CapLand buys prime Ho Chi Minh City site

Singapore

SINGAPORE developer CapitaLand has bought a prime site in Ho Chi Minh City for US$51.9 million, its third acquisition in Vietnam since the government relaxed rules to allow foreign investment and ownership of real estate there.

The 0.5-hectare site, acquired through its wholly owned subsidiary CapitaLand (Vietnam) Holdings, will be redeveloped into a mixed-use residential cum commercial project.

The site can potentially be developed to offer 302 units across two towers - a 17-storey residential tower and a 22-storey serviced residence tower. The 102-unit residential tower will offer a variety of two, three and four-bedroom apartments, and penthouse units. The 200-unit serviced residence will offer a range of two and three-bedroom apartments, penthouse units and amenities. The latter will be managed by CapitaLand's serviced residence arm, The Ascott Limited under its Somerset brand. The Ascott will also offer concierge services to the residents next door.

The project, estimated to be worth US$106 million when completed by 2018, is expected to be launched in the fourth quarter of 2016. It will be CapitaLand's ninth residential project and 19th serviced residence in Vietnam.

Last year, CapitaLand was among the top-performing foreign developers in Vietnam with 1,321 residential units sold at a value of S$226.5 million. It said that its residential sales continued to perform well in the first half of 2016 with 470 units worth about S$80 million sold.

Encouraged by the 94 per cent occupancy rate and positive returns at Somerset Vista Ho Chi Minh City, CapitaLand is on the lookout for more opportunities.

"Beyond residential projects, we are also on the lookout for investment opportunities in offices, serviced residences and integrated developments," Chen Lian Pang, CEO of CapitaLand Vietnam, said.

Following Vietnam's legislative changes in July 2015 to allow foreign investment and ownership of real estate, CapitaLand has launched three of its Vietnam residential developments in Singapore - namely The Vista, Vista Verde and Seasons Avenue (Summer Suites tower). It said these were well-received with over 130 units sold to date, while about 80 per cent of launched units at its residential developments Mulberry Lane, Seasons Avenue, The Vista, PARCSpring, and Vista Verde have been substantially sold.

Lee Chee Koon, CEO of The Ascott Limited, said that Vietnam was the company's biggest market in South-east Asia, with 19 properties and close to 4,000 units in six localities. "We remain confident in the potential for serviced residences in the country, and will continue to seek opportunities to expand in cities where we have presence and other high growth cities."

CapitaLand's total asset size in Vietnam at the end of June 2016 was S$748 million, making the market the group's third largest in South-east Asia after Singapore and Malaysia.

For its fiscal second quarter, CapitaLand's net profit fell 37 per cent to S$294 million from a year ago due to lower revaluation gains. This was mitigated by improved earnings from The Ascott as a result of acquisitions, as well as CapitaLand Singapore, thanks to maiden contribution from Cairnhill Nine as well as CapitaGreen's higher rental income. Adjusting for one-off items, operating net profit rose 32 per cent to S$171.6 million.

Some analysts say the latest acquisition is consistent with CapitaLand's strategy "to invest in, develop and manage a diversified portfolio" of real estate in Vietnam, a new growth market of the group.

At S$3.15 a share, CapitaLand's valuations remain undemanding, they said. However, they continue to see some resistance due to nagging concerns over China's economic slowdown which could dampen demand for housing and private consumption expenditure as well as retail sales.