In mid-July last year a one-hectare project at 265 Cau Giay Street in Hanoi’s Gau Giay district - one of the most favorable areas in the capital - saw site clearance get underway after lying idle for five years.

As rumors swirled around the market over who the new owners of Cemaco Tower were, the FLC Group officially announced it had completed its acquisition of the project. One month later it kicked off construction of the tower, changing its name to FLC Twin Towers.

With total investment of VND5.2 trillion ($238.3 million) from FLC, the project will comprise twin towers, including a 50-storey residential tower and a 38-storey office tower, with apartments for sale on a total area of 66,484 sq m, office space for lease with a total floor space of 35,960 sq m, and a shopping mall on 25,000 sq m.

“The number of people seeking information and expressing a desire to purchase an apartment has reached 1,000; double than the number of apartments for sale,” a representative from FLC said at the time.

The project is expected to be completed and apartments handed over to buyers in 2017.

FLC’s acquisition of this project was one of a number of merger and acquisition (M&A) deals that took place during 2015.

With recovery in the property market, M&A activities were found in all segments, becoming one of most important drivers in reviving and developing under-construction projects, Mr. Nguyen Van Duc, Deputy Chairman of the Ho Chi Minh City Real Estate Association and Deputy Director of the Dat Lanh Real Estate Company, told VET.

Residential allure

Among the different segments that make up the real estate market, residential saw a large number of M&As in 2015.

Foreign developers usually choose to joint venture or cooperate with local developers rather than acquisition in the segment.

According to insiders, developing and operating a residential project in Vietnam can be extremely complex and there are a host of challenges to address from a legal perspective.

Establishing a joint venture with domestic developers that have local expertise is therefore a smart decision.

The high-end segment was the most attractive among foreign developers in the residential market.

“Foreign investors prefer high-end projects because they have experience in developing such projects around the world,” Mr. Nguyen Nam Son, Chairman of Tanzanite International, the developer of The Hamptons Ho Tram, told VET.

“Most high-end projects with luxury design and prime location promise great profits for their developers.”

Vietnam’s real estate market has been growing, especially in the high-end segment of the condominium market, according to Mr. Robert Wong, Executive Director of Hongkong Land.

“After years of conducting extensive research we decided to intensify our presence and business here by collaborating with SonKim Land, a reputable and well regarded local developer in Vietnam,” Mr. Wong said in explaining why the company cooperated with SonKim to develop The Nassim.

“The Nassim is a true luxury project that will be a welcome addition to Hongkong Land’s regional residential portfolio and is a great example of a successful strategic partnership with local developers,” he said.

The Singaporean fund Genesis Global Capital, which has invested in Germany, the US, and Brazil and has been eyeing Vietnam, signed an agreement to develop Diamond Lotus - a green residential building developed by the Phuc Khang Corp. in Ho Chi Minh City’s District 8 last November.

It acquired 30 per cent of the project to sell and lease to foreigners in Vietnam in a deal worth $300 million over a period of six years, according to Mr. Tran Tam, Chairman of Phuc Khang.

Vietnam is continuing to integrate further into the global economy and is attracting many international investors to conduct business and people to live and travel in the country. FTAs like the TPP will result in a spike in housing demand among overseas Vietnamese professionals and businesspeople in the country.

“Most of my friends living in Singapore and Hong Kong would like to own a house in Vietnam as well,” Mr. Son said.

Foreigners are estimated to account for 30 per cent of homebuyers in Ho Chi Minh City, he said, adding that their demand for high-end apartments will increase in the time to come.

Besides high-end residential, affordable housing also attracted substantial interest from foreign investors last year.

Among others, the US investment fund Global Emerging Markets (GEM) and the Hoang Quan Group entered into an agreement in which the US fund would invest $20 million in the Vietnamese partner through the purchase of shares within 30 months of the signing of the agreement last July.

According to GEM President and CEO Mr. Christopher F. Brown, the investment fund has been interested in Hoang Quan’s real estate investment performance for a long time, especially as the developer is one of the pioneers in developing large-scale social housing projects in the south of Vietnam.

“GEM believes that the social housing segment will see further development in the future due to Vietnam’s social security policies,” Mr. Brown was quoted as saying.

Hospitality highlights

Vietnam’s resort and hospitality property has also seen its share of foreign suitors. “Although the second home market is still in the very early stages of development the market in Vietnam can compete directly with that of Phuket or Bali,” according to Mr. Matthew Powell, Director of Savills Hanoi.

When two long-awaited pieces of legislation - the Law on Housing and the Law on Real Estate Business - came into effect on July 1 industry insiders anticipated their impact would be significant as they mark an important step towards opening up Vietnam’s real estate market to overseas investment.

In addition, total international arrivals in 2015 reached 7,943,651, an increase of 0.9 per cent against 2014, according to the Vietnam National Administration of Tourism. These factors all support the development of Vietnam’s resort and hospitality projects.

Among notable M&A deals in the sector, VinaLand Limited, part of VinaCapital, sold its stake in the $4 billion Nam Hoi An casino resort to Gold Yield Enterprises Limited, a unit of the Hong Kong-based Chow Tai Fook, last September.

The transaction turned VinaLand from the largest shareholder of a project developing a mixed-use township incorporating homes, shops, leisure facilities, and gaming on more than 100 ha in the Chu Lai Economic Zone, into a strategic investor and gave Chow Tai Fook, owned by Hong Kong's fourth richest person, Cheng Yu Tung, control of the project.

In the next two or three years projects with beachfront villas and units in Da Nang and on Phu Quoc Island are certain to be much sought after by foreign developers due to their potential for profit, according to Mr. Son.

“To own a beachfront villa in Vietnam purchasers may have to pay just $1 million compared to $5 million for a comparable property elsewhere,” he said.

As buyers from Hanoi and Ho Chi Minh City account for the majority in hospitality projects, those located within a two or three hour drive of the two cities will become more attractive among developers and investors.

It is important that infrastructure improvements continue and in particular that there are more direct flights to Vietnam to ensure that the market is sustainable and buyers can achieve attractive returns, according to insiders.

Hoang Thu

VN Economic Times