Vietnam heads regional M&A bounce

June 22, 2023 | 09:00
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The end of 2023 is forecast to be an exciting time for mergers and acquisitions in the real estate sector, which is set to help domestic enterprises lower their debt repayment pressures.
Vietnam heads regional M&A bounce
Developers are rapidly seeking more cash flow for projects that are yet to be implemented

Data from commercial real estate research firm Real Capital Analytics shows that five industrial real estate merger and acquisition (M&A) transactions were reported in Dong Nai, Bac Giang, Bac Ninh, and Vinh Phuc provinces, as well as two land developments in Ho Chi Minh City and Gia Lai province, with the total value of announced transactions estimated at more than $100 million in the first five months.

A ray of light for the market in 2023 is that new investors are flooding in. According to Bui Trang, country head of Cushman & Wakefield Vietnam, the Vietnamese market is more attractive than in other countries in the context of an unstable global economy and the collapse of several big banks.

“Usually, when other markets have political and economic fluctuations, real estate investors then turn to places like Vietnam as a safe destination for their incoming investment,” said Trang.

According to Trang, before 2025 the market can expect larger-scale deals, especially private placement deals to choose strategic partners of large equitised state-owned enterprises and foreign investors.

However, Phan Xuan Can, chairman of Sohovietnam, said that legality was one of the major barriers preventing deals from being closed.

“Legal logjams can leave many projects ineligible for transfer. This year there may be a number of transactions, maybe even worth billions of dollars, but they will only be projects with clear legality,” Can said,

In a report released in May, experts at Colliers Vietnam emphasised that the factors of inflation, interest rates, and the global economic recession were continuing to hinder the recovery of key real estate markets in the Asia-Pacific region.

“As a result, investors are turning to a defensive strategy, leading to a wave of exits away from high-risk assets,” said Colliers Vietnam. “In the context of untapped capital flows and limited domestic credit, it is time for pension funds, insurance funds, and sovereign wealth funds from Europe, North American, and Asia-Pacific to approach housing projects in Vietnam where the capital market share depends mostly on the domestic sector.”

Domestic real estate investors are restructuring capital sources, and selling off assets to have the cash flow to maintain operations while waiting for the market to recover.

Khang Dien Housing Investment and Trading JSC in May sold a 49 per cent stake in two residential projects in Thu Duc of Ho Chi Minh City, with a total value of about VND3.18 trillion ($132 million) for Keppel Group Singapore and KVF fund.

This is Keppel’s second joint investment in Vietnam, following the acquisition of three land plots in Hanoi in 2022. The deal took place with Khang Dien increasingly exposed to financial problems, with record inventories and profits in decline.

Meanwhile, with its position as the largest real estate developer in Vietnam and market capitalisation of about $8 billion, Vinhomes is also actively seeking cash flow from the transfer of projects that have not been implemented.

Vinhomes and Singaporean real estate developer CapitaLand Group are negotiating to transfer assets worth about $1.5 billion, including a part of Vinhomes Ocean Park 3 project and another project located in Haiphong city in the north.

Phat Dat JSC earlier this year transferred more than 28 million shares, equivalent to 89 per cent, to Hoa Binh Real Estate JSC, a subsidiary that owns the 197 Dien Bien Phu project in Binh Thanh district of Ho Chi Minh City. Phat Dat has successfully transferred the Astral City project and brought in VND 3.3 trillion ($139 million) in cash.

According to a representative of the company, the transfer of shares to Hoa Binh Real Estate is part of Phat Dat’s investment portfolio restructuring strategy with the aim of optimising investment resources, ensuring cash flow, and increasing debt settlement capability and early bond settlement.

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By Ngoc Bich

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