Real estate giants pounce on land expansion strategies

By Vu Le, Dam Tuan   April 1, 2016 | 04:58 pm PT
Huge real-estate corporations such as Vingroup, Sacomreal and Khang Dien are racing to snap up more land through new partnerships and M&As.

Real estate enterprises have strong interest in other businesses that own land and property in strategic areas like downtown or developed zones. In the middle of March, the Hanoi Stock Exchange revealed that Vietnam’s leading property developer Vingroup plans to buy a stake in the Vietnam Book Corporation (Savina).


Real estate giants are trying to snap up land by acquiring stakes in other companies. Photo: VnExpress

Vingroup will negotiate the price with the book company. After acquiring Savina, Vingroup will be the strategic shareholder in the VND900 billion (over $40 million) Savina Plaza project located in the center of Hanoi.

If the deal is finalized, Vietnam’s most famous property giant will develop its new partner's extensive land and property with investment of VND463 billion (nearly $21 million).

In exchange, Vingroup needs to ensure a long-lasting partnership with Savina that includes technology transfer, HR training, corporate governance and the refurbishment of No.44 Trang Tien street. The property giant has pledged not to transfer any of its stake in the company for at least five years.

Besides the headquarters located in an expensive part of downtown Hanoi near Hoan Kiem Lake, the state owned publisher owns land in prime locations across Hanoi that generate an estimated 80 percent of its revenue while only 20 percent comes from publishing and selling books.

In 2015, Vingroup also purchased a major stake in the Vietnam Exhibition and Fair Centre, another state-owned company with prime real estate in Hanoi.

Saigon Commercial Real Estate JSC. has taken a diffferent approach and targeted retail partners. On March 31 it announced 20 strategic partners in various fields, including Auchan Retail Vietnam - Simply Mart and Co.op Mart.

Chairman and CEO of Sacomreal Dang Hong Anh told VnExpress that retail partners play a special role in its complex commercial real estate development strategy. The HCM City arm of the company will prioritize leasing or selling space in its properties, while expanding upwards at existing retail stores to build more storeys.

A third strategy is to cooperate with the textile and construction industries. On March 19, Thuduc Housing Development Corporation signed partnership contracts with Lien Phuong Textile Garment JSC., HCM City's Foreign Trade Development & Investment Corporation and the UK investment fund Pavo Capital.

The deals with its domestic partners has allowed Thuduc House to expand six of its projects including residential, office buildings and urban zones in HCM City, Nha Trang and Nam Dinh province.

Pavo Capital provides Thuduc and its partners financial support for short and long term capital demands for these projects. The troika partnership will help Thuduc expand the company’s real estate more quickly compared to using traditional approaches (3-5 years with huge funding).

Another important strategy is to acquire a stake in other real estate firms. At the end of last year, Khang Dien House Developer JSC. bought 32 million shares in Binh Chanh Construction Investment JSC. (BCI) to increase its ownership to 57.21 percent.

BCI has 24 projects in HCM City covering a total area of nearly 400 hectares, mainly in Binh Tan and Binh Chanh districts. Other real estate enterprises have also applied this method such as HCM Infrastructure Investment JSC., Angia Investment, Hung Thinh Corporation and Dat Xanh Group.

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