Real estate M&A: Are Vietnamese firrms losing ground at home?

According to data from the Ministry of Planning and Investment, overall FDI into the real estate industry reached approximately USD 1.98 billion in the first five months of the year, accounting for nearly 17.9% of total registered investment capital, representing a 70.8% increase over the same time last year. Singapore, Hong Kong, and Japan are the top three nations or territories in terms of overall investment in Vietnam.

A Balanced Market

However, data and information on recently announced project purchases indicate that international investors have a tiny advantage in the real estate M&A race.

Mr. Nguyễn Trọng Toàn, Investment Manager at Savills Hanoi, acknowledged that there have been few major M&A deals done in the first half of the year, with investors carefully assessing and filtering options for disbursement.

Many land banks for housing projects are attracting special interest from investors, who are looking for favorable signals from the government and key authorities to settle remaining concerns. Land use fees, site clearance, and compensation are critical factors in speeding deal completion. Many office buildings and hotels are being observed and analyzed by investors as they prepare to negotiate prices and structure transactions.

The announced transactions mostly focus on industrial parks, logistics, and manufacturing sectors, and are being carried out by well-known industrial park investors such as Tripod Technology, Mapletree Logistics, and Weifang Goer Group in industrial parks located in Bac Ninh, Long An, Dong Nai, and Ba Ria - Vung Tau. Mapletree Logistics Trust (MLT), a Singaporean investment fund, invested SGD 68.4 million (Singapore dollars) to purchase two grade-A warehouses in Vietnam, situated in Binh Duong and Hung Yen.

The present market condition differs from that of 2021-2022, since domestic "sharks" dominated trade during the epidemic.

Notable acquisitions include Phát Đạt acquiring a 99% share in Bac Cuong Investment Company, which has a property in Hai Chau district, Da Nang City, and Vinhomes transferring over 7 hectares of land from the Vinhomes Grand Park project in Thu Duc City to Masterise Homes.

However, analysts feel both local and international investors operate equally in the M&A market, with each group having unique capabilities and priority areas.

According to Mr. Nguyễn Trọng Toàn, domestic investors have an edge over international investors in terms of knowing the legal environment, familiarity with processes, and coordination with key authorities to complete legal procedures. As a result, local investors are increasingly prepared to take risks, acquiring projects that have yet to complete legal procedures for development.

Foreign investors, on the other hand, have financial resources, a strong brand image, and the ability to create and run real estate products. This group has distinct plans for expanding their investment in the Vietnamese market, with the goal of diversifying their asset portfolios and increasing profitability.

Expectations of a Boom When New Laws Take Effect

According to Lawyer Nguyễn Nhật Dương from HM&P Law Firm, Article 117 of the 2024 Land Law states that when land is transferred for real estate developments, it does not need to be recovered from the transferor. Instead, foreign-invested economic organizations obtaining project transfers will be awarded or leased property by the state without going through an auction or bidding procedure, specifically with land usage fees, as per Clause 3, Article 119 of the 2024 property Law.

Although it is unclear how the property will be awarded to the transferee if it is not reclaimed from the transferor, eliminating the land reclamation step may reduce time for parties involved in M&A transactions, allowing the transferee to complete the transfer process more rapidly.

According to MBS Securities Company, capital restructuring and real estate project M&A will be active in the last months of 2024. MBS also predicts that to overcome obstacles in obtaining bank loans, several publicly traded real estate businesses may seek funds on the stock exchange.

Thus, better legal factors are projected to boost real estate M&A activity in 2024.