02:42 (GMT +7) - Sunday 28/05/2017

Property

Stepping in

Released at: 16:17, 30/04/2017

Stepping in

Photo: Viet Tuan

M&A deals continue to be the primary method of investors entering Vietnam’s real estate market.

by Hong Nhung & Linh Ngoc

An Gia Investment and Japan’s Creed Group Investment Fund completed the acquisition of seven blocks of the Lacasa project in Ho Chi Minh City’s District 7 from the Van Phat Hung Group (VPH) on March 12. In March 2015, An Gia bought two blocks of the Lacasa project to develop its Angia Riverside and Angia Skyline projects and then bought the remaining five blocks. This is the sixth merger and acquisition (M&A) deal An Gia has concluded in recent years.

Vietnam’s real estate market has witnessed a flood of capable developers intensifying their M&A activities in order to secure projects with favorable locations. According to some experts, many property enterprises lack sales experience and have been unable to continue projects because they aimed at the wrong segment. Vietnam’s real estate market, as a result, has seen a host of M&As through cooperation between many investors, with numerous successful transactions conducted.

Favored approach

M&A activities in Vietnam’s real estate market continued to soar last year after a positive 2015, with deal volumes accelerating in recent months. Cushman & Wakefield (C&W) Vietnam reported that in 2015 there were 28 deals in the domestic property market, 18 of which were estimated at around $1.2 billion. As at the end of 2016 there were 24 deals completed, in which the five largest were estimated to total more than $1.3 billion.

Through M&As done to acquire projects, according to Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), property developers have been helping resolve inventories and bad debts within the real estate market. Enterprises facing difficulties have retrieved capital resources, paid debts, and restarted their business plans after selling long-delayed projects.

The opening months of 2017 have seen two notable M&A transactions, including the five remaining blocks of the Lacasa project being acquired for around $41 million by An Gia Investment and the Creed Group, which specializes in principal investment and property development. “After taking over the project from VPH, the company will exploit the project’s advantages, improve its design, add more utilities, and adjust prices to give customers greater access,” Mr. Luong Si Khoa, Vice Chairman of An Gia Investment, told VET. “This is also how we applied the last five M&A deals and found success.”

According to Mr. Khoa, there are two reasons why An Gia decided to pursue M&As rather than develop its own land reserves for new project construction. Firstly, “M&As help us save much time in completing legal procedures and dealing with issues related to site clearance and compensation,” he said. “If we develop new projects, this process may take more than a year, while the market has many good signs and we must quickly avail ourselves of the opportunities to introduce products.” 

Secondly, “most stalled projects have favorable locations with large land reserves and developed infrastructure and are near the city center, and we can promote new product lines in accordance with market demand,” he added. Mr. Masakazu Yamaguchi, Director of Creed Group Investment Fund in Vietnam, believes that while foreign investors have strength in finance and management experience, domestic firms possess advantages in large land reserves and an understanding of the local business environment and legal policies, so the combination of the two parties can create a range of competitive advantages. “In particular, we want to acquire ‘clean’ land reserves with full legal status in order to develop projects methodically, even if the cost of the land is higher,” he said.

The other major M&A deal early this year was the Hung Thinh Corporation purchasing a property project in Ho Chi Minh City’s Binh Tan district from the Binh Chanh Construction Investment (BCCI) for an undisclosed sum. Mr. Nguyen Dinh Trung, Chairman of Hung Thinh, told local media that this was the company’s second M&A deal with BCCI in the last six months. The first was a project, also in Binh Tan district, which was already built and selling apartments.