Real estate M&A in Vietnam hit $1.5b in 2017, set for record levels this year: JLL

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Vietnam’s real estate sector saw mergers and acquisitions (M&A) touch a total of $1.5 billion in 2017, with 2018 expected to be another record year for M&A in the country, according to the latest report by real estate and investment management firm JLL.

The Vietnamese real estate market remains very attractive to foreign investors, especially from Japan, Korea, Singapore and mainland China, the report noted. M&A and joint ventures are popular avenues as foreign investors and real estate firms seek to join forces with local developers.

“The legal system continues to improve which provided more confidence to investors looking to gain a foothold in this exciting market. As Vietnam is an emerging market, there are a number of opportunities that can offer investors high returns not seen in other more mature markets,” Stephen Wyatt, JLL’s Country Head for Vietnam told DEALSTREETASIA in an interaction.

Some of the prominent deals last year were a joint venture between Hongkong Land (HKL) and Ho Chi Minh Infrastructure Investment JSC (CII), a $40-million acquisition of 1.45-hectare site District 4 by CapitaLand and VinaLand divesting its entire stake in the Vina Square Project for about $41.2 million.

While residential remains one of the most attractive sectors in the country, investors are now also eyeing the commercial market, especially Grade A office in prime locations. Last year, CapitaLand acquired a prime commercial site in the CBD of Ho Chi Minh city to develop its first international Grade A office tower in the country. Mitsubishi purchased 11,000 sqm office component of Le Meridien from Tien Phuoc Real Estate JSC and 990 Co. Ltd.

There is also greater interest among private equity funds to tap the market. The year 2017 saw the establishment of a joint venture between Warburg Pincus and Becamex IDC Corporation to develop international standard logistics warehouses in the country.

Wyatt pointed out that it will be difficult for foreign investors to find clean land (compensation completion, site clearance, land use fees have been paid, land use right is in place, and good planning) for residential and commercial projects as the Vietnamese realty market is still immature.

Moreover, the Vietnamese real estate market is tightly held and access to good assets is quite limited, he added.

Despite the challenges, JLL predicts M&A activities in Vietnam’s realty sector to hit record levels this year. “Hospitality has been interesting over the past year with new funds with foreign capital now specifically targeting this sector. We expect that this trend will continue in hospitality, and in other growing sectors such as Industrial and alternatives like education,” the JLL report noted.