CapitaLand to launch $500m Vietnam fund targeting commercial property

Property developer CapitaLand intends to expand its presence in Vietnam, with plans to set up a new $500 million commercial fund and to acquire more residential development sites. This fund will be targeting investment of commercial property mainly in Ho Chi Minh City and Hanoi.

 

This will be CapitaLand’s second investment fund in Vietnam. Their first Vietnamese fund was a $200 million fund launched in 2010, backed by GIC and Mitsubishi Estate Asia. The fund is fully invested in three residential projects in Ho Chi Minh City and Hanoi.

The new fund was announced on Monday (November 21, 2016).

CapitaLand president and group chief executive Lim Ming Yan said: "We see opportunities in the commercial space in Vietnam… so we are prepared to take a position. I think the general trajectory… for Vietnam is favourable and we foresee that this trend will continue for at least the next 10 years.”

CapitaLand, which has been operating in Vietnam since 1994, observed that the mismatch in the demand and supply for Grade A offices see "strong potential upside”.

Currently, the property major maintains a portfolio of residential projects and serviced residences in Vietnam. It has launched nine residential projects with more than 9100 units in Ho Chi Minh City and Hanoi.

According to Vincent Wee, Deputy CEO of CapitaLand Vietnam, the company is "well-positioned to ride Vietnam’s economic growth and will continue to increase our presence in Vietnam’s key gateway cities (HCMC and Hanoi)”, while actively replenishing their residential pipeline.

CapitaLand’s Vietnam arm will also be increasing its focus on commercial assets to achieve higher proportion of operating PATMI (profit after tax & minority interest) and support the Group’s ROE (return on equity) target.

It will also be working with capital partners to grow its fund under management to S$1 billion by 2017 to support CapitaLand’s AUM targets.

Lim notes: "If you talk to many of these sovereign wealth funds and pension funds, they feel they are underexposed to Asian real estate at this point… they are prepared to allot more capital.”

The new fund was announced in alignment with plans by the property major to grow their total assets under management (AUM) to S$10 billion ($7 billion) from various private investment vehicles by 2020

It plans to acquire more land sites in Vietnam for residential development that potentially yield between 2000 to 2500 units. This comes at a time when Vietnam is undergoing increasing urbanisation with housing demand expected to rise as the middle class grows.