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JLL: M&A activities hit $1.5bn in 2017

Released at: 16:33, 06/02/2018

JLL: M&A activities hit $1.5bn in 2017

Photo: Viet Tuan (VET)

M&As active in 2017 and will reach record levels this year, according to JLL Vietnam.

by Hong Nhung

Total merger and acquisition (M&A) transactions in Vietnam’s real estate market in 2017 were valued at around $1.5 billion, a sharp increase compared to $921 million in 2016, according to the latest JLL Vietnam report on M&A activities in the country.

There are hundreds of millions of dollars waiting to be poured into the market in most segments, including residential, office, retail, hospitality, and industrial, with investors from a host of different countries such as Japan, South Korea, and Singapore and an increasing number of groups from mainland China.

2017 proved to be an active year for M&A activities. Thu Thiem, the new urban development in Ho Chi Minh City, witnessed a number of high profile deals, including the joint venture between Hongkong Land (HKL) and the Ho Chi Minh Infrastructure Investment JSC (CII), which signed a cooperation contract in December to develop the Thu Thiem River Park project.

Investors remain bullish on Vietnam’s real estate market, with a growing number looking to acquire “clean and clear” land. In the last quarter of 2017, CapitaLand acquired a 1.45-ha site in District 4 for around $40 million, making it the ninth residential development in the city and eleventh in the country.

Demand for operating office buildings in prime location continues to rise. In the first month of 2017, CapitaLand entered into a conditional agreement to acquire a prime commercial site in Ho Chi Minh City’s CBD to develop its first international Grade A office tower in Vietnam, picking up a 100 per cent stake in a 0.6-ha site with a gross floor area of 106,000 sq m. Mitsubishi, meanwhile, purchased the 11,000 sq m office component of Le Me’ridien from Tien Phuoc Real Estate JSC and 990 Co. Ltd.

Some demand has come from offshore capital sources, but the Continental Tower deal is the latest seeing commitment from domestic buyers.

Vietnam’s real estate market welcomed a record number of foreign capital investors last year, mainly private equity funds, looking to deploy their capital quickly and efficiently. Notable transactions involved the establishment of a joint venture and a strategic cooperation agreement between Warburg Pincus and the Becamex IDC Corporation to develop international-standard logistics warehouses and to share capital market experience and assist Becamex to grow its business and customer base globally.

Residential is traditionally one of the most attractive sectors but investors are now targeting the commercial market, especially Grade A office space in prime locations with expected potential growth of capital value and yield compression (7-8 per cent), JLL noted. Office rentals in Vietnam are higher than in neighboring countries, reflecting an overall shortage of supply. Investors continue to show a good appetite for hotel assets.

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