Investment injection bolsters real estate M&A haul

January 01, 2024 | 15:00
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The total value of merger and acquisition deals in the real estate sector reached $1.2 billion in 2023, according to the latest report from Cushman & Wakefield Vietnam.

In December, four development sites for residential development and two industrial developments were disclosed in Bac Ninh, Hung Yen, and Binh Duong provinces.

Investment injection bolsters real estate M&A haul
Investment injection bolsters real estate M&A haul, Source:

The latest outstanding deal was on December 11 when Binh Duong People’s Committee allowed Becamex IDC to transfer a 18.9-hectare new urban area project in Thu Dau Mot to Sycamore Co., Ltd., a subsidiary of CapitaLand.

With an estimated investment capital of approximately $797 million, Sycamore plans to build CapitaLand’s first large-scale residential project in Vietnam with more than 460 low-rise villas and about 3,300 apartments, with a total construction area of about 593,000 square metres.

Stephan Higgins, head of Capital Markets at Cushman & Wakefield Vietnam, assessed that a large amount of capital from foreign investors will be completed and poured into the Vietnamese real estate market in the 2024-2026 period.

“Many transactions have been being actively negotiated. The targeted investment goals aim to find clean land funds with good quality, legal ownership, complete compensation and development potential,” said Higgins.

Khanh Nguyen, head of Business Development at Gamuda Land, said that the real estate currently ranks third in the top merger and acquisition (M&A) activities in the Vietnamese market.

“The Vietnamese market still has a lot of room for growth. With the current supply narrowed by half to 15,000-20,000 products in 2023, Vietnam has potential for more,” Khanh said.

Meanwhile Dinh Minh Tuan, director of in the southern region, said that capital restructuring, M&A deals, and focusing on the mid-end segment are forecast to be the main trends of the real estate industry in 2024.

“Foreign investors have both financial and technical capacity. When the market recovers and grows again, they will be the ones to dominate the market with a range of products,” Tuan said.

In its latest market outlook report released in December, MB Securities forecasts that in 2024, the mid-range real estate segment will be a bright spot of recovery when positive signals have appeared in the market.

“The lack of supply in the affordable segment and low interest rates will stimulate demand in this segment thanks to strong real housing demand,” it said.

To overcome difficulties in accessing bank loans, a number of listed businesses such as CEO Group, Novaland, Dat Xanh, Phat Dat, and Hoang Quan Real Estate have planned to mobilise capital from the stock market.

MB Securities believes that M&A will also be the capital mobilisation trend of real estate companies in 2024 because in the context of a sharp increase in bad debt, banks will be more cautious in the real estate lending process.

Lower risk-free interest rates in the international market will also increase the valuation of Vietnamese real estate projects to international organisations, which in turn can bring about M&A activities.

According to KPMG Vietnam, M&A and calling for investment from private equity funds are of interest to many businesses to find a way out for projects that are behind schedule due to lack of capital.

“Some investors, instead of wanting to transfer the entire project, have tried to pursue it by calling on investors to contribute capital to implement the project. Meanwhile, many foreign investors have begun transferring capital into real estate projects in Vietnam in the form of buying back shares,” said Warrick Cleine, chairman and CEO of KPMG in Vietnam and Cambodia.

Furthermore, inflation is controlled below the target of 4 per cent, and the International Monetary Fund forecasts that GDP will increase again at 5.8 per cent in 2024 and 6.9 per cent in 2025. “All of those are fundamentals point to a favourable year for investors targeting strategic opportunities in the dynamic Vietnamese market,” Cleine said.

Vice chairman Nguyen Chi Thanh of the Vietnam Real Estate Brokers Association assessed that the industrial real estate market together with residential and office real estate segment will be top priority for M&A deals. However, legal problems are holding back deals, leaving foreign investors with few options.

“A series of difficult days and the government’s continuous efforts in recent times are all aimed at developing the market towards more transparency and healthy. This will be an important premise for other activities in general and M&A activities to have improvements to reach higher steps,” Thanh added.

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By Ngoc Chau

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