Real estate M&A waiting for big wave at the end of the year

In the first half of this year, the real estate market only recorded a few merger and acquisition (M&A) deals in the industrial and residential real estate sectors. However, this market is expected to accelerate in the last months of the year, when new land laws take effect.

Few deals closed

Although the selling pressure is still very high, the real estate M&A market in the first half of 2024 is still quite quiet, with only a few deals being closed. For example, at the end of June 2024, Phat Dat Real Estate Development Joint Stock Company approved the policy of transferring all 49% of shares at BIDICI Company with a transfer price not lower than 130% of par value (VND 10,000/share).

Four days later, Phat Dat successfully transferred 25% of BIDICI Company shares to an individual for VND 769.5 billion, reducing Phat Dat's ownership ratio at BIDICI from 49% to 24%. Thanks to this transaction, Phat Dat reported a profit of VND 50 billion in the second quarter of 2024, although its revenue was only recorded at over VND 8.3 billion.

It is known that BIDICI was established in October 2020, with an investment project in the high-rise apartment land, Subdivision 9, belonging to Nhon Hoi Eco-tourism Urban Area (Binh Dinh) that Phat Dat won the auction in June 2019.

As for Nam Long Group, after many delays due to problems in updating investment certificate procedures, in June 2004, this enterprise completed the transfer of 25% of capital at Paragon Dai Phuoc Project (also known as Nam Long Dai Phuoc) to partner Nishi Nippon Railroad (Japan), with a value of 662 billion VND.

The Paragon Dai Phuoc project has a scale of 45 hectares, located on Dai Phuoc Island (Dong Nai province). In fact, since 2022, Nam Long Group has received the above amount, which is a deposit to transfer 25% of shares in Paragon Dai Phuoc. Thanks to the completion of this deal, Nam Long escaped losses in the second quarter of 2024, when total revenue decreased by nearly 74% compared to the same period.

In addition to the two above-mentioned deals, the market also recorded a number of other deals, such as Kim Oanh Group cooperating with 3 corporations: Sumitomo Forestry, Kumagai Gumi, NTT Urban Development to develop The One World Project in Binh Duong.

One World has a scale of nearly 50 hectares, with a total investment of more than 1 billion USD. The project is divided into 6 component projects. The investor plans to build facilities including a conference - exhibition center, Aeon shopping mall, 5-star hotel, and international inter-level school. These products will be introduced to the market in 2025.

Meanwhile, the industrial real estate segment also recorded the deal of Tripod Technology Corporation acquiring an 18-hectare industrial land plot in Ba Ria - Vung Tau from Sonadezi Chau Duc.

With an investment capital of 250 million USD, Electronic Tripod Vietnam Factory (Chau Duc) contributes to realizing the expansion and development plan of the high-tech electronics industry of Tripod Technology Group. This is also the largest high-tech project in Chau Duc Industrial Park to date.

Expectations of acceleration

The pressure on the selling side is still very high and M&A is considered a solution to help businesses temporarily overcome immediate difficulties, especially when the Land Law, Real Estate Business Law and Housing Law, which took effect from August 1, are expected to clear legal procedures, thereby speeding up project purchase and sale procedures.

After a long period of planning to sell the project, but unsuccessfully, the Board of Directors of Van Phat Hung Company recently continued to pass a resolution approving the policy of transferring 99% of shares at Nha Be Real Estate Joint Stock Company (Nha Be Land) - the investor of Nhon Duc Nha Be Residential Area Project (HCMC). This is also the Company's main business goal in 2024.

New, more open regulations are the premise for the Vietnamese real estate market to welcome a strong wave of foreign investment in the coming time.

Lawyer Nguyen Truc Hien, member of Vietnam International Law Firm Limited Liability Company (VILAF)

In fact, since 2021, Lotte Land has transferred VND 200 billion to Van Phat Hung to advance the purchase of 55% of Nha Be Land shares, but according to the leader of this enterprise, during the recent difficult period, waiting for new laws to be applied as well as dependence on decisions of agencies and departments has slowed down the implementation process.

Mr. Phung Dien Trong, Deputy General Director of Van Phat Hung, said that the most important part to complete the capital transfer lies in the project's legal aspects, specifically the approval of the investment policy for the project. In recent years, the completion of project legal procedures has had to wait for the approval decision of the competent authorities, so the time has been prolonged, leading to the delay of most projects in Ho Chi Minh City, including the above project of the Company.

However, it is likely that the Nhon Duc Nha Be Residential Area Project will be approved for investment in the third quarter of 2024, after the new land laws come into effect. This is a prerequisite for not only Lotte Land, but also other interested partners to be able to carry out the transfer.

In addition to legal requirements - a necessary condition for a successful M&A project, the policies in the new law also open up many prospects for foreign investors.

For example, the Law on Real Estate Business stipulates that investors transferring projects must fulfill financial obligations regarding the project's land, including land use fees, land rents, and taxes, fees, and charges related to land; after completing the transfer procedures and fulfilling financial obligations related to the transfer transaction, the buyer will be granted a pink book.

Unlike before, after completing financial obligations on land, investors have to spend a lot of time to get the pink book as well as land handover. This is a positive new point and is expected to contribute to speeding up the process of implementing procedures for transferring real estate projects.

Lawyer Nguyen Truc Hien, member of Vietnam International Law Firm (VILAF), assessed that the real estate sector has always attracted the attention of domestic and foreign investors, but in the past, there were many barriers, especially legal ones, which prevented project M&A activities from breaking through.

The 2024 Land Law also adds many benefits for foreign investors, such as receiving the transfer of land use rights in industrial parks, industrial clusters, high-tech zones, using land due to receiving the transfer of real estate projects and expanding the method of receiving land use rights for foreign-invested enterprises.

“The new, more open regulations are the premise for the Vietnamese real estate market to welcome a strong wave of foreign investment in the coming time,” Ms. Hien emphasized.

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