Sharp increase in direct investment

Japan-based Hinokiya Group and Technical World Group (TWG) signed an agreement on June 22 to develop a Japanese-style house project in Ho Chi Minh City through the establishment of a joint venture, for which the capital contribution ratio will be 50:50. 

This real estate project covers an  area of 9.7 hectares in Ho Chi Minh City, marking Hinokiya Group’s first project outside Japan. According to the Japanese group, Vietnam is considered a market with huge potential for investment, thanks to its stable and high economic growth rate, young population and rising income levels. 

On May 15, BW Industrial Development JSC, a joint venture between the US private equity fund Warburg Pincus and Vietnam’s Investment and Industrial Development Corporation (Becamex IDC), made debut in the southern province of Binh Duong.

With over 2 million square meters of industrial land and US$200 million in initial capital (Warburg Pincus committed 70% of the capital), BW is considered the largest supplier of industrial properties and logistics services in Vietnam, thus meeting demand of multinational corporations and e-commerce companies. 

The company has bought land for eight projects in five localities lying in key economic zones in the north and south, including Binh Duong, Dong Nai, Hai Phong, Hai Duong and Bac Ninh. 

This was Warburg Pincus’s first investment into the industrial property development in Vietnam after pumping over US$1 billion into the country’s commercial real estate and banking sector. 

Warburg Pincus is relishing its opportunities in Vietnam as the economy grows and capital markets develop, Jeffrey Perlman, Southeast Asia chief of the private equity firm told Reuters.

Perlman said the growth in Vietnam’s capital markets to US$200 billion in value from some US$35 billion five years ago, was a big draw for global investors, and he expected local regulators to bring in more reforms to develop the markets.
   
Foreign investors registered to pour US$20.33 billion in Vietnam in the first half this year, of which real estate was the second most heavily invested, with US$5.54 billion or 27.25% of total registered capital, according to the Foreign Investment Agency under the Ministry of Planning and Investment.

The figure saw a sharp increase from the US$3.05 billion committed to the real estate sector in 2017, accounting for only 8.5% of total registered capital. 

In March, Amata Vietnam, a subsidiary of Thailand’s largest industrial estate operator Amata Corporation received government approval to develop smart industrial estates in 714 hectares in Quang Ninh province. 

Recently, Vietnam also licensed the US$600-million Lotte Mall Hanoi project which will build a hotel, apartment, office and trade center complex. 

Notably, a US$4.13-billion smart city project is expected to be developed in Dong Anh district, Hanoi and funded by a joint venture between Japan’s Sumitomo and Vietnam’s BRG. 

Hectic M&A activities

In addition to direct investment, mergers and acquisitions (M&A) activities are also considered an attractive investment channel for foreign investors. 

Troy Griffiths, deputy managing director of Savills Vietnam said Vietnam’s stable macro-economic condition has supported domestic growth and high FDI inflow to the country. 

It has been a very healthy start to 2018 with solid performance across all asset classes and property will remain a safe haven throughout the short term, added Griffiths.

Consequently, M&A activities across the country has been pretty hectic, including the 24% stake purchase of real estate developer Nomura Real Estate Asia, a subsidiary of Nomura Real Estate Holdings, in Sunwah Tower, where 85% of the floor area is rented by foreign investors with total leasing area of 20,800 square meters in Ho Chi Minh City. 

In March, CapitaLand acquired a land plot in West Lake district of Hanoi for US$30.2 million. Vietnam is the third largest market for CapitaLand in Southeast Asia, after Singapore and Malaysia.  As of December 2017, it had US$694 million worth of gross assets under management in Vietnam.  

The latest acquisition will expand CapitaLand’s portfolio to 12 residential developments, one integrated development and 21 serviced residences with around 4,700 units, across six cities in Vietnam.

Keppel Land Limited (Keppel Land), through its wholly-owned subsidiary, Oil (Asia) Pte. Limited, has acquired the remaining 10% stake in Jencity Limited from Jenclub Limited for a consideration of approximately US$11.4 million at Saigon Sports City project. 

Last but not least, Singapore`s sovereign wealth fund Government of Singapore Investment Corp. (GIC) is expected to invest VND29.5 trillion (US$1.3 billion) in Vinhomes.

The investment will be through share purchases and providing a loan for the luxury and serviced apartment development arm of Vietnam’s biggest property developer Vingroup.

GIC is one of the largest investors in Vietnam’s market, notably with investments in Masan Group (5% shares), Vietjet Air (5%), Vinamilk (0.7%), FPT (3.5%), Pan Group, Vinasun, and others, with total capital of nearly VND15 trillion (US$660 million). 

Following recent movements, 2018 is expected to be a record year for the real estate M&A activities in Vietnam, according to real estate and investment management firm Jones Lang LaSalle (JLL).