Though VinaCapital’s sale of shares in big real estate projects in Hanoi and HCM City has sparked concern about the market’s bouyancy, insiders say everything is fine.
The real estate market has been flat for a considerable time, prompting some investors and foreign investment funds to sell projects to restructure their investment portfolios. Two sales by the foreign-owned investment fund VinaCapital have prompted speculation that foreigners in particular are losing interest. Industry insiders discount that idea.
In mid-October, VinaCapital sold 50.1 percent of its stake in the A&B high-rise building project in District 1 of HCM City. When complete in 2011, the project will add 25,500 square metres of downtown office space. The fund’s general director, Don Lam said that the fund invested nearly $10 million in A&B and earned an internal return rate (IRR)of 17.5 percent on the sale.
VinaCapital last month also sold a 70 percent stake in the five-star Hilton Hanoi Opera Hotel. It reportedly had a profit of $8 million after three years of developing the hotel.
VinaCapital declined to name the investors who purchased the stakes.
Andy Ho, the fund’s Managing Director, said that VinaCapital expects “Vietnam’s real estate market to continue developing in the time to come. However, in the office leasing market segment, supply is far exceeding demand. Therefore, VinaCapital has restructured its investment portfolio in order to optimize profits,” he said.
Dr Le Dang Doanh, a widely quoted economist, believes that Vietnam’s real estate market remains very attractive in comparison with regional markets.
However, unstable land prices make investors feel insecure, Doanh said. “The sharp increases in land costs have really hindered foreign investment in Vietnam, while putting a heavy burden on ordinary people.”
Rudolf Hever, Senior Executive of CBRE Vietnam, a real estate consultancy, says that a lot of real estate projects have changed hands recently, but details have not been made public. Hever sees no signs of panicky selling. “If foreign investors did not flee the market in late 2008 and early 2009, when the market fell sharply, they will not flee now,” he said.
Ngo Duong Hoang Thao of Dai Dong Duong Consultancy Co. called the sale of two real estate projects by VinaCapital “a normal thing,” and small-scale if compared to VinaCapital’s two billion dollar Vietnam portfolio. Thao scoffed at rumors that the fund is ‘fleeing’ Vietnam.
“VinaCapital itself is a financial investment fund,” Thao commented. “It will sell stakes when it feels it can maximize its return on investment, so that it can get money for other investment deals.”
Agreeing, the General Director of Berjaya Vietnam, Nguyen Hoai Nam, said that it is quite normal for VinaCapital or other investment funds to sell projects. In fact, Nam said, the sale of projects at good prices is a sign that the real estate market is really attractive to investors.