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News Release

VIETNAM

JLL: Overview on M&A activities in Vietnam 1H 2018

By Khanh Nguyen, Associate Director, Capital Markets, Vietnam, JLL



​Vietnam, 5 July 2018 – Vietnam has become an attractive destination for many foreign investors largely due to the country's friendly policies encouraging FDI, its political stability and strong economy. Foreign direct investment (FDI) disbursements rose 8.4% year-on-year to US$8.37 billion in the first six months of 2018, according to Foreign Investment Agency statistics. Furthermore, Vietnam has been taking initiatives to improve its transparency to the next level, according to JLL's Global Real Estate Transparency Index. Vietnam remains one of the most favorable destinations for foreign investment in South East Asia.

Within the first half of 2018, the Vietnamese real estate market continues to show irresistible appeal to foreign investors and continued to witness high-value merger and acquisition (M&A) transactions in a variety of sectors such as residential, commercial and industrial. Joint ventures have become popular among foreign developers who have strong financial capacity and track record joining forces with local developers who own land and have strong connection with the local community. Foreign investors are from many different countries such as Japan, Korea, Singapore, with an increasing number of groups from mainland China. JLL observes that there is an increasing number of local investors who are actively seeking for real estate deals alongside with foreign investors.

 

2018 starts off with the acquisition of Sun Wah office tower by Nomura Real Estate Development. According to their press release in January this year, Nomura acquired 24% stake in the Grade A office building located in prime location of District 1, Ho Chi Minh City. This was the company's first office project in Vietnam and second project in the country, after their investment in a condominium project "Phu My Hung Midtown" in District 7, Ho Chi Minh City. This transaction has shown Nomura's strong interest in the Vietnamese market and their long-term commitment in the country.

 

The residential sector continued to be buoyant with five major M&A transactions within the first six months. In March, CapitaLand announced that its wholly owned subsidiary CVH Nereus Pte. Ltd. acquired 16.9 million ordinary shares, representing 99.5% of the charter capital of Hien Duc Tay Ho Joint Stock Company ("HDTH"), for a total cash consideration of approximately VND 685 billion (approximately US$29.8 million), subject to usual post-completion adjustments. HDTH owns a 0.9-ha development land plot in Tay Ho District, Hanoi which will be developed into a mixed-use development consisting of residential and Small Office Home Office (SoHo) apartments, office and retail space.

 

According to their announcement in April, Frasers Property entered into a conditional share purchase agreement with Tran Thai Lands Company Limited to acquire 24 million ordinary shares, representing 75% of the issued share capital of Phu An Khang Real Estate Joint Stock Company ("PAK"). It is intended that PAK will undertake the development of a residential and commercial project on a mixed-use development land plot in District 2, Ho Chi Minh City which is held by PAK. The aggregate consideration for the proposed acquisition is VND 408.6 billion (equivalent to approximately US$18 million).

 

Another major mixed-use residential development deal in June 2018 is the divestment of Keppel Land's stakes in Quoc Loc Phat JSC ("QLP")'s development project in District 2, Ho Chi Minh City. Keppel Corporation Limited has recently announced in their press release that its wholly-owned subsidiary, Keppel Land Limited ("KLL"), through KLL's wholly-owned subsidiaries Keppel Land Thu Thiem Pte. Ltd. and its indirect wholly-owned subsidiary, Orbista Pte. Ltd. (which owned 20% and 25% shareholding interest in QLP respectively) has entered into a sales and purchase agreement to divest their stake in QLP for VND702.0 billion (equivalent to approximately US$30.6 million). Following the transaction, KLL will hold 15% interest in QLP through Orbista. After the completion of the aforementioned transaction, Keppel Corporation Limited intends to divest its remaining indirect interest of 15% shareholding in QLP which is held through its wholly-owned subsidiary, Oil Asia Pte. Ltd. which in turns, holds 100% of the shareholding interest in Orbista. Further announcement will be made by Keppel Corporation Limited regarding to this subsequent divestment.

 

Within the same month, Malaysia's Berjaya Land Berhad announced that its wholly-owned subsidiary, Berjaya Leisure (Cayman) Limited ("BLeisure Cayman"), had divested its entire resultant 32.5% of the capital contribution in Berjaya Vietnam Financial Center Limited ("BVFC") to Vinhomes Joint Stock Company ("Vinhomes") and Can Gio Tourist City Corporation for a cash consideration of VND884.9 billion (approximately US$38.4 million). Prior to the disposal of BVFC, BLeisure Cayman's capital contribution of VND967.3 billion (equivalent to US$42 million) represented 100% of the charter capital of BVFC. However, Vinhomes had in March 2018 injected fresh capital contribution of VND2,008.7 billion (equivalent to approximately US$87.3 million) following the conditions imposed by the Vietnamese authorities, resulting in a dilution of BLeisure Caymans' holding in the charter capital of BVFC from 100% to 32.5%. According to their press release, BVFC is developing the project comprising "office building, a five-star hotel, service residences and shopping mall on a 6.64-ha land located in District 10, Ho Chi Minh City". The company has not yet to commence operations.

 

In addition, according to the same announcement from Berjaya Land Berhad in 4th June 2018, Vingroup and its affiliates will potentially acquire Berjaya Vietnam International University Town One Member Limited Liability Company ("BVIUT") and have in December 2017 injected a cash sum of VND 11,904 billion (equivalent to approximately US$518 million) as capital contribution into BVIUT. Effectively, the consortium has raised its stake in the firm to 99.2%. BLeisure Cayman's initial stake in BVIUT has been diluted from 100% to 0.8% and the company intends to dispose the remaining stake in the near future.

 

Investment deals in 1H 2018 were diversified with a good variety of asset and property types transacted. In May 2018, Sembcorp Industries (Sembcorp) announced in their press release that Sembcorp Infra Services (SIS), a subsidiary of Sembcorp's wholly-owned entity Sembcorp Development, entered into a share subscription agreement with CRE Asia in respect of the proposed subscription to new shares to be issued by SIS. SIS will see its share capital increased to 20.5 million ordinary shares via the issuance of new ordinary shares, and CRE Asia has agreed to invest US$6.2 million into SIS in exchange for 6.2 million new ordinary shares, or 30% of the enlarged capital, with Sembcorp Development holding the remaining 70%.

 

SIS and its wholly-owned subsidiary SIS Hai Phong are the developers of around 30,000 sqm of warehouse space within the Vietnam Singapore Industrial Park integrated township (VSIP) in Hai Phong, Vietnam. The new capital from CRE Asia and bank borrowings will fund the development of an additional 30,000 sqm of warehouse space in Vietnam by SIS.

 

When looking at the market as a whole we expect continued growth through most asset types. 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 affordable housing market is another key growing sector, now drawing specialist capital sources who identify value in these underlying fundamentals including growing middle class.

 

We expect foreign investors to continue showing their keen interest and strong commitment in Vietnamese real estate market, and that the market in still growing. Both incumbent and incoming foreign investors are actively hunting for "clean" and "clear" projects that can meet their required returns and conditions. Due to the strong focus on Vietnam from regional investors, we expect M&A activities to reach new record levels in 2018.

 

List of some M&A transactions in Vietnam 1H18:

Source: Real Capital Analytics

Date Property Name Type City
Jun-18The Vietnam Financial CentreDev SiteHo Chi Minh City
May-18Binh Xuyen II industrial park land plotDev SiteBinh Xuyen
Apr-18District 2 land plotDev SiteHo Chi Minh City
Apr-18Vietnam International University (VIUT) ProjectDev SiteHo Chi Minh City
Apr-18Ngan Binh ComplexDev SiteHo Chi Minh City
Apr-18Eco-Green SaigonDev SiteHo Chi Minh City
Mar-18Malibu projectDev SiteHoi An
Feb-18Tay Ho District land plotDev SiteHa Noi
Jan-1851 Phan Boi ChauDev SiteHa Noi
Jan-18Sunwah TowerOfficeHo Chi Minh City
Jan-18Project Site Guest Park Hyatt HanoiDev SiteHa Noi

 

Source: Real Capital Analytics

 

Download a copy of '2Q18 Vietnam Property Market Brief': HERE

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Agency Leasing , Consulting , Facilities Management , Property and Asset Management , Capital Markets

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JLL (NYSE: JLL) is a leading professional services firm that specialises in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with nearly 300 corporate offices, operations in over 80 countries and a global workforce of 83,500 as of March 31, 2018. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.