Many real estate businesses are “struggling” with piles of assets
In the writer’s recent conversation with a representative of a real estate business in Ho Chi Minh City, he said that the biggest difficulty currently facing the business is not being able to find any other cash flow other than credit. use, or borrow from somewhere to hold out.
He also shared that the business has many projects, but unfortunately the projects have legal problems that cannot be resolved, so it is impossible to launch a business or sell the project.
“One of our projects had a capital increase of up to 1,900 billion VND, but following many discussions, the partner forced the price to be 800 billion VND, then 900 billion VND, but at this price, how might we sell it?”, this person lamented.
Many real estate businesses fall into a “dilemma” when the market’s difficulties have not ended and the removal of legal procedures continues to drag on… Photo: Quoc Hai
Stories of real estate businesses falling into the above “dilemma” are increasingly common, as the market’s difficulties have not ended.
For example, at LDG Group, in September 2023, this enterprise passed a resolution, implementing a plan to cooperate in project development, transfer projects, transfer shares owned or owned by subsidiaries. to solve financial needs to serve the payment of bond debts, bank debts, and ensure financial resources for project development.
Accordingly, LDG Investment Joint Stock Company wants to sell the Bai But – Son Tra beach resort project in Da Nang, the C1 apartment complex in Binh Duong and other assets and projects to repay bonds and bank debt. row.
In 2023, the market also recorded many famous M&A deals.
For example, recently “giant” Hung Thinh also joined hands with Marubeni – Japan’s largest multi-industry trading and investment group. The two sides cooperate to invest in developing a project located in the new administrative center of the city. Thu Duc, total expected investment is over 10,000 billion VND.
Or, in July 2023, Gamuda Land Nam Viet Investment Co. Ltd, a subsidiary of Gamuda Berhad Malaysia Group, spent regarding 316 million USD (regarding 7.2 trillion VND) to buy 98% of the capital of Tam Luc Real Estate Joint Stock Company.
Through this acquisition, Gamuda owns a project with the trade name The Riverdale, an area of 3.7 hectares, located in An Phu ward, City. Thu Duc (now renamed Eaton Park). Gamuda plans to develop this land into a mixed-use high-rise project including 1,968 exclusive apartments, 12 penthouses, 51 shops at the podium and 21 shophouses in all 6 40-storey towers.
In May 2023, the joint venture between Keppel Land (a unit of the Group) and Keppel Vietnam Fund (a private fund of the Group) spent nearly 3.2 trillion VND to buy 49% of shares in 2 projects of Keppel Land. Khang Dien.
Difficulties in cash flow force many businesses to sell their years of enthusiasm. Photo: Quang Duy
In addition to the above outstanding deals, M&A activities in 2023 are also vibrant with many other notable deals such as SkyWorld Development Berhad (Malaysia) buying 2,060 m2 of land in District 8, Ho Chi Minh City, from Thuan Thanh Joint Stock Company with price of 14.3 million USD to develop residential real estate project; Saigonres Group (Vietnam) has carried out M&A procedures to purchase 90% of the shares of Duc Nhi Joint Stock Company, becoming the owner of a plot of land with an area of 7,700 m2 in Tan Phu district, Ho Chi Minh City…
Foreign investors “master the game”
At the M&A Vietnam Forum 2023 event, Mr. Warrick Cleine, Chairman and General Director of KPMG Vietnam and Cambodia, commented that in the first 10 months of 2023, domestic investors will switch to a defensive position to reevaluate their strategies. . On the contrary, foreign investors are occupying all 5 top positions in terms of M&A transaction value.
Among them, Japan, Singapore, and the US continue to be the most active foreign investors, accounting for more than 70% of the total announced transaction value.
In particular, among the 5 largest M&A deals since the beginning of the year, there are 2 deals from real estate. This shows that despite many difficulties, real estate is still the focus and attracts the attention of the M&A world, especially foreign investors during the period when domestic investors retreat to a defensive position.
“In the first 10 months of 2023, real estate is the second largest field in terms of M&A scale, accounting for 23% of the 4.4 billion USD in total market transactions. While in previous years, this number was lower, not For the years 2021 and 2022, real estate holds a proportion of 17% and 16% of the value of M&A deals,” said a representative of KPMG Vietnam.
The director of a real estate business in Ho Chi Minh City shared that there is an underground wave of M&A in the real estate market, because in fact there are many deals because the parties do not want to announce or have not yet finalized the final price.
“As far as I know, many large real estate businesses have sold a lot of project assets during the restructuring process recently. However, this will be clearer in the second half of 2024 and beyond. Next, even though the projects were not officially announced to be transferred, their names and owners were changed,” this person said.
According to data from the Vietnam Association of Real Estate Brokers (VARS), the number of foreign investment groups interested in M&A of real estate projects is still increasing sharply with a group of investors from Singapore. , Korea, Taiwan, Japan, Malaysia… However, most new deals are in the appraisal and negotiation process.
The reason comes from the fact that the buyer has the upper hand in terms of cash flow, so they often bargain and only want to buy at a low price, while on the seller’s side, it is very difficult for businesses to accept selling assets at a cheap price following giving up their assets. too much effort and expense for creating land funds, projects, legal implementation…
However, VARS believes that there are still special cases where the project owner cannot continue to bear the costs, facing the risk of “drowning on a pile of assets”. Therefore, these businesses must sell assets and projects to restructure debt and operating systems. This is also an ideal opportunity for foreign investors to carry out M&A projects at “softer” prices.