The property industry is seeing a revival in mergers and acquisitions with several large deals completed this year and the average transaction value at a record high.
At a recent conference Dang Van Thanh, chairman of conglomerate TTC Group, said M&A is one of his company’s main focuses now.
In the last few years TTC Hospitality, its hotel and resort subsidiary, has acquired several three- to five-star hotels across Vietnam, the latest being the Imperial Hotel in Hue.
It now has 20 properties.
In the housing segment, Malaysian property developer Gamula Land has had many M&A deals in the past two years.
Within the year, it bought out local property developer Tam Luc for US$316 million and took over a massive 3.77-hectare project for six 40-story buildings on HCMC’s Mai Chi Tho Street.
Angus Liew, chairman of Gamuda Land Vietnam, claims the firm’s M&A plans have been carried out smoothly for the past two years.
“We will be looking out for new [M&A] deals. This market is very appealing to property developers.”
A report by audit firm KPMG shows real estate has the second highest year-to-date transaction value in Vietnam’s M&A market.
In 2021 and 2022, the industry also contributed to 17% and 16% of the country’s M&A market value, respectively.
Of the five biggest M&A deals, two are real estate.
Another notable deal involves real estate firm ESR buying US$450 million worth of state-owned industrial property developer BW Industrial’s shares, taking a strategic stake in the latter firm.
The average value of an M&A deal in the first 10 months of this year hit an all-time high at US$166 million, more than tripled the figures in 2019 and 2022, which were $56 million and $51.8 million, respectively.
A few factors are driving Vietnam’s real estate M&A market.
The first is the rise of the industrial real estate industry stemming from the global supply chain moving manufacturing to Vietnam, according to Truong An duong, general manager of property developer Frasers Property Vietnam.
“In the short term, the industrial real estate sector will continue to develop and see more M&A deals.”
In fact, out of the $25.76 billion of FDI poured into Vietnam in the year to date, manufacturing and process industries attracted $18.84 billion.
According to real estate firm Jones Lang LaSalle (JLL), warehouse rent in Q3 of 2023 has jumped 3.5% in the south and 5.7% in the north of Vietnam from the same period last year.
The second factor is the record low bank deposit rates driving investors to other options, including real estate.
Khanh Vu, deputy CEO of investment firm VinaCapital Vietnam Opportunity, believes investors are coming back to the market.
Experts speculate Vietnam’s real estate M&A market will continue to thrive.
Warrick Cleine, chairman and CEO of KPMG in Vietnam and Cambodia, comments that the real estate M&A market will be even more active in 2024.
Liew, having invested in many countries, finds Vietnam the most profitable with high demand, insufficient supply and a large and young population – 50% of which is expected to move up to the middle class.
“The legal framework is also favorable and enticing. We [Gamuda Land Vietnam] can even sell unfinished projects, which is not allowed in some other countries,” he says while claiming M&A is the fastest strategy to make a big profit.
Duong speculates that aside from industrial real estate and housing, the office sector will also see more M&A deals, especially those involving premium offices with green certification.
“M&A has a lot of potential to grow in all sectors [of the real estate market].”
Nonetheless, there are some issues that remain to be solved, including time-consuming legal processes for business acquisitions, unreasonable pricing and weaknesses in the sell-side’s accounting system.
“If the legal processes could be more transparent, especially the land auction process, more investors would be interested,” says Liew.
Luu Thi Thanh Man, CEO of property developer Phuc Khang, assesses that as M&A deals increase in quantity and value, the buy-side and sell-side need to cooperate to manage and maintain the quality of their projects after the transaction.
