Real estate project acquisition is bustling again

"M&A is a path we are very interested in," said Mr. Dang Van Thanh, Chairman of TTC Group, at a recent forum on mergers and acquisitions. About 3 months ago, TTC inaugurated an investment resort at Doc Let beach (Khanh Hoa). But Mr. Thanh said that was an isolated case. "We do M&A for the rest," he said.

Over the past few years, TTC Hospitality of this group has continuously acquired 3-5 star hotels in many localities. The most recent project in their hands is Imperial Hotel Hue. To date, TTC's hotel and resort system covers nearly 20 destinations.

Not only TTC is "hunting", in the housing project segment, Gamuda Land has continuously persisted in its acquisition strategy for the past two years. After two deals in Thu Duc (Ho Chi Minh City) and Binh Duong last year, this year the Malaysian real estate giant spent 316 million USD to acquire Tam Luc Company to own a 3.77-hectare project, planned to have 6 40-storey towers right on the front of Mai Chi Tho Street.

Mr. Angus Liew, Chairman of the Board of Members of Gamuda Land Vietnam, said that the M&A strategy implemented in Vietnam since 2020 and the past two years has been going smoothly. "We will look for further opportunities. This market is very attractive to real estate investors," he said.

According to KPMG's report, in the first 10 months of the year, real estate was the second largest sector in terms of M&A scale, accounting for 23% of the 4.4 billion USD in transactions in the entire Vietnamese market. In 2021 and 2022, real estate accounted for 17% and 16%.

Of the five largest deals, two were in real estate. In addition to Gamuda Land buying Tam Luc, the larger deal was ESR spending $450 million to buy a strategic stake in industrial property manager BW Industrial. On average, the size of a deal in the first 10 months of the year reached a record $166 million, compared to $56 million in 2019 and $51.8 million in 2022.

Warrick Cleine, Chairman & CEO of KPMG Vietnam and Cambodia, said that real estate used to attract a lot of M&A activities many years ago. Now, this market is bustling again, thanks to a number of reasons.

First, industrial real estate has become an attractive asset as investors see a trend of shifting production to Vietnam, according to Mr. Truong An Duong, CEO of the Northern region of Frasers Property Vietnam. "In the coming time, industrial real estate will develop well and there will be more M&A deals," he predicted.

In fact, of the 25.76 billion USD of FDI poured into Vietnam in the past 10 months, 18.84 billion USD was invested in the processing and manufacturing industry. According to JJL, rental prices for ready-built warehouses continued to increase in the third quarter, with 3.5% in the South and 5.7% in the North compared to the same period in 2022.

Second, after the liquidity crisis last year, the interest rate level has continuously decreased, giving the real estate market a chance to recover, especially stimulating housing demand. Mr. Khanh Vu, Deputy General Director of VinaCapital Vietnam Opportunity Fund, said that with the current low interest rates, people are ready to look at real estate. "It is not surprising that investors are starting to return," he said.

Experts predict that real estate M&A will continue to be vibrant. Investing in many places, but Mr. Angus Liew said that after traveling around, he still realized that Vietnam is an attractive destination. According to him, this market has a lot of demand but limited supply, the population is not only large but also young and 50% will move to the middle class.

"The legal framework is also favorable and attractive. We can sell unfinished projects while in some other countries this is not possible," he assessed. In particular, choosing the M&A method will help bring quick results, only about 7 years according to Mr. Angus Liew's calculation.

Mr. Truong An Duong of Frasers Property believes that not only industrial and residential real estate, office buildings will also witness M&A development when the number of luxury buildings with green standards is still scarce. "M&A demand in the coming years has a lot of potential in all segments," he said.

However, the market also has areas for improvement. Some common challenges of the Vietnamese M&A industry include lengthy legal processes for conducting deals, high valuation expectations, and weak accounting systems on the seller side. In addition, the real estate sector also has its own characteristics. "If the process is more transparent, especially land auctions, it will attract more investors," said Mr. Angus Liew.

Ms. Luu Thi Thanh Mau, General Director of Phuc Khang Investment and Construction Joint Stock Company, assessed that M&A deals are increasing rapidly in both quantity and scale of agreements, so it has reached a stage where quality is needed more than quantity. Buyers and sellers need to improve quality to leverage capital, management, and product quality after the transaction, through compliance with industry standards from an M&A perspective.

Mr. Warrick Cleine said that the real estate industry has many challenges in the legal environment, but strategic investors are still actively pursuing many high-quality assets. "Investors with clean land funds and good legal quality will be attractive. This is an interesting field and there will be a lot of activities in 2024," he said.