3 adventures Capitaland has been having in Vietnam in 2017

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Capitaland has been an active player in Vietnam over the years, encouraged by the boom in the economy, growing disposable income and increased propensity by consumers to spend.

What has Capitaland been doing in the last few years?

Here are 3 things that the company has been doing.


Capitaland’s purchase of a Ho Chi Minh residential site in Nov 2017

On 16 Nov 2017, Capitaland reported in the news that they have completed purchase of a 14,474 square metre site in Ho Chi Minh City.

The price of their acquisition is US$38.9 million (S$53.5 million) and the company intends to build residential apartments on it is estimated to be worth US$177 million.

In addition to their projects Vista Verde and The Vista, this new 1.45 hectare site in District 4 will be developed into an 870-unit residential development with a retail component, with views of the Saigon river and city Skyline, CapitaLand said.

The project will comprise three 24-storey towers, split into two single blocks and one triple block, with retail units on the lower floors. The average size of each apartment will be about 79 sq m.

Similar to Keppel Land, Capitaland said that the acquisition is part of its strategy to diversify its real estate portfolio and to strengthen its foothold in Vietnam.

Given the doldrums the Singapore market has been in over the last 4 years, this move by Capitaland is also to diversify their income stream.

The developer said it had a record year of home sales in the country, with almost all of its newest residential development, d’Edge Thao dien in Ho Chi Minh City, sold in under two months after its July launch.

Once complete, this development will be Capitaland’s 11th residential development in Vietnam. Vietnam figures as a key component in the company’s strategy, being the third largest market in South-East Asia, after Singapore and Malaysia.

As at end-September 2017, the company had S$2 billion of gross assets under management in Vietnam.

[Also read: Singapore’s place in the wealth report]



Capitaland’s close of Vietnam Commercial Fund in Aug 2017

Not new to the fund management business, CapitaLand Limited has successfully set up its first commercial fund in Vietnam – CapitaLand Vietnam Commercial Fund I (CVCFI).

In today’s market which is flush with liquidity, CVCFI has closed at US$300 million.

The fund has a mandate to invest in Grade A commercial real estate in Vietnam and has a fund life of eight years.

A fund life of 5 to 8 years are common in the industry. This provides enough time for the developer to build it out, install tenants and then exit.

Some funds also has a “plus 1” or “plus 2” option, meaning that the life of the fund can be extended by the number of years.

CapitaLand will hold a 40% stake in CVCFI while the remaining interests will be held by major institutional investors.

Mr Lim Ming Yan, President & Group CEO of CapitaLand Limited, said says that scaling up in the real estate sector requires strong financial capacity and flexibility.

By proactively working with reputable capital partners to build scale, we can be nimble and react fast to seize growth opportunities. We see increasing investor interest in Southeast Asia, in particular Vietnam.

They want to invest in the country through CapitaLand given our deep local platform and execution capabilities.  CapitaLand is positive about the growth trajectory of Vietnam and foresee that this trend will continue for at least the next 10 years.

Besides the growing demand for residential properties with urbanisation, the company sees strong potential upside in the commercial real estate sector given the mismatch between demand and supply of quality office space.

Having been firmly established in key gateway cities like Ho Chi Minh City and Hanoi – the company is able to leverage their developer-owner-operator capabilities.

Coupled with a fund management platform staffed by experienced professionals, synergies across asset classes can be harvested to deliver better strong returns.

Mr Lim added that CapitaLand Vietnam Commercial Fund I brings the company a step closer to their goal of raising funds with total assets under management of up to S$10 billion by 2020.

It comes on the back of a large private equity partnership, the US$1.5 billion Raffles City China Investment Partners III, which invests in prime integrated developments in gateway cities in China.

One benefit of having strong capital partners to scale up with is the boost to return on equity generated by fee income.

In the first half of this year, Capitaland earned S$95.9 million in fees from non-listed real estate and REIT management activities, which makes up 5% of the Group’s revenue.

Mr Chen Lian Pang, CEO of CapitaLand Vietnam, said that having been part of the Vietnam growth story for over two decades, CapitaLand has earned a reputation for delivering quality residential developments and serviced residences in key cities.

In January this year, the company made their first foray into commercial real estate through our acquisition and development of an international Grade A office tower in the Central Business District of Ho Chi Minh City which will feature a direct connection to an upcoming metro station.

With the completion of this development in 2020, the portfolio will continue to be diversified and foothold strengthened in the country.

Mr Chen added, tapping on the appetite for innovative offerings such as coworking spaces, CapitaLand partnered the country’s largest coworking space operator, Toong, which opened their first outlet in Ho Chi Minh City at CapitaLand’s The Oxygen mall within the residential development, The Vista.

The company is following through on their commitment to being a long-term player in Vietnam and will continue to seek opportunities to grow their presence through strategic investments.

[Also read: Capitaland’s largest mall in Suzhou]



Capitaland’s acquisition of a CBD site in Ho Chi Minh in Jan 2017

In Jan 2017, CapitaLand, through wholly-owned subsidiary CapitaLand (Vietnam) Holdings, entered into a conditional agreement to acquire a prime commercial site in the Central Business District (CBD) of Ho Chi Minh City to develop its first international Grade A office tower in Vietnam.

Having been active in Vietnam through residential property developments, Capitaland is now taking their Singapore expertise in building office towers to Ho Chi Minh.

In terms of ownership, CapitaLand will be going it alone and holding a 100 per cent stake in the 0.6-hectare site with a gross floor area of 106,000 square metres.

The planned building will be in Ho Chi Minh’s District 1, with retail units at the ground and basement level.

As evidence of their strong local network and financial clout, the development is in a choice location and will be directly connected to a planned metro station which will link the CBD to the districts of Binh Thanh, 2 and 9.

Construction has already gone on for 3 quarters (since first quarter 2017) as of the writing of this post. Completion is expected in 2020, and timed perfectly so that the metro line which will be running by then, will be able to bring consumers and office workers to the location.

Mr Lim Ming Yan, CapitaLand president & group CEO said the office development serves to diversify CapitaLand’s portfolio and strengthen our foothold in Vietnam.

The development is the first step in the plan to establish a US$500 million investment fund focused Vietnam commercial properties.

As a growing economy, there will be an increased need for office space for knowledge workers, and Capitaland is presently taking steps to ride on that trend.

Given its strong growth outlook and positive market sentiments, the company is excited to be a long-term player in Vietnam’s growth story and will continue to look out for opportunities to grow their footprint.

Mr Chen Lian Pang, CEO of CapitaLand Vietnam, said, as one of the tallest buildings in Ho Chi Minh City when completed, this commercial development will be the only project in the CBD with unfettered views of the beautiful Saigon River and a direct connection to the future metro line. CapitaLand sees strong potential upside in the office market, particularly in Ho Chi Minh City, given the mismatch between demand and supply of Grade A office buildings.

Given its choice location, the company is assured that the building will attract top multinationals, locally incorporated foreign banks and financial institutions.

Tenants can look forward to state-of-the-art office facilities as well as exciting retail offerings, including some of the city’s best restaurants and cafes, lifestyle and entertainment outlets.

[Also read: Investing in Chinese REITs? 10 things to look out for]

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