Industrial real estate gaining M&A interest

December 07, 2023 | 11:00
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Although not dominating in terms of the number and value of deals, the industrial real estate market is starting to record more interest in mergers and acquisitions from foreign investors.
Industrial real estate gaining M&A interest
More capital has been pumped into industrial real estate and further requests seem to be on the way, photo Le Toan

Truong An Duong, general manager of North Vietnam and Residential at Frasers Property Vietnam (FPV), said that Vietnam has a good basement for promoting economic growth. In particular, the demand for industrial real estate is increasing due to the growing flow of foreign investment into the market.

“In the coming time, we believe that industrial real estate will still develop well, merger and acquisition (M&A) deals in the real estate sector will also increase,” Duong commented at the Vietnam M&A Forum 2023 held last week by VIR in Ho Chi Minh City.

Sharing experiences on how to make M&A deals successful, Duong mentioned some necessary requirements.

“The first is pricing, a realistic price must be given. Secondly, all parties must be transparent and understanding. In particular, after signing, both sides must make efforts to complete it. The post-M&A period must continue to be transparent and strive to build trust between the two sides,” Duong said.

One of the outstanding deals in industrial real estate in recent times was the deal with FPV in cooperation with Gelex Group to deploy industrial areas in the north with total investment of around $250 million.

Earlier this year, ESR Group, one of the largest asset management companies in Asia-Pacific, led a group of investors to invest capital into BW Industrial Development.

Some other major deals were Foxconn’s investment in Quang Chau Industrial Park in the northern province of Bac Giang and Goertek’s investment in WHA Industrial Park in the central province of Nghe An.

EY-Parthenon in September said that it recorded 10 deals in negotiation with a value of up to billions of dollars that could be finalised in the coming years. It added that the trend of industrial real estate M&A deals in the coming time will be average in size, but large in number to expand the portfolio in many key locations, meeting the diverse needs of foreign-led companies with an average value of $100-200 million per deal.

In addition to large manufacturers such as Samsung and LG, other large corporations globally continue to choose Vietnam as their destination. Also in September, Apple completed the transfer of 11 audio-visual equipment factories to Vietnam, marking a significant change in the technology giant’s global supply chain strategy.

According to KPMG Vietnam experts, Vietnam’s GDP growth will recover to 6.5 per cent next year thanks to the recovery of exports and domestic production.

In addition, the comprehensive strategic partnership between Vietnam and the United States is expected to promote huge new investment capital flows from the US, and will also encourage more investment flows of businesses from other countries. The US currently accounts for only about 3 per cent of capital flows into Vietnam.

“With the country’s economic growth rate and stable political environment, overseas funding flows are expected to continue to maintain growth momentum in the long term, especially in the manufacturing sector,” said Nguyen Cong Ai, deputy general director of KPMG Vietnam.

Ai acknowledged that this leads to increased demand for industrial real estate and logistics infrastructure in neighbouring provinces around Hanoi and Ho Chi Minh City, where the amount of available land is still relatively large.

“In this trend, developers also do not miss the opportunity. In particular, they shorten the time to enter the market through M&A activities,” Ai said.

In fact, although not dominating in terms of number and value of deals, the market is starting to record more investment requests and new international capital flows are also interested in entering the market.

Meanwhile, BW Industrial Development is ready to seize the opportunity of next year’s economic recovery with the launch of 10 new projects with a total floor area of about one million sq.m nationwide. These projects aim to meet growing demand from domestic and foreign investors interested in Vietnam’s industrial and logistics sectors.

Lance Li, CEO of BW, said, “We are maintaining our development strategy, acquiring high-quality assets and well-located land plots, firmly consolidating a position as one of the largest industrial and logistics real estate for lease in Vietnam.”

Further evaluating the investment appetite of current investors, Ai from KPMG said that investors’ M&A appetite has many differences compared to previous periods.

“In the past, when foreign investors entered Vietnam, they often required perfect legality, but recently, with the sellers being Vietnamese businesses with appropriate prices offers and making efforts in taking responsibility for completing legal procedures, foreign investors are more accepting of a certain level of risk,” said Ai.

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By Ngoc Anh

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