M&A real estate: Investors must show style and class

When the traditional real estate segments such as retail, offices for lease, commercial housing, foreign investors are filled, foreign investors will look for a new segment, which arises from meeting today technology demand.

Recent credit tightening policies on real estate have forced domestic businesses to quickly seek additional capital from foreign investors.

Startup leverage


After 3 months of putting the first space into operation at E.town Central (District 4, Ho Chi Minh City), the largest area in Southeast Asia, WeWork - a startup to develop a co-working space, seeking to expand quickly in Vietnam market.


Before entering the office market in the most vibrant urban of 10 million people in Vietnam, WeWork also promptly brought Hanoi to its sights with the acquisition of the company of big rival Naked Hub (China) with cost 400 million USD. Naked Hub opened its first co-working space in Vietnam in April 2018 at a building on Xuan Thuy Street (Hanoi). With the direct acquisition of rivals, WeWork shows that it is gradually entering the market of shared office in the Capital.


WeWork's potential made SoftBank decide to spend US $ 3 billion to buy WeWork shares. The capital-raising deal valued WeWork at $ 42 billion. Investors are watching every move of WeWork globally to decide how to invest.


WeWork appears to stir up the real estate market, as well as awakening the big players focusing on traditional market segments in Vietnam.


Typically, CapitaLand Group (Singapore), after locating in many different segments, decided to enhance the real estate value chain and expand its global trade and retail network; Complex of commercial, industrial and transport offices; complex project, urban development; residential area;...


CapitaLand has just completed the acquisition of Temasek to buy back all issued shares of Ascendas Pte Ltd and Singbridge Pte. Ltd. This $ 8.1 billion deal makes CapitaLand the largest multi-industry real estate group in Asia, with a net worth of more than S $ 123 billion.


According to Lee Chee Koon, CEO of CapitaLand, with this expansion, his business possesses certain advantages in all four core markets: Singapore, China, India and Vietnam, in the same time can help create larger scale in developed markets.


Regarding the housing segment, in March 2018, CapitaLand also announced the acquisition of 0.9 hectares of land in Tay Ho District (Hanoi) with a value of about VND 685 billion (approximately US $ 29.78 million). Not long after that, in the third quarter of 2018, CapitaLand continued to acquire 6 hectares of land in Binh Trung Dong Ward, District 2, Ho Chi Minh City with a value of 1,380 billion VND (equivalent to 60 million USD). This project will provide the market with more than 100 housing units, expected to be completed in 2021.


In addition, a series of foreign names have been involved in the Vietnamese real estate market for over 1 year. Typically, the big Nomura Real Development acquires 24% of Sun Wah - Grade A office building in the centre of HCMC.


Facing the "hidden" problem


Vietnam has become an attractive destination for foreign investors thanks to the Government's investment encouragement policies, political and economic stability. In addition, Vietnam has been proactively improving transparency in the real estate market to become the preferred destination for investment flows.


In particular, the recent policy of tightening credit in real estate has forced domestic businesses to quickly seek additional capital from foreign investors.


During this period, most "big companies" have implemented strategies to expand their land bank through M&A deals. China, Singapore and Korea, Japan are considered to be very active investors in the project trading market. Office leasing market in segments and industrial real estate will be the hottest industry in 2019, driven by the movement of businesses from China and the positive impact of CPTPP, EVFTA trade agreements.


Meanwhile, in hotel industry and entertainment space will be fragmented. Deloitte's real estate M&A experts say that will open up opportunities for M&A 2019 with major mergers.


According to Ms. Khanh Nguyen, Director of Capital Market Division at JLL Vietnam, the lengthy approval process may affect new development projects in 2019. “Clean” and transparent sourcing is ready. To invest will be a challenge for developers and invest next year. However, this move will make the Vietnamese real estate market more attractive.


M&A will continue to be an essential trend as the market matures and investors will have to prove their bravery, experience, style and level to gain opportunities for cooperation and participation into great value and potential deals.


However, the M&A consultants also noted that, although the acquisition of real estate through M&A is a highly effective way, there are often many "hidden" issues that will appear after a while. According to statistics, there is at least one failure in every 5 deals, of which, one issue mentioned is that the market price of real estate can vary greatly with the agreed value, exposes the acquiring company to significant financial risks.


According to Vu Anh