M&A Landscape in Real Estate - Vietnam Business · © 2017 KPMG Tax and Advisory Limited, a Vietnamese limited liability companies and member firm of the KPMG network of independent

M&A Landscape in Real Estate

October 2017

2© 2017 KPMG Tax and Advisory Limited, a Vietnamese limited liability companies and member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Document Classification: KPMG Confidential

M&A landscape overviewM&A transaction value and volume in real estate market for the past 5 years

Value CAGR of 22.17%From 2012 to YTD2017

USD million

337

898

185

709564

239

5

14

198

708

198

421

12

2325

31

27 31

0

5

10

15

20

25

30

35

0

200

400

600

800

1000

1200

1400

1600

2012 2013 2014 2015 2016 YTD2017

Operating Properties Value Development Site Value Volume

Note: There are transactions that do not disclose valueData is collected as at September 2017

Source: Real Capital Analytics

M&A Transaction Statistics



Transaction breakdown

Mixed-use development sites*, 10.0%

Residential, 22.3%

Hospitality, 19.6% Industrial,

7.4%

Office, 25.6%

Retail, 14.9%

Others, 0.1%

Note:(*) Mixed-use development sites include developing multi-function projects (e.g. office, retail, residential, hotel, etc)The other categories (except mixed-use development site) include developing and operating projects and properties, respectively


Mixed-use development sites*, 14.8%

Residential, 28.2%

Hospitality, 20.8%

Industrial, 7.4%

Office, 16.8%

Retail, 10.7%

Others, 1.3%

Value from 2012 – YTD2017 Volume from 2012 – YTD2017

USD4.5 billion

149 transactions

M&A Transaction Statistics



Vietnamese property market in comparison

$3,000 –4,000

$3,000 –4,000

$3,000 –5,000

$8,000 –10,000

$13,500

HCMC Jakarta Manila Bangkok Singapore

Apartment rental yield p.a. 2016

Tokyo 3.4% - 5.4%

Singapore 2.5%

Hong Kong 2% - 3%

Ho Chi Minh City 7% - 8%

Jakarta 8.6% - 9.6%

Manila 6% - 7%

Bangkok 4% - 5%

Real estate market overview

Premium apartment price per sqm 2016

Source: Global Property Guide, Trade Press Source: Global Property Guide, Trade Press



2.7%

0.9%

3.0%3.3% 3.5%

2.6%2.4%

3.2% 3.3%

5.6%

5.0% 4.9%

5.0% 5.1%4.8% 5.0% 5.0%

5.3%

4.7%

6.0% 5.0%

4.2% 4.3%4.0% 3.9% 4.5%

4.8%

5.4%6.0%

6.7%6.2% 6.3% 6.5% 6.4%

5.8%6.2%

5.0%

3.6%

1.9% 2.0%2.3%

1.8% 1.7%2.2% 2.4%

-1.1%

-0.1%

0.9%

1.9%

2.9%

3.9%

4.9%

5.9%

6.9%

2013 2014 2015 2016 2017 2018 2019 2020 2021

What makes Vietnam appealing

Singapore

Vietnam

Malaysia

Indonesia

Thailand

An outperformer amidst the Asia Pacific nations with impressive GDP growth rate exceeding 6%, underpinned by progressive indicators and accelerating FDI levels

8.5 million 30% YoY

International visits

16.3% YoY85,357Newly established enterprises

6.5% - 8% Mortgage rate (for 1st year, depending on collateral and principal amount)

$1.16 billion

FDI inflows to Real estate

Fundamental indicators

8M2017

Source: Economist Intelligence Unit, accessed on 2 September 2017



What makes Vietnam appealing

Indonesia Japan Vietnam Thailand Malaysia Singapore

264 mm

127.5 mm 95.5 mm69 mm

31.6 mm5.7 mm

51% 43% 54% 52% 53% 52%

Total population in 2016 and % working age (20 – 54)

Fundamental indicators

Source: Business Monitor International



Top infrastructure spender in South East Asia with 5.7% GDP

Value proposition

Better connections within the nation

Rise in tourist numbers

Office and retail expansion in central area

Leveraged value of commercial and residential properties along new transportation lines

What makes Vietnam appealingFundamental indicators

Hanoi Highway – Mai Chi Tho Intersection

Hanoi Highway expansion

Metro route map

Thu Thiem 2 Bridge

Source: Trade Press



Deal volume by sectors

26%

19%

13%

12%

17%

26%

26%

29%

52%

13%

17%

16%

30%

19%

8%

22%

42%

16%

15%

16%

12%

22%

25%

7%

7%

3%

8%

39%

10%

4%

16%

8%

3%

4%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

YTD2017

2016

2015

2014

2013

2012

Mixed-use development sites Residential Hospitality Office Retail Industrial Others


Transactions breakdown

Residential, hospitality and office are the most active sectors for M&A transactions since 2012



Deal value by sectors

35%

16%

5%

6%

1%

36%

14%

27%

54%

5%

8%

14%

43%

5%

7%

25%

43%

9%

20%

38%

28%

14%

48%

5%

7%

4%

2%

57%

2%

22%

3%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

YTD2017

2016*

2015

2014

2013**

2012

Mixed-use development sites Residential Hospitality Office Retail Industrial Others

Note: (*) The transaction in Industrial sector does not disclose value in 2016(**) The transaction in Others sector does not disclose value in 2013


Office has the highest deal value, followed by residential and hospitality for the period 2012 – YTD2017




Top 10 deals by valueTargets Buyers Sellers Year Value

($m) % sought

Vincom Center A and Vinpearl Luxury Ho Chi Minh

Vietnam Infrastructure and Property Development Group Corporation (VIPD Group)

Vingroup Joint Stock Company 2013 469 100%

Landmark 72 Mirae Asset Financial Group and AON Plc

Keangnam Enterprises, Ltd 2015 374 100%

Amata City Long Thanh Amata Corporation Public Company Limited

Dong Nai Province 2015 279 100%

Kumho Asiana Plaza and IntercontinentalAsiana Saigon

Mapletree Investments Pte Ltd Kumho Industrial Co., Ltd. and Asiana Airlines, Inc.

2016 215 100%

Vincom Megamall Royal and Times City; Vincom Center Long Bien, A, Ha Long, Ba Trieu Tower A, B and C

Warburg Pincus LLC Vingroup Joint Stock Company 2013 198 20%

TNR Tower TNR Holdings Vietnam Joint Stock Company

Vingroup Joint Stock Company 2015 110 100%

Indochina Plaza Hanoi Shopping Center and Offices; Riverside Serviced Apartments;Montgomerie Links Vietnam

Gaw Capital Partners Indochina Capital Corporation 2015 106 100%

Thu Thiem New Urban Area Project Hongkong Land Holdings Limited Ho Chi Minh City Infrastructure Investment JSC (CII)

2017 95 64%

Empire City Keppel Land Limited Gaw Capital Partners; Tran Thai Lands Company Limited and Tien Phuoc Real Estate JSC

2016 94 40%

Corner Stone Building Daibiru Corporation Vietnam International Commercial Joint Stock Bank

2014 94 N/A

Note: (*) Mixed-use sectors include multiple sectors (such as a combination of residential, hospitality, office, etc) Source: Real Capital Analytics, Trade Press




Highlighted deals by sectorsSectors Buyers Sellers Targets %

soughtValue

($m) Year

OfficeMirae Asset Financial GroupAON Plc

Keangnam Enterprises Ltd

Landmark 72 100% 374 2015

TNR Holdings Vietnam JSC Vingroup TNR Tower 100% 110 2015

Residential

Keppel Land LimitedTan Truong Company Limited.

N/A Ca Cam River Development Site N/A 146 2015

N/A Phat Dat Real Estate Development Corp

The Everrich 3 100% 121 2017

HospitalityVietnam Infrastructure and Property Development Group Corporation

Vingroup JSc Vinpearl Luxury Ho Chi Minh 100% 155 2013

Hanel Company Limited Daewoo E&C Hanoi Daewoo Hotel 70% 80 2012

Retail

Vietnam Infrastructure and Property Development Group Corporation

Vingroup JSC Vincom Center A 100% 314 2013

Warburg Pincus LLC Vingroup Vincom Mega Mall Royal City, Vincom Mega Mall Times City, Vincom Center Long Bien, VincomCenter A, Vincom Center Ha Long, Vincom Center Ba Trieu A, B, C

20% 198 2013

Mixed-use development

sites

Hongkong Land Holdings Limited HCMC Infrastructure Investmentt (CII)

Thu Thiem New Urban Area Project 64% 95 2017

Keppel Land Limited Gaw Capital Partners; Tran Thai Lands and Tien Phuoc Real Estate

Empire City 40% 94 2016

IndustrialAmata Corporation Public Co., Ltd. (Thailand)

Dong Nai Province Amata City Long Thanh 100% 279 2015

SIFLEX Co., Ltd.(South Korea) Panasonic Sanyo Bac Giang N/A 10 2014Source: Real Capital Analytics, Trade Press




3

138

70

103

22

312

1

-5

15

35

55

75

95

TW KR US VN HK MY SG TH JP AU

Top 10 investor countries

Country Value (USDm)

Vietnam 1,468

Singapore 836

South Korea 461

Japan 324

Thailand 295

Hong Kong 217

United States 198

United Kingdom 94

Malaysia 83

United Arab Emirates 65

Foreign countries comprise 54% in volume and 67% in value

Volume from 2012 – YTD2017 Value from 2012 – YTD2017





Challenges versus opportunities

Relaxed regulations on housing ownership of foreigners

Sustained urbanization and rapid industrialization

Expanding middle class base, rising income and large proportion of labour force

Hurdles in land clearance process

Limited access to efficient operating assets

Inconsistent planning and quality of surrounding infrastructure

Be ready to capitalize on plenty of opportunitiesBe well-prepared for certain difficulties

“Complicated” regulations

From investor’s perspective



Residential

IndustrialOffice

Retail

6.6% value growth rate from 2017 to 2021

7.2% net-yield growth rate from 2017 to 2021

Vietnam will continue to gain traction in the real estate sector.M&A transactions will continue to increase due to the demand from international investorsand domestic property developers



Source: Business Monitor International, Trade Press

Market outlookMarket outlook



KPMG insights - Getting the deal done (1/2)

Key considerations from Financial Due Diligence perspective

• Low quality of financial numbers i.e. inadequate records / controls / governance or multiple accounting records

• Robustness of financial performance drivers e.g. occupancy rates and lease rates (if retail), analysis of presales, recognized revenues, collection progress and remaining unsold units (if sales of apartments)

• The capitalization of cost structure and its qualification to tax deduction

• Funding – cost and availability of debt and its impacts to the business

• CAPEX and maintenance plan and the stability of revenue

• Potential commitments and contingent liabilities of existing projects

• Related-party transactions and relevant implications

• Selling progress and identified cash trap

KPMG insights



KPMG insights - Getting the deal done (2/2)

Key considerations from Valuation perspective

• For development projects: estimation of reasonable cost and time to fulfill unfinished legal requirement of the project land

• For operating assets: equity value consideration, eliminating items not contributing and including items not contributing to future value for the projects

• Validity and terms of needed operating licenses

• Working capital required post acquisition.

KPMG insights

Thank you


© 2017 KPMG Tax and Advisory Limited, a Vietnamese limited liability companies and member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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M&A Landscape in Real Estate - Vietnam Business · © 2017 KPMG Tax and Advisory Limited, a Vietnamese limited liability companies and member firm of the KPMG network of independent