Real estate buy-out deals continue to find favour

Despite inadequate legal regulations, foreign firms haven’t been put off buying assets

In the third quarter of 2014, a majority of transactions were reported in Ho Chi Minh City.

Japan’s Creed Group caught the headlines after buying into a range of projects of Nam Bay Bay Investment Joint Stock company (NBB), starting from City Gate Towers with the price of more than $59 million, followed by the NBB Garden 2 and NBB Garden 3 buildings.

Also in Ho Chi Minh City, Posco sold its Diamond Plaza to Lotte Shopping, while domestically-owned Tien Phuoc Corporation sold the Estella development to Singapore’s Keppel Land.

Japan-based Daibiru Corporation, an office developer also announced its buy out of the Conerstone Building in Hanoi for more than $60 million.

Conerstone was built by VIB Ngo Gia Tu, a joint venture between the Vietnam International Bank and Ngo Gia Tu Company.

According to Real Capital Analytics, a global data provider on property transactions, 15 transactions were reported per year on average during 2011 to 2013.

It is estimated that the average value per transaction reached more than $35 million.

During this period, most outstanding transactions reported were Metro Cash and Carry ($877 million), Vincom Centre A ($314 million) and Hanoi Daewoo Hotel ($114 million).

Figures from CBRE Vietnam revealed that domestic players dominated overall, but Korean firms were active in both selling and buying, with a range of names such as Kumho Asiana, Daewoo, Lotte and CJ while Singapore firms proved active buyers with through Keppel Land, Mappletree, and CapitaLand.

Among foreign players, Korea, Singapore and Japan led the buyer group while Korea and Hong Kong were largely sellers.

Despite the legal reforms, buyouts by foreign firms still remain overly complicated.

Neil MacGregor, managing director of Savills Vietnam, commented that the primary barrier to foreign investors was a lack of stocks and legal procedures.

“What typically happens is when they start looking for those operating assets, they realise that it’s challenging and there are not that many assets available and then they move in for development,” MacGregor said.

Another challenge in finding available land is clearly defining who has legal ownership and clear titles to the land, a vital issue that foreign investors need to resolve, MacGregor advised.

Japan, Singapore and Hong Kong investors are among the most avid property hunters, he added.

According to the Foreign Investment Agency under the Ministry of Planning and Investment, the real estate sector still ranked second in terms of overall FDI attraction in Vietnam in the first 9 months of 2014 with 27 new and extended projects licensed worth $1.2 billion.