CapitaLand a long-term player in Vietnam’s rapid urbanisation

By Lin Zhiqin

/ The Edge Property |

May 6, 2017 8:00 AM SGT

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On the weekend of April 30 and May 1, Singapore’s largest listed property group, CapitaLand, launched the latest phase of its Hanoi residential project, Seasons Avenue, in the first of a series of roadshows in Singapore.

The 1,300-unit Seasons Avenue — with four 40- to 41-storey towers, each representing one of the four seasons — is located at Mo Lao New Urban Area in Ha Dong District, Hanoi’s new CBD. The project sits on a land area of 1.36ha, near a bus rapid transit station and the Cat Linh-Ha Dong Metro Line, which will connect the old and new CBD. Within a 10-minute walk from the residential development are amenities such as Big C shopping mall, OGV cineplex, Co.opMart supermarket and the Hanoi Military Hospital.

Seasons Avenue was topped out in March and is slated for completion by end-2017

A high-end residential development, Seasons Avenue has a mix of two- and three-bedroom apartments sized from 721 to 1,453 sq ft. The project was launched in August 2015 and 741 units (57%) had been sold as at end-1Q2017. The project was topped out in March this year and is slated for completion by end-2017.

Seasons Avenue also marks CapitaLand’s ninth residential development in Vietnam since 2006. In fact, Vietnam represents the third-largest market in Asean for CapitaLand, after Singapore and Malaysia. Out of CapitaLand’s $44.2 billion in total assets under management around the world, about $2.1 billion (5%) is in Vietnam.

‘Focus on prime cities’

“With an annual economic growth rate averaging 6% over the last three years, Vietnam is one of the fastest-growing economies in Asia,” says Chen Lian Pang, CEO of CapitaLand Vietnam. “We remain focused on the prime cities of Ho Chi Minh City and Hanoi. Nevertheless, we will also keep a lookout for other up-and-coming cities or districts and explore potential opportunities.”

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Chen says “urbanisation is a key driver in the economy”, and as the key cities develop, demand for improved infrastructure and real estate will invariably rise. As such, CapitaLand intends to focus on sites that are not just well located in terms of proximity to metro lines and transport network, but also accessible to established amenities such as schools, shopping centres, business and financial districts, as well as other expatriate communities.

Chen: Given Vietnam’s strong growth outlook and positive market sentiment, we are committed to being a long-term player in its urbanisation story

Seasons Avenue marks CapitaLand’s second residential development in Hanoi, and its second joint venture with leading Vietnamese real estate group, Hoang Thanh Investment Co. Japan’s Mitsubish Estate Asia is also a joint-venture partner in Seasons Avenue.

CapitaLand and Hoang Thanh’s flagship project in Hanoi was the 1,478-unit Mulberry Lane, located near Seasons Avenue and in Mo Lao New Urban Area, Ha Dong district. Mulberry Lane is a high-end residential development close to the National Convention Centre, as well as educational institutions such as Hanoi University of Science and Technology, Hanoi Architectural University and Vietnam National University, and kindergartens. About 1,117 units, or 76% of the project, were sold as at end-1Q2017.

The 1,478-unit Mulberry Lane is CapitaLand and Hoang Thanh’s flagship project in Hanoi

The other seven residential projects developed by CapitaLand are in the prime districts of Ho Chi Minh City. They include the 750-unit The Vista, the 402-unit PARCSpring and the 1,152-unit Vista Verde. Of the nine residential projects in CapitaLand’s portfolio, four have been completed: Mulberry Lane, PARCSpring (100% sold), The Vista (97% sold) and the 344-unit The Krista (91% sold).

Spike in overseas demand

CapitaLand’s residential sales in Vietnam have increased dramatically over the past three years — from 1,125 units at a total of $151.5 million in FY2014 to 1,321 units for $226.5 million in 2015. Last year, home sales rang in at 1,480 units at $282 million.

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The y-o-y jump in new-home sales is even more stark compared with residential sales in the first quarter over the past three years. In 1Q2015, 90 units worth $18 million were sold, compared with 240 units worth $36 million in 1Q2016. In 1Q2017, CapitaLand sold 316 units worth $119 million — 3.3 times more than a year ago.

The spike in residential sales is due largely to the Vietnamese government’s relaxation of foreign ownership regulations, which came into effect in July 2015. And that has increased investor demand — both local and international — for residential property in Vietnam. Prior to that, foreigners were not allowed to buy property in the country unless they worked there, and they could purchase only a unit for their own use. They had to sell the property when they left.

CapitaLand was among the first to tap international appetite for Vietnam residential property, launching four of its developments in Singapore from late 2015 to 2016. They are The Vista, Vista Verde, Seasons Avenue (Summer Suites tower) and D1MENSION, its boutique luxury project in Ho Chi Minh City. This was followed by the launch of Vista Verde and the 1,127-unit Feliz en Vista in Hong Kong.

While local Vietnamese still make up about 80% of the buyers in high- end projects, the remaining 20% are foreigners, primarily from Singapore and Hong Kong. “Our overseas launches have been well received, and we will continue to bring relevant projects to these markets,” says CapitaLand’s Chen.

Building a pipeline of projects

CapitaLand intends to ramp up its pipeline of projects by acquiring more residential development sites — with the potential to yield between 2,000 and 2,500 units — this year. The group also plans to look out for investment opportunities in offices, serviced residences and integrated developments.

The Oxygen, a three-storey mall at The Vista in Ho Chi Minh City, was opened in March

In January, the company announced that it had agreed to acquire a 0.6ha prime commercial site in Ho Chi Minh’s CBD, in prime District 1. The site can be developed into a new 240m Grade-A office tower with a gross floor area of 1.4 million sq ft. The development, located near the Saigon River, will be directly connected to a planned metro station, linking the CBD to the Binh Thanh District, as well as Districts 2 and 9.

The office tower is slated for completion in 2020, around the same time as the opening of the new metro line. “The consistently high foreign direct investment inflows have also boosted demand for Grade-A office space, especially in Ho Chi Minh City,” says Chen.

In March, CapitaLand opened The Oxygen, a three-storey community mall at The Vista in Ho Chi Minh City. It has a net lettable area of 64,583 sq ft and a range of retail offerings, including a supermarket, restaurants, cafés and a co- working space.

CapitaLand’s president and group CEO Lim Ming Yan says Ho Chi Minh City could be a potential home for a Raffles City — the group’s flagship brand of integrated developments characterised by their city-centre location and link to key transport nodes — given Vietnam’s growth trajectory.

There are also plans to establish a US$500 million ($697 million) fund focusing on commercial properties, mainly in Ho Chi Minh City and Hanoi, by end-2017. This will be CapitaLand’s second fund. The first, comprising US$200 million, was launched in 2010 and is fully invested, with its underlying assets being three residential projects in Ho Chi Minh City and Hanoi. Seed projects have been identified for the second fund, and CapitaLand is currently in discussions with prospective investors.

Biggest serviced apartment player

CapitaLand was among the first property groups from Singapore to establish a beachhead in Vietnam. In 1994, it ventured into the serviced apartments sector with Hanoi Tower and Sofitel Plaza Hanoi, followed by Somerset West Lake Hanoi, managed by its serviced apartment arm, The Ascott.

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Today, Ascott is the world’s largest serviced residence owner-operator, with 22 assets in Vietnam and a total of 4,600 residences across six cities — Hanoi, Halong, Hai Phong, Danang, Nha Trang and Ho Chi Minh City. According to Chen, Ascott is expected to open more than 3,000 serviced residences in Vietnam over the next three years, and is on track to achieve a target of 7,000 units by 2020.

D1MENSION is a US$106 million mixed-use development in Ho Chi Minh City’s prime District 1

In September 2016, CapitaLand paid US$51.9 million for a 0.5ha site in Cau Kho ward in Ho Chi Minh City’s District 1. The site is being developed into a 22-storey, 200-unit serviced residence tower under the Somerset brand, and D1MENSION, a 17-storey residential tower.

Setting benchmark in luxury

D1MENSION was launched last November and 40% of the 30 units released had been sold as at end-1Q2017. The US$106 million mixed-use development in prime District 1 is positioned in the same league as Cairnhill Nine in Singapore, which is located in the heart of Orchard Road and linked to Ascott’s serviced apartment tower, branded The Ascott Orchard Singapore.

At an average price of US$5,000 psm, the 102-unit D1MENSION has also set a new price benchmark for luxury residences in Ho Chi Minh City. For investors, CapitaLand is offering a guaranteed yield of 7% a year for two years. Residents will be able to enjoy panoramic views of the city skyline and roundthe- clock concierge service offered by Ascott.

When completed in 2018, D1MENSION will bring CapitaLand’s total residential portfolio in Vietnam to nine projects, with a total of 9,100 units. “Given Vietnam’s strong growth outlook and positive market sentiment, we are committed to being a long-term player in its urbanisation story,” says Chen.

This article appeared in The Edge Property Pullout, Issue 778 (May 8, 2017) of The Edge Singapore.

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