REAL ESTATE BUSINESSES READY FOR NEW WAVE

Listed companies raise registered capital

The growing fancy of investors in real estate companies is not a surprise because the investor confidence in property market recovery is further strengthened. To seize the opportunity in the declining market, many property companies are raising their capital base. At the Annual General Meeting of Shareholders in 2015, FLC Group Joint Stock Company will seek its shareholders’ approval for issuing 465 million shares to increase its registered capital from VND3,749 billion to VND8,398 billion.
 
Earlier, during a share offering roadshow prior to the meeting, FLC President Trinh Van Quyet said that the capital increase will enable FLC to carry out many investment projects, including FLC Sam Son and Khanh Hoa Administrative Centre.
 
Phat Dat Real Estate Development Corp (PDR) called an extraordinary shareholders' meeting in early 2015 to seek the approval of shareholders for the offering of 65.1 million shares to increase its registered capital from VND1,302 billion to VND2,018 billion. This source of fund will support the corporation’s operations in the second quarter of 2015.
 
PDR President and CEO Nguyen Van Dat said after the capital increase is completed, the corporation will invest and develop a serviced commercial and residential complex covering 10,000 square metres in the downtown of Ho Chi Minh City. The money raised this time will also help the firm to seek new opportunities in 2015.
At the end of 2014, PDR acquired a project from Duc Khai Joint Stock Company at No. 290 An Duong Vuong Street (District 5, Ho Chi Minh City). PDR will invest some VND1,400 billion to invest in the EverRich Residence, which is expected to open up sales in the second quarter of 2015.
 
Other property companies like An Duong Thao Dien Real Estate Trading Investment Joint Stock Company and Saigon Thuong Tin Real Estate Joint Stock Company (Sacomreal) also have fundraising plans. Shareholders of An Duong Thao Dien Real Estate Trading Investment Joint Stock Company ratified a plan to offer 54.59 million new shares to existing shareholders or partners to hike its charter capital to VND1,092 billion. This secondary offering is expected to take place in the first quarter and second quarter of 2015.
 
Cooperation

Unlisted companies have also actively increased their capital base by teaming up with other partners.
 
Som Kim Land Real Estate Company signed a cooperation agreement with Hamon Group of the United Kingdom to develop property projects in Ho Chi Minh City. According to this agreement, the two sides will jointly develop Gateway Thao Dien Apartment Complex in District 2.
 
Nguyen Hoang Tuan, Chairman of Som Kim Land, said Gateway Thao Dien project is estimated to cost US$100 million. Although stake-holding ratio is unrevealed by both sides, the differential is forecast to be narrow.
 
Nam Cuong Group and STDA Real Estate Project Supermarket System also signed an investment cooperation agreement to invest, build and operate three buildings (H, J and K) in CT7 Section, Duong Noi Urban Area (Ha Dong District, Hanoi City) with a total investment of VND1 trillion.
 
Pham Thanh Hung, President of CEN Invest, said the cooperation will help reduce financial risks. Thang Long Urban Development Investment Joint Stock Company also joined hands with Atlantic Vietnam Real Estate Exchange to distribute products from Sun Square Project.
 
Besides, a series of business cooperation deals have been reached. For example, Nam Long Group cooperated with two Japan firms, Nippon Railroad and Hankyu Reality, to develop Sakura Flora Project in District 9, HCM City. Other remarkable deals are Viet Han with TNR Vietnam Holdings, and Savills Vietnam with Vingroup in Vinhomes Riverside (Long Bien District, Hanoi City).
 
The property market recovery is getting clearer and this is a good opportunity for property companies to catch the new investment wave. So, it is understandable to see companies to raise their capital base. However, fundraising by means of share offering is raising concerns of specialists.
 
The Ministry of Finance said that fundraising through the stock exchange will change the corporate control structure that existing shareholders are unable to see. Besides, the big capital increase in a short time is likely to pose risks to businesses and shareholders as their governance capabilities may fail to keep up with the new scale.
 
After the fundraising is completed, the degree of binding between businesses and investors will be deeper and wider and this will result in significant pressures in implementing and maintaining business results corresponding to their new increase scales, including revenue, profit and dividend.

Source: VCCI