Vietnam Economic Times- In 2009, Vietnam Property Holding (VPH) was ranked as the Top Real Estate Fund in Vietnam by LCF Rothschild after securing third position in 2008.
Vietnam Property Holding (VPH) is a Cayman Islands exempted company created to engage in property investment in Vietnam. VPH is managed by Saigon Asset Management (SAM) an exempted company incorporated under the laws of the Cayman Islands. SAM’s investment team draws on the talents of international and domestically-trained professionals from top fund management companies in Vietnam, complemented by a seasoned board of directors consisting of Vietnamese senior executives with deep- rooted local knowledge and relationships. Corporate governance and the value creation process are enhanced by international advisors with demonstrated corporate influence regionally and globally.
The principal investment objective of the Company is leveraging its local investment team and net- work to invest in attractive real estate projects and companies. VPH seeks to maximize capital gain from investing in a diversified portfolio of Vietnamese properties and companies. In 2010, VPH plans to increase exposure in small and mid cap real estate companies with strong growth potential and adequate liquidity. The fund will also search for bank guaranteed deals with convertible options as well as seek out strategic partners to co-invest and develop projects.
How do you explain VPH’s top ranking in the context of Vietnam’s difficult economic situation in 2009?
Real estate investments are usually long term and may face lack of liquidity until exit and are often complicated for foreign investors due to the overall regulations concerning ownership rights, land compensation, and licensing. The typical model most funds take is an equity position in a real estate project or a blue-chip property-focused company. We try to be slightly more innovative by searching for debt deals with bank guarantees. At the end of the term we can walk away with a reasonable return or convert it into equity. Another approach we use is to go after listed companies with hidden assets and great potential value. These are what we call the “jewels”. These two approaches were what gave us a slight edge in return for 2009. Finding these deals requires investigation and due diligence in the field and an ability to fit in, speak the local language and understand local customs, while continuously building relationships with strategic partners and brokers.
Vietnam’s difficult economic situation has led to its property market becoming partly frozen over the last few months. How did this affect VPH during the third and fourth quarters of 2009?
While the real estate market experienced a difficult situation in the second half of 2009, the listed securities market actually fared much better. We were able to increase NAV due to our investments in listed real estate companies and bank guaranteed deals, as mentioned above. We diversified asset classes to listed securities in response to the freeze. In addition, we were able to realize some returns from the debt deals. Lastly, and fortunately, we stayed away from early-stage or greenfield real estate deals, many of which ended up being devalued by year end. Instead, we focused on small and mid cap securities as well as the lucrative bank guaranteed deals.
Looking to 2010, do you think VPH will maintain its 2009 top ranking?
That would be nice, but I’m sure our competitors will not feel the same so we all will have to work pretty hard, which ultimately will be good for investors and the Vietnam market. Being a younger fund we will take advantage of our size, mobility and hunger to deserve the top slot. Rankings aside, our top objective is still an attractive absolute return for our investors. We believe in having a consistent and continuous growth in attractive return year- over-year rather than relative rankings.
How do you view Vietnam’s property market in 2010?
In general, we see an increasing trend of dispositions of properties rather than acquisitions, and local developers and investors continue to lead and replace foreigners on the buy side. On the commercial side, we see good opportunities to buy back completed office and hotel properties instead of developing new ones, or to take the head- lease for sub-lettings. The downturn has made existing properties more attractive than building from scratch. The retail side is expected to continue to boom as investors are positioning for WTO commitments to be lifted fully by early 2012. On the residential side we see that township and large-scale complexes will continue to struggle with land clearance and compensation while greater real demand for afford- able housing and middle-end residential sectors will lift these areas. The recent open policy for overseas Vietnamese and foreigners to own apartments will likely push prices in the residential market higher. Cash is still king and the kings appear to be Vietnamese (no longer foreigners). We would prefer more exposures in middle-end residential and retail projects.
What should authorities do to resolve the partly-frozen property market?
Real estate is a very large investment focus for Vietnam. While the country is still in its early stages of development, participants should join together in creating a more investor-friendly environment. It would be nice to see further encouragement for foreigners to buy and own properties. Programs providing interest subsidies for first time property buyers are always a plus. Taxation and the legal framework on land and housing markets should be addressed regularly to monitor the market in a more efficient way.