Vietnam: Joint ventures preferred for equity investment in real estate

Photo by Ngo Tung on Unsplash

Joint ventures are the most preferred route for investors in the Vietnamese real estate sector since the beginning of this year, as they seek to combine the assets owned by local developers with the capital and expertise of foreign companies.

Acquisition of local realty firms was another favoured route for overseas developers wanting to navigate the market, while private equity funds shied away from closing deals, according to industry experts who spoke with DEALSTREETASIA recently.

"The institutional side is getting stronger than private equity. If we look at the money that is flowing from countries like Japan, China and Korea, it is much bigger,” said Troy Griffiths, deputy managing director of Savills Vietnam. CBRE recorded four equity investment deals of late, three of which were JVs between local companies and foreign partners.

Nam Long has partnered with two Japanese firms — Hankyu Realty and Nishi Nippon Railroad — for the $348-million Mizuki Park project in Ho Chi Minh City. The Vietnamese firm holds a 50 per cent stake in the project.

Similarly, Ho Chi Minh City Infrastructure Investment has forged a $115-million JV with Hong Kong Land, while Bitexco entered into a partnership with Mitsubishi Corporation to develop the $290-million Manor Central Park in Hanoi.

The only private equity deal recorded in the first half of 2017 was the first close at $46 million of a $100 million follow-on investment round by EXS Capital in SonKim Land.

Last month also saw a funding agreement between Vietnam-focused fund manager Indochina Capital and co-working space operator Toong.

Meanwhile, data given by Savills shows a number of land acquisition deals that were inked or closed recently. These include a domestic transaction between DOJI Group and Continental Tower, and a string of purchases by Japanese players, including Mitsubishi buying Le Meridien’s office area, Fujita Corp acquiring 70 per cent of A&B office tower, and AEON Mall acquiring a 95,000 square metre plot in Hanoi from BIM Group.

During the two-year period until the end of 2016, private equity investors were actively involved in direct investment through their funding platforms. In 2015, Gaw Capital started with a special purpose vehicle, Gaw NP Capital Vietnam Fund 1 LP, and acquired a portfolio of Indochina Capital for $106 million.

A year later, Indochina Capital formed a $1 billion investment platform with Kajima Corporation, which was followed by multi-dollar partnerships between Warburg Pincus and VinaCapital, and between Sunwah and Saigon Asset Management.

Although private equity funds are still actively looking at the sector, it still "makes compelling business sense for most investors entering Vietnam to form a JV with local developers,” CBRE said in response to an email query.

"This would be helpful not only in sourcing projects but also in ensuring that projects are completed smoothly,” the firm noted.

Savills Vietnam’s Griffiths says that several real estate deals in Ho Chi Minh City will be announced in the next few months. "Deal activity will continue to grow strongly in the second half. We are doing more presentations to foreign investors than ever before. Vietnam is a very attractive market at the moment,” he said.


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