Property
service provider CBRE expects 2012 to be the year of merger and acquisition
activities in Viet Nam's real estate market, increasing its competitiveness and
liquidity.
It says that during the first nine months of
2011, the total value of M&A reached US$251 million, third behind consumer
goods and finance.
While the dominant formula for transactions
has been domestic seller and foreign buyer, "we still see great potential
in transactions between foreign sellers and local buyers or even between two
foreign parties," says a company press release.
"From what has happened in the Vietnamese
real estate market, we can easily see this is a reaction based on the urgent
need."
It explains that a sluggish market over the
last three years plus tightening credit policies have left most developers
without enough resources to continue their projects, forcing them to sell some
in their portfolio in order to execute others.
Furthermore, the few enterprises with better
financial health have also realised it is no longer appropriate to develop
projects swiftly "without orientation".
CBRE feels it is important that these firms
co-operate with financially capable partners who are also experienced in project
development, especially in the targeted sectors and fields. The partners should
also have "in-depth knowledge of the Vietnam market such as market cycles,
population income, property purchasing practices of domestic buyers and real
estate credit," the press release says.
While there is considerable potential for
M&A transactions, there are several hurdles in the Vietnamese market.
The majority of Vietnamese project owners
still feel that "to sell is to fail", and are not comfortable with
talking to investors, funds or any agents with an open mind, the CBRE press
release says.
They also lack marketing expertise to
introduce their projects to potential clients. There are also many who want to
keep the name of their buildings after the transaction.
The lack of transparency, the tendency to ask
for very high prices, the lack of flexibility in business development plans and
reluctance to give up controlling shares in a project are other hurdles, the
company says.
It advises that Vietnamese real estate companies
looking to sell their projects need to prepare clear legal particulars,
compensation for site clearance, fully-paid land fees and get ready for any
form of co-operation, joint venture or BCC.
They should also put themselves in the shoes
of a prospective buyer before losing their latter's interest by asking for
higher-than-market prices.
"With the global crisis and overwhelming
difficulties of the Vietnamese economy in 2012, we all know that the number of
real potential investors is low. If we lose the chance, others will surely
seize it."
Vietnam News
Business & Investment Opportunities
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