Foreign investor led M&A deals keep Vietnam’s realty market buzzing despite domestic downturn

Indochina Plaza Hanoi building

By Nguyen Thi Bich Ngoc

June 8, 2015

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.

Also read: Gaw Capital buys Vietnam’s Indochina Land Holdings-2 fund at 58% discount

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.

Also read: Goldman Sachs, Qatar Investment Authority bid for Hanoi’s tallest building

Prior to the above two deals, Vietnam’s VIBank had sold the Hanoi-based A class Corner Stone office building to Japan’s Daibiru Corporation in a $60.1 million transaction.

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.

Related stories:

Vietnam real estate on upswing as foreign investments increase

Vietnam’s Muong Thanh Group acquires hotel and tourism firm Phuong Dong

Vietnam’s Fecon allies with UAE investment fund for infrastructure development

FLC Group to launch $163m project in central Vietnam

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

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Following vacancies can be applied for (only in Singapore).   

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  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.
APPLY NOW