts have predicted that many other transactions could well have taken place without public fanfare. These transactions immensely influenced the real estate market, and have prompted a shake-out of less financially capable investors.

Foreign investors, especially those from Japan, the Republic of Korea, Singapore and China are searching to purchase offices for rent and shopping centres, while domestic investors are concentrating mainly on buying and selling accommodation.

The financial portal Stoxplus predicted the real estate market would continue to see more dynamic transactions, with foreign investors remaining interested in the retail sector. Projects with good locations, transparent legal situations and competitive prices will remain top targets.   

According to CBRE associate director of investment Adam Bury, whilst the increase in investment enquiries and activities may sound like a silver lining to a particularly grey cloud for some active within the market, it is worth remembering that investors were also looking to Vietnam for opportunistic returns.

“To generate such opportunistic returns, of over 25 per cent IRR for a project, the price at which an investor enters a project is key,” Bury asserted.

In addition to valuations, there are three other major hurdles which domestic groups must overcome if they are to secure foreign investment. Those projects must have a proven track record, prudent and efficient structuring and transparency to incoming groups.