Vietnam’s real estate sector has been sluggish for a while, facing a slowdown in domestic buying activity especially from prospective home owners, mainly due to an oversupply in that segment. But this has not stemmed the inflow of foreign investment, in the sector, visible through the several M&A deals that have taken place recently.
The most prominent one involves Indochina Capital, Vietnam’s first real estate fund, which exited from a portion Indochina Land Holdings 2 (ILH2) portfolio, divesting it the Hong Kong-based Gaw Capital Partners.
The sale of the assets is part of Indochina Capital’s unwinding process, said the company adding that the Hong Kong partner will retain Indochina Land to provide ongoing asset management services during a transitional period.
These assets represent four out of 12 projects originally invested in by ILH2, including Indochina Plaza Hanoi, Hyatt Regency Da Nang and two ongoing projects in the central Quang Nam province and Ho Chi Minh City.
DEALSTREETASIA had earlier reported ( quoting industry sources familiar with development) that the institutional investors in ILH2 had sold out for around $110 million – a discount of more than 58 per cent for Gaw.
Peter Ryder, CEO of Indochina Capital, said: “In the real estate fund management business, exit strategies are as important as investment strategies. We are proud to have developed Indochina Plaza Ha Noi and Hyatt Regency Da Nang and other award-winning properties throughout Vietnam.”
He said the term of ILH2 approached its termination date, calling the sale as a successful exit.
Meanwhile, there has been speculation about Hanoi’s tallest building – Keangnam Hanoi Landmark Tower –constructed by Korea’s Keangnam Enterprises – being sold for $800 million to either Goldman Sachs or the Qatar Investment Authority (QIA), last month.
However, a new twist to this development came to light revealing that the the offer from the Qatar’s sovereign wealth fund was faked by one of the officials at the New York-based commercial real estate service Colliers International – which is a lead manager in the sale of the 72-story building,
Nonetheless, the Korean court has agreed to sell the asset, and interested, well-financed organisations are potentially overseas companies.
A real (estate) potential
Although the local market is currently facing the issue of over supply, leading higher vacancy rates and declining rent prices, Indochina Capital remains positive about the country’s property market. The reasons are – large population, favourable demographics, ongoing urbanisation and steady regulatory liberalisation.
The company said that the high-end segment, where the realty funds focus, presents unique opportunities for developers who possess the ability to develop differentiated, luxury properties with value appreciating overtime. Meanwhile, competition in the medium and lower segments is fierce.
Ryder said that Indochina Land’s approach in Vietnam includes identifying opportunistic development projects with a focus on one-of-a-kind concepts, quality design and construction in excellent locations, so that it can create “remarkable high end properties” for the long term.
While property trading in two major cities of Hanoi and Ho Chi Minh has been sluggish, tourism-focused real estate is an investment magnet in Da Nang, which attracted 25 foreign direct investment projects worth as much as $1.8 billion.
In the city, FDI projects in tourist real estate made up 54 per cent of the total FDI capital.
Experts believe that Vietnam’s real estate market has reached the low point of the growth circle, while other Asian markets are on the high point. It is predicted that the market will recover within the next couple of years and to become an attractive destination for global investors, especially with in the hospitality and the office building segments.