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Defensive market posture leads to consolidations
Mergers and acquisations will increase sharply in the real estate sector this year due to expected difficulties in obtaining financing for projects, says Troy Griffiths, national director of research and valuation for Savills Viet Nam.
The need to raise capital through the securities market, as well as to streamline and restructure operations, would also drive M&A activity in the real estate industry, Griffiths suggested, adding that the market would no longer be able to thrive on simple land transactions or the wholesale development of apartment projects.
According to research and consultancy company AVM Viet Nam's report M&A Viet Nam 2010-11, real estate was one of the three sectors which witnessed the greatest number and highest value of M&A deals last year, ranking behind only the industrial and financial sectors.
The largest M&A deal in terms of value last year was Sacomreal's transfer of a 60-per-cent stake in Sai Gon Thuong Tin Tan Thang Investment Real Estate Joint Stock Company, worth US$82.4 million, to Gamuda Land. Gamuda Land now is the developer of the Celadon City project in HCM City's Tan Phu District.
Since mid-2010, the real estate market has seen at least five other major M&A deals. Late last month, VinaCapital's VinaLand Real Estate Co sold all of its holdings in a housing project in HCM City for $10.9 million. Earlier, Korean Vina Development Inc sold its 60-per-cent stake in HCM City's $120 million Blooming Park apartment project (Now known as Imperia An Phu) to Prudential Viet Nam.
Kinh Do Corp also transferred a 50-per-cent interest in Sai Gon Kim Cuong Joint Stock Company, an investor in the SJC Tower in HCM City, to another domestic investor, while PetroVietnam Finance Land Joint Stock Co transferred its Diamon Tower project in Ha Noi to Petro Imico Construction Investment Joint Stock Company.
Many property firms see M&A as an effective tool to boost revenue growth. Kinh Do executives said their deal brought them a profit of VND425 billion ($20.2 million).
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