Multi-million-dollar transactions fuel Vietnam M&A market in Q1/2022
Real estate is the second largest foreign direct investment (FDI) recipient in Vietnam for the past 10 years.
Merger and acquisition (M&A) transactions in Vietnam’s real estate in the first quarter (Q1) of this year exceeded the total value of each year in the 2019-2021 period, fueled by multi-million-dollar deals inked mostly in Hanoi and Ho Chi Minh City.
The office segment accounted for 58% of the total value of M&A transactions while industrial and residential segments recorded 28% and 13%, respectively, according to Cushman & Wakefield.
Notably, Hanoi registered about 58% of total transaction volume in the country, largely contributed by the US$550-million transfer deal of Grade-A office building Capital Place in Ba Dinh District from CapitaLand Development to Viva Land.
Trang Bui, General Manager of Cushman & Wakefield Vietnam, commented: “Total stock in Ho Chi Minh City and Hanoi combined is only about Bangkok’s total, which comprises mostly Grade B and C spaces with a lack of availability in Grade A products that are sought after by FDI businesses. Thus, after a prolonged period of lockdown and work-from-home wave, Vietnam’s office sector re-emerges at the top spot.”
|Homebuyer seeks information for a real estate project in Hanoi. Photo: Pham Hung/The Hanoi Times|
Fueled by steady economic recovery
Transaction activity resumed following steady economic recovery, said Cushman & Wakefield, a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners.
In the first three months of 2022, Vietnam’s GDP had a positive growth rate of 5.03%. The registered capital of foreign direct investment (FDI) into the Vietnam market reached $3.2 billion while disbursed FDI capital was the highest in half a decade, reaching US$4.42 billion, increased by 7.8% year-on-year.
After the manufacturing and processing industry, real estate is currently the second largest FDI recipient in the past 10 years in Vietnam. Contrary to the expectations of some experts about the risk of a real estate “bubble”, the real estate M&A market in 2021 is still active with a series of big deals, real estate businesses continuously acquire more large land funds.
In early 2021, Vinhomes JSC announced the acquisition of Dai An Urban Area in Hung Yen province, a satellite area east of Hanoi. The deal has an estimated value of VND3.1 trillion ($134 million).
In Q1, Nam Long Investment JSC completed the acquisition of 100% of the company that owns the 170-ha project in Dong Nai from Keppel Land. After going to Nam Long, the project with new name Izumi will be developed by Nam Long and Japanese partner Hankyu Hanshin Properties with a total investment of VND18.6 trillion ($808 million). In which, Nam Long owns 65.1% shares and Hankyu Hanshin owns 34.9% shares.
Last quarter, the market witnessed a number of outstanding deals in Ho Chi Minh City such as the collaboration between Novaland and Tai Nguyen JSC to restart the Grand Sentosa project (formerly known as Kenton Node) in Nha Be area. Similarly, in district 1, Saigon One Tower has been renamed IFC One Tower and will be managed by VivaLand Investment and Development JSC. In Dong Nai, the Swan Bay project with an area of about 200 hectares will be developed by Phu Long Real Estate JSC.
|A real estate project in Dong Anh District, Hanoi. Photo: Pham Hung/The Hanoi Times|
From 2017 to Q1/2022, investors’ appetite was still mainly aimed at traditional asset classes including the housing market, development land, industrial, office, and hotel market. In which, 76% of housing transactions are concentrated in Ho Chi Minh City, while Bac Ninh, Dong Nai, and Binh Duong account for more than 50% of industrial real estate investment, and Hanoi has 65% of transactions in the hotel segment.
Trang attributed the sentiment to healthy demand for residential, industrial, retail, and practice groups (cold storage, data center, among others). “The market will also witness a strong recovery story in the resort tourism and retail segments, which have been restrained in recent times thanks to the reopening of international routes. The residential real estate market can also expect positivity thanks to the $114 trillion infrastructure investment package approved by the National Assembly,” she noted.
Because the market is still dominated by domestic investors, many international investors still prefer to participate in the form of joint ventures with local partners. Most investors are involved in joint ventures and M&A deals rather than pure real estate transactions. The source of investment money is not lacking, but the difficulty lies in finding the right opportunity. The biggest barrier is the scarcity of suitable land funds in big cities like Ho Chi Minh City and Hanoi for project development.
One of the most important things for international investors is transparency. The more transparent the market is, the more foreign investors are interested. If the market is not transparent enough, there is not enough information and data, slow transactions, and unclear land ownership – all of which pose challenges for foreign investors. Foreign investors have a lot of capital, waiting to be invested in real estate. They want to partner with local investors, but they need the transaction to happen quickly, shared Trang.
Changes in legal framework are expected to remove existing barriers for real estate M&A activities this year, the New York Stock Exchange-listed company Cushman & Wakefield predicted, attributing recent and upcoming moves to the positive outlook.
It stated that the Government has recently agreed to develop a revision for Law on Housing and Real Estate Business Law, which will be submitted to the National Assembly in its Plenary Session scheduled in October 2022. At the same time, there is a proposal to submit to the National Assembly for comments and approval of the Land Law (revised) to create a legal basis for the business of land use rights.
When passed, these laws will have a great impact on the real estate market: A series of existing problems related to the real estate market such as investment activities, legal procedures because of the legal system and relevant regulations have been gradually completed, so there are no longer contradictions between the provisions in the investment legal system.
As macroeconomic circumstances remain positive and international flights are open again, the M&A market is set to be even more active in 2022. Many businesses with strong financial potential, have assessed and planned long-term development after the pandemic. For example, Novaland is building the Nova Group ecosystem; or Dat Xanh spent VND1 billion ($43 million) to establish four subsidiaries in the fields of technology, finance, and real estate.
Cushman & Wakefield said the market is growing and maturing at a faster rate than before. Market participants from project developers, investors, banks, and state regulators are more cautious in each of their actions and roles.
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