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When big guys run away from real estate investments
Several years ago, investors eagerly and noisily entered the real estate market. Nowadays, they leave the market quietly.
The story of Hoa Sen
On December 12, 2009, the local dwellers of the Dien Phuc Thanh residential quarter in district 9 of HCM City, witnessed an important event and saw many VIPs. The event was the ceremony starting the implementation of the Pho Dong-Hoa Sen apartment project, developed by Hoa Sen Group and Pho Dong Investment and Development Company.
Pho Dong-Hoa Sen was the first real estate project of Hoa Sen. The next projects of the group are the Hoa Sen Phuoc Long B and Hoa Sen Riverside in district 9.
At that moment, Hoa Sen stated that it planned to continue making investment in the real estate sector and strived to become a leading group in the field. It also stated that it would implement a series of property projects nationwide in anticipation of the recovery of the real estate market.
After that, in 2010, Hoa Sen spent 52.25 billion dong to buy a land plot at No 123 Tran Nao Street in district 2, planning to build the group’s head quarter on the land.
In the annual reports in 2009 and 2010, Le Phuoc Vu, Chair of Hoa Sen Group, stressed that besides logistics, the investments in the real estate sector promise to help increase the turnover and profit of the group.
However, in late 2011, Hoa Sen group unexpected announced big changes in its business strategy. It decided to withdraw from some auxiliary business fields to gather strength on the main business field – making steel.
With the new decision, Hoa Sen would withdraw all the capital from three real estate projects and one logistics project – the Hoa Sen-Gemadept port. It would only maintain the Pho Dong-Hoa Sen project which has been half done.
By the end of 2011, Hoa Sen had disbursed 186.98 billion dong for the four projects.
According to Vu, Hoa Sen decided to jump into the real estate sector on the forecast about the optimistic prospect on the real estate market. However, the market turned out to be not as good as expected, therefore, Hoa Sen decided to give up.
The audited report in 2009-2010 showed that Hoa Sen had the debts accounting for 64 percent of total assets, and 85 percent of the debts were short term debts. With the big debt, Hoa Sen has to pay big loan interests. The finance reports in the latest four quarters showed that it had to spend 50 billion dong a quarter to pay interests.
Hoa Sen needs one trillion dong more for the Hoa Sen Phu My sheet metal and the steel pipe factory. Therefore, though Vu has attributed the capital withdrawal to the changed real estate market, people think that Hoa Sen is trying to withdraw capital because it lacks money.
The followers
Not only Hoa Sen, in 2009, a lot of other businesses jumped into the real estate market. These included big names such as Kinh Do, a sweet manufacturer, Mai Linh, a taxi firm, Vinh Tien, a paper company. However, the real estate price decreases have pushed many businesses against the wall. Therefore, analysts believe that many other businesses would follow Hoa Sen.
The name of one of them is clear: Sacom, a cable manufacturer. In 2009, Sacom joined the market with three big projects, including Giai Viet in district 8, SamLand Riverview in Binh Thanh, and a resort at the Tuyen Lam Lake in Da Lat.
Sacom once affirmed that it will keep patient with the real estate sector. However, in the business plan submitted to the 2012 shareholder’s meeting, Sacom’s board of directors showed its intention to transfer the land plot at No 475/1 Dien Bien Phu street in HCM City.
It is really difficult to transfer projects at this moment, because sellers would not get good prices in the current conditions. Therefore, the fact that Sacom still wants to transfer the project shows that it has become too tired of real estate investments.
Bich Diep
vietnamnet
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