M&A dealmaking in real estate rumbles on undaunted

M&A dealmaking in real estate rumbles on undaunted - illustration photo

In July, CapitaLand Tower Ltd. handed over a land plot located in the Saigon-Ba Son complex to Ho Chi Minh City Commercial Services JSC (Setra Corp.) for an office tower project named The Sun Tower.

The value of the deal was not revealed, but according to the Hanoi Stock Exchange, Setra Corp. afterwards had issued bonds and collected a total of VND3.75 trillion ($163 million). The sum will expire in July 2023 and is assumed to be allocated to develop The Sun Tower.

Two other land plots at the Saigon-Ba Son complex were also said to have been transferred to domestic investors recently – Centennial Saigon invested in by Alpha King and Sunshine Heritages from Sunshine Group.

The Centennial Saigon is comprised of a 49-storey building and is considered one of the most luxurious projects in Ho Chi Minh City, with a price of $8,000-12,000 per square metre when it was launched to the market last year.

Sunshine Heritage meanwhile consists of a 36-storey building and two 47-storey buildings at a total of 12,000sq.m.

In Tay Ninh province, Hoang Quan Group has also transferred a social housing project to Golden City. This project will be developed from VND1.75 trillion ($76 million).

In June, Phat Dat Real Estate Development JSC acquired 99 per cent from Ben Thanh-Long Hai JSC to develop Tropicana Beach Resort and Spa, as well as Wyndham Tropicana Resort & Villa in Long Hai town of Ba Ria-Vung Tau province.

In the west of Hanoi, meanwhile, Vinaconex transferred 50 per cent of its shares in An Khanh JVC in the Splendora Urban Area project to Pacific Star Investment and Development JSC, ending a 15-year involvement in the venture.

A slew of other deals have not yet been confirmed officially. However, according to recent figures released by Savills Vietnam, at least $500 million was valued from M&A deals during the last few months in the Vietnamese market.

In the global market, according to a recent analysis from PwC, the current pandemic has forced real estate deals to drop in the first half of this year, but recovery could be attainable by the fourth quarter as the industry meets demand for rapid technological change and greater workforce flexibility.

Uncertainty in underwriting, financial markets, and the broader economy dampened M&A across real estate during the first half of 2020.

“Price discovery was elusive in many sectors. However, investors hold ample dry powder, and changes in how we live and work could lead to growth in this asset class,” read the PwC report. “For now, demand for many types of real estate remains strong, driven by growth in e-commerce, digitalisation of business, and the move by millennials to mid-size cities. We expect deal-making to gradually gain strength, assuming the economy revives during the second half.”

Tim Bodner, US real estate deals leader at PwC, believes that the whole globe is experiencing the great digital acceleration of business models that changes the status of many real estate activities.

“Companies across sectors are accelerating their adoption of the cloud, rapidly moving more online from offline, and digitalising business processes. These accelerating trends are propelling market activity in certain real estate sectors that were once niche and now should be viewed as mainstream and for the traditional sectors are causing investors to rethink use cases and innovate to capture hidden value for well-located real estate,” Bodner said.

According to Phan Xuan Can, chairman from Sohovietnam, “M&A deals are an ideal opportunity for investors who are financially capable because buying distressed assets is the shortest way for them to gather land funds at a reasonable charge.”

Via M&A deals, developers will save time in completing legal and administrative procedures, as well as land compensation issues, Can added.

Moreover, transactions also help end project delays, reducing stockpiles, and resurrecting the belief of buyers in the market.