Giant real estate deals could see delayed plans reborn

Keppel last week announced that it was in the process of selling a part of Saigon Sports City and the Saigon Centre, two major real estate projects in Ho Chi Minh City. The two deals are expected to bring Keppel VND6.5-7.4 trillion, ($270-310 million), subject to conditions including obtaining regulatory approval, according to a Keppel statement.

The Saigon Sports City deal is being funded by HTV Dai Phuoc Co., Ltd. and Vinobly Investment Real Estate, which will receive 35 per cent each. The remaining 30 per cent will remain with Keppel subsidiary Jencity.

Meanwhile, Japan’s Toshin Development has subscribed for 46.36 million ordinary shares in Himawari VNSC3, another

Keppel subsidiary and developer of the Saigon Centre. Keppel holds the remaining 46.55 million ordinary shares.

Through this transaction, Toshin will indirectly participate in Saigon Centre’s phase 3, a potential mixed-use development located in the most vibrant downtown area of Ho Chi Minh City. Toshin will pay about around $46.4 million in seven instalments, with the final instalment expected to take place after construction permits are issued to the project developers.

Toshin is a developer of real estate established in the 1960s by Takashimaya Group, an operator of high-end shopping centres in Japan.

The Saigon Centre, located in District 1 and covering 2 hectares, consists of 25 floors of offices and apartments for lease in the first phase, and has been in use since 1996. Phase 2 was completed in 2016 with an additional 43 floors and nearly 200 serviced apartments. Phase 3 will cover 8,600 sq.m and is undergoing planning.

The Saigon Sports City project broke ground in 2019 with an estimated capital of $500 million on a 64-hectare plot in Thu Duc city. When completed, it is expected to provide thousands of luxury apartments as well as sports, entertainment, and lifestyle facilities for its residents.

The projected first-phase operation date was scheduled for 2027, but little progress has been seen at the site thus far.

Variety of complexes

Also in September, TT Capital Investment Corporation and two Japanese partners, Cosmos Initia and Koterasu Partners, launched the TT AVIO project of about 2,000 affordable apartments. The joint venture is expected to invest about $150 million in the next five years.

Cosmos Initia is a member of Daiwa House Group, which has subsidiaries cooperating to develop a number of real estate projects in Vietnam. Koterasu was established in 2020.

Elsewhere, in August, Daewoo E&C Company from South Korea decided to invest $105 million to develop real estate projects in Dong Nai and Thai Binh provinces. A consortium of Daewoo E&C Vina, THT Development Company, Gip Land Co., Ltd. and Zup Invest will develop a new Kien Giang urban area in Thai Binh province. The project spans 96 ha, with total investment of $343 million.

In the southern region, Daewoo E&C also will cooperate with Taekwang Vina Company to develop the Long Tan Phu Hoi urban area in Dong Nai province, a compound of low-rise housing, high-rise apartments, and social housing.

Many other merger and acquisition (M&A) projects look likely to emerge in the near future. According to The Korea Economic Daily, South Korean securities company Mirae Asset is looking to convert bonds into shares in the Landmark 72 complex of three buildings, including the second-tallest skyscraper in Vietnam, Keangnam Hanoi Landmark Tower.

Last week the newspaper reported that the global reinsurance company AON Plc, the owner of the project, wants to sell all of its shares in the asset for more than $770 million.

Several real estate and infrastructure management companies are reportedly considering purchasing the skyscraper. It is located in the new development area of Hanoi, on the main road located by the National Convention Centre, JW Mariott Hotel Hanoi, and a series of office buildings.

The building currently has more than 300 office rentals, including many multinational companies with long-term leases such as Ericsson Vietnam, KPMG, PwC, Woori Bank, Doosan, Marubeni, FPT, and more.

Phan Xuan Can, chairman of SohoVietnam, a professional realtor for M&A in real estate, said that the tower was an attractive deal for investors and financial funds.

“In addition, Keangnam Landmark is one of the very few high-rise buildings in Hanoi which can currently offer 2,000 sq.m on one floor. This is one of the conditions that can attract large companies, especially multinational companies, to build back-office space, with thousands of employees housed at a time,” said Can.

Another project grabbing attention is the change of ownership of the 5-star Spirit of Saigon hotel. Located opposite Ben Thanh market in District 1 of Ho Chi Minh City, it boasted an initial investment of $500 million and is currently collateral for $416 million of bonds.

On September 23, a representative of Saigon Glory bondholders issued a document approving

Bitexco Group’s permission to transfer the collateral to Phuong Dong Hanoi Real Estate Company. Bitexco Group is the parent company, which owns all of Saigon Glory LLC, the investor of The Spirit of Saigon.

After construction of the basement over a decade ago, the project was at a standstill until 2020, when the towers were built. Nevertheless, despite gaining capital from bonds, further construction is still delayed. Saigon Glory has suffered losses for years and failed to repay bonds on time, with seriously depleted collateral.

Investors seek quality

According to Cushman & Wakefield Vietnam, there have been about 16 notable real estate M&A deals since the last quarter of 2023. Foreign investors who are willing to spend the most are mainly from Malaysia, China, Japan, Singapore, and South Korea.

According to Bui Trang, country head of Cushman & Wakefield Vietnam, many transactions are still in the negotiation process.

“The goal of foreign investors is still to find clean land, good quality, and real value as well as complete legal documents, with a lot of development potential,” Trang said.

The housing segment is still an attractive choice for both domestic and foreign investors because of its attractive profit rate, Trang added.

“If 15 years ago, foreign capital only focused on high-end housing with familiar names such as Keppel Land and Capitaland, now the market has many new players joining the game such as Lotte Group, GS, Sumitomo, and Hong Kong Land,” she said.

Along with housing, the industrial real estate sector is also a magnet attracting foreign capital. One of the most notable deals earlier in the year was Mapletree Logistics Trust, an investment fund from Singapore, which spent more than $50 million to buy two class A warehouses in Binh Duong and Hung Yen provinces, Trang added.

Can from SohoVietnam said that currently, the demand for buying was very high, but supply of projects very limited because many developments do not have the correct legal documents.

“Hopefully, the three amended laws that come into effect from August 1 will be a breakthrough for M&A activities to be smoother going forward,” Can said. “More projects offered will gradually meet supply and pull the transfer price down to a reasonable level, and correspondingly, house prices will also be pulled down.”

Restructuring efforts are helping many listed real estate businesses have capital flow to repay debt as well as meeting the demand of investment and business activities.

Japanese investors continue to participate more deeply in merger and acquisition activities in the real estate sector in Vietnam, with a series of new initiatives and expanding portfolios.

Vietnam Investment Consulting (VNIC) successfully convened the National Industrial Real Estate Forum 2024, themed 'Capturing Trends, Leading the Market' on September 19 in Hanoi.