Capital begins to flow into real estate developers

Vietnam's real estate market has started to show signs of improved sentiment following a prolonged period of "capital hiccups" with many real estate companies announcing that they have successfully issued bonds or raised capital from funds and individual investors.

Hung Thinh Incons Joint Stock Company (listed on the Ho Chi Minh Stock Exchange or HoSE as HTN) has announced it will be issuing shares to existing shareholders at VND10,000 ($0.41) per share. The resolution was approved by the firm's annual general meeting of shareholders in 2023.

Specifically, the company will issue 89.1 million new shares, with a subscription ratio of 1:1 (existing shareholders can buy one new share for each share they already own). The expected charter capital will double to VND1.78 trillion ($72.53 million). The issuance is scheduled for the fourth quarter after receiving approval from the State Securities Commission.

Hung Thinh Incons is expecting to raise VND891 billion ($36.26 million) from the offer, and the company plans to spend VND400 billion on the transfer of a part of the Amata Commercial Complex in Long Binh ward, Bien Hoa town, Dong Nai province; VND34.3 billion ($1.39 million) to buy shares in Kim Lan Trading Investment Joint Stock Company; and VND457 billion ($18.6 million) to increase capital for its construction projects.

Hodeco Investment and Construction Joint Stock Company in Ba Ria-Vung Tau province (HoSE: HDC) is implementing a plan to issue 20 million shares at VND15,000 ($0.61) per share (equal to half of the market price), with a subscription ratio of 1,000:148. The implementation is scheduled for Q4/2023 and Q1/2024, after receiving the State Securities Commission's okay.

Recently, C.E.O. Group (listed on the Hanoi Stock Exchange or HNX as CEO) announced that they had successfully sold 242.7 million shares out of 252.2 million shares on offer to existing shareholders. The company will sell the remaining 9.5 million shares to five other investors. In addition, the group has also distributed 5 million Employee Stock Ownership Plan (ESOP) shares.

The company raised almost VND2.6 trillion ($105.84 million) at VND10,000 per share to invest in the high-end Sonasea Residences villa project, increasing capital for subsidiary companies, and raising working capital.

Becamex IDC has also been actively raising funds. Specifically, the company announced the successful issuance of VND2 trillion ($81.44 million) in private placement bonds with a 5-year term. Furthermore, a plan for private placement issuance of bonds in 2023 with a maximum value of VND760 billion ($30.93 million) has just been approved by the board of directors.

The leadership of Becamex IDC announced five main goals for the period 2023-2028 at this year's annual general meeting, including expanding into nine more provinces and cities, bringing the total to 20; developing social housing; creating new-generation industrial parks; and developing service-urban areas and transport infrastructure.

Becamex IDC needs to increase its capital by VND20-30 trillion ($1.22 billion) in order to carry out its significant investment plans, from the current VND10.35 trillion ($421.41 million).

The board of directors of Nam Long Investment Corporation (HoSE: NLG) has decided to move forward with a plan to issue VND500 billion ($20.35 million) in five-year-term private placement bonds.

The first six months will carry an annual interest rate of 9.6%, followed by a nominal rate of interest plus a margin of 2.5% per annum. The objective is to invest in the Nam Long 2 residential area within the Nam Can Tho urban area, Hung Thanh ward, Cai Rang district, Can Tho city. The project obtained official approvals from relevant authorities in 2019 and 2020.

Ho Chi Minh City Infrastructure Investment Joint Stock Company (HoSE: CII) has announced it plans to continue restructuring its capital sources aggressively with a total value of almost VND7 trillion ($285 million).

CII has been working with a number of international financial institutions with an AA credit rating from Fitch in order to acquire payment guarantee for the bonds which have a total value of approximately VND2.4 trillion ($97.69 million) and a term of over 10 years. As a result, CII's bonds will have a credit rating on par with international guarantee organizations.

Furthermore, CII plans to issue convertible bonds to existing shareholders with a 10-year term and a total value of up to VND4.5 trillion ($183.18 million). Currently, CII is working with the State Securities Commission on the documentation for the issuance of the first phase of convertible bonds, which will have an issuance value of approximately VND2.84 trillion ($115.62 million).

According to data from the Vietnam Bond Market Association (VBMA), in August, there were 22 private placement bond issuances with a total value of nearly VND25.06 trillion ($1.02 billion). This figure is significantly higher than in July and accounts for nearly 20% of the total year-to-date value.

In addition to banks, many real estate companies such as Lan Viet Real Estate Company Limited (VND4.1 trillion or $166.87 million), Lien Lap Investment Business Real Estate Company Limited LLC (VND1.47 trillion or $59.82 million), and Capitaland Tower (VND7.24 trillion or $294.62 million) have successfully raised proceeds through bond issuances.

Companies are not only issuing bonds to raise capital; they are also targeting foreign funds. For example, in a recent update regarding new bondholders, NamLand Limited Company, which issued a VND900 billion ($36.64 million) bond batch, is facing interest and principal payment delays. The company stated that it is working with several foreign organizations, including Mitshubishi Estate, to propose support for financial restructuring and continuation of project development on the condition that the projects meet the necessary selling conditions.

NamLand has submitted its documents to Millenium Bridge Global Investors (MBGI) and requested a loan for financial restructuring and project development.

"We hope that in the near future, we will sign formal cooperation agreements with one of our partners to continue the implementation of the Shizen Home project," said Nguyen Thuc Anh Thi, chairman of NamLand.

Money helps revitalize companies

According to Ha Van Thien, deputy general director of Tran Anh Group, the most significant and fundamental challenge in the current market and for businesses is the lack of cash flow.

According to Thien, for a real estate company, money is like the lifeblood that nourishes the body. Without blood, the body cannot survive. "Real estate businesses have three channels to raise capital: bank loans, bond issuances, and sales revenue. Among these, bank loans and corporate bond issuance activities are currently tightly controlled, making them not easily accessible.

The survival of a business depends on sales results, but the challenge lies in the market's demand. "The most challenging solution for businesses at this time is how to create liquidity in the market. To achieve liquidity, we need to instill trust in buyers through demand-stimulating policies, support in loans and interest rates, removing legal entanglements for projects, and increasing transparency in the market," Thien noted.

According to Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association (HoREA), access to sources of capital through bond issuances and credit is a "lifesaver" for real estate businesses in the current market situation, which is still challenging due to weak purchasing power.

Nguyen Thanh Nghi, Minister of Construction, at a conference in mid-September 2023 said he predicted that the real estate market would gradually warm up in the final months of the year and show signs of a recovery in 2024, leading to increased demand for construction materials and laborers. Lower loan interest rates, a more active bond market, and removal of legal entanglements have started to bring about posititve results, he added.