» » M&A in Real Estate To Boom

VNRE - The property market is now in a period of huge capital shortage, investors are therefore seeking for new sources of finance through merger and acquisition (M&A) activities in order to maintain as well as stimulate the market's growth.

According to Savills Vietnam's statistics, M&A activity in the global real estate market is witnessing a rapid growth of 23.8 percent in the 2009-2010 period. Deal value increased from US$12 billion to US$22.7 billion in Asia Pacific, while the figure in the US nearly tripled to reach US$11 billion in 2010 from US$3.8 billion in 2009.
Since 2010, M&A in Vietnam's real estate market has become one of the most remarkable fields after industry, services and finance in terms of both transaction quantity and value.

Ho Chi Minh City's real estate market has also seen series of merger and acquisition deals over the past time. Early this year, VinaLand under VinaCapital Investment Management Limited sold its entire equity stake in the international residential project in the city's District 9 at a price of US$10.9 million.

Earlier, Korean Vina Development Inc sold its 60-percent stake in the Blooming Park apartment project in Ho Chi Minh City's District 2 to Prudential Vietnam (the project is now known as the US$120-million Imperia An Phu). Kinh Do Corporation also transferred all of its 50-percent capital contribution in the Sai Gon Kim Cuong Joint Stock Company, the investor of the SJC Tower in the center of Ho Chi Minh City, to another Vietnamese firm.

Recently, JSM Indochina has sold the Peninsula project at a price of around US$11 million to the Sao Sang Saigon Joint Stock Company, an affiliate of the Nam A Bank. The Peninsula project covers an area of 7,400 square meters on Nguyen Van Huong Street in Thao Dien Ward of Ho Chi Minh City's District 2.

Khang An Real Estate Investment Joint Stock Company has agreed to transfer an 80 percent stake of a residential zone project in Tan Tao A Ward in Binh Tan District to its Singaporean partner - Dacin Holdings. In July this year Khang An purchased all stakes of the Van Phat Hung Company to raise its total capital contribution in the project to 90 percent from an initial 60 percent stake.

Also, there have been many other M&A projects over the past two years. The reason for this may come from difficulties in borrowing capital from the banks and in restructuring investment catalogue, from the dangers of license withdrawal due to project's prolonged delay, as well as from the sales or decrease of stakes to mobilize capital for company's major business. The purchaser, through M&A, will be able to get access to other fields and penetrate new markets thanks to the seller, even having chances to earn benefits from infrastructure and site clearance compensation.

Neil MacGregor, Deputy Managing Director of Savills Vietnam, said that Vietnam's property market is facing an actual lack of capital, investors, therefore, are seeking for new sources of finance.

According to him, there are a number of options for investors to add capital to their existing projects without using bank capital. The options include sales of outright project to a third party, search for a joint venture partner, en bloc sales of residential units, or strata sales of retail and office. Many Vietnamese investors are holding large land and able to partly sell to third parties in order to raise capital for other projects.

Although the shortage of bank finance is troublesome for many in the real estate sector, it also creates an unprecedented period of opportunity for investors, particularly those having a lot of cash for M&A activity. Therefore, M&A in real estate is predicted to rise in the coming time.

According to Neil MacGregor, M&A in the real estate field would grow rapidly and attract more investment from foreigners if enterprises continue facing capital difficulties and the bank interest rates remain high.

Chairman of Ho Chi Minh City Real Estate Association Le Hoang Chau said that many firms decided to sell their real estate at low, breakeven or loss prices in the context of financial difficulties. Many others, however, choose the solution of transferring their projects to stronger local and foreign firms. In general, that is a way for survival and an aim to further develop the local property market.

Reported by My An | VEN

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