Merger and acquisition (M&A) activities are heating up the local property market as several property projects are under negotiations for transfer.
Since 2008, many investors, through foreign brokerage firms located in Vietnam, have been exploring and seeking chances to enter the local property market where local investors have been facing financial problems and struggling to find an outlet for their products.
Marc Townsend, managing director of CB Richard Ellis Vietnam (CBRE), said many foreign investors are eyeing Asia, of which Vietnam is a new investment destination.
He said Korean investors are making their way back to Vietnam while several Chinese and Russian firms are looking for chances to invest in office buildings or serviced apartments.
Sai Gon Thuong Tin Real Estate Joint Stock Company, or Sacomreal, said it received many foreign investment funds seeking ways to invest in its projects this June.
For example, Mapletree Investments under Singapore-based Temasek Holdings showed keen interest in office building and apartment projects, while Sung Chang of South Korea was interested in retail projects. EngelInvest of Israel was also named.
Townsend said high population density and profitability of property projects were the main factors attracing foreign investments despite current economic challenges.
Tightened real estate loans and cash flow problems are putting great pressuring on local investors, forcing several companies to transfer their projects, reduce investments or accept break-even or even losses to maintain their businesses.
To overcome the credit squeeze, many firms are looking for cooperation with local and foreign investors to access capital sources.
Su Ngoc Khuong, associate director of investment at Savills Vietnam Co., said many Vietnamese investors are seeking advice to approach foreign partners. The company witnessed a 20 percent increase in consultation enquiries this year compared to 2010.
Most investors in the local property market are Asian, such as Japanese, Korean or Singaporean, thanks to similar cultures.
Besides apartments and offices, villas are also appealing to many foreign investors.
Khuong said few companies publicize their project transfer, except for the listed ones. Moreover, a transfer deal takes between six months and two years to be completed.
Jones Lang LaSalle Vietnam Co, for instance, took one year to settle the transfer of the Centre Point office building project on Nguyen Van Troi Street in Ho Chi Minh City’s Phu Nhuan District and the transfer value remains unknown.
Savills Vietnam has helped transfer a complex project of US$120 million, including a shopping center, a office building and residences in HCMC, Khuong said.
The transfer is to be completed at the year’s end but identities of both local and foreign investors have yet to be revealed.
Khuong’s company has previously succeeded in brokering the transfer of an office building project worth $100 million in Hanoi. Khuong said that many project transfers are underway and more M&A would be announced in the coming time.
While new investors are cautiously entering local market, those who have entered the market are expanding their investments through project acquisition.
In May, CapitalLand Group announced a 70 percent stake acquisition of an apartment project in Binh Tri Dong Ward in HCMC’s District 2 from Khang Dien Sai Gon Real Estate Co.
The project comprises of 974 units covering 2.9 ha with a total capital of $70 million.
Two weeks later, the Singapore-based property group announced another acquisition of a 65 percent stake worth VND121 billion of Quoc Cuong Sai Gon Co.
With these two projects, CapitalLand holds a total 7 property projects with 6,400 units, excluding the Somerset Central TD Hai Phong City project acquired by its subsidiary, Ascott Group Limited.
Yip Hoong Mun, chief representative of CapitalLand Vietnam, said the current difficulties are opportunities to investors and emphasized that his firm would keep seeking investment cooperation in viable real estate projects.
Regarding this issue, Chairman Le Hoang Chau of the HCMC Real Estate Association (Horea), said project M&A tendency would continue and investors are obliged to join hands to enhance financial power so as to implement their projects.
Market observers are optimistic about mutual support in brand names, experience, project management and even customers offered by foreign partners. They also say that not all project transfers result in losses.
Sacomreal is an example. The property firm gained hundreds of billions of dongs from the transfer of the Celadon City residence project in HCMC’s Tan Phu District, while it still retains a 40 percent stake in the project.
Experts predicted if project transfer deals are successfull, dozens of property projects might change hands in the near future.