Why Real Estate

WHY REAL ESTATE?

About Vietnam

In trend with the impressive expansion of the Vietnamese economy, the Vietnamese real estate industry has showed incredible growth in recent years and is considered one of the most attractive in Asia. In 2008, 50% of Vietnam FDI has been into the real estate industry. In HCM City, 90% of the FDI has been into the real estate industry.

As forecasted by industry experts, such as CB Richard Ellis, Cushman & Wakefield and the like, all agree that significant real estate and infra related investments are required to support Vietnam’s growth potential. We believe that Vietnam’s Real Estate is one of the most profitable asset type in any investor’s investment portfolio.

We see highly attractive investment opportunities across all asset classes for experienced real estate professionals who are able to combine international best practices of real estate development and finance with local deal sourcing and execution.

RESIDENTIAL

Within the Vietnamese real estate market, we find the Residential market to be the most exciting and attractive asset class. Currently Vietnam faces a severe shortage of housing space in the country’s urban areas as the current demand only satisfies only less than 30% of the demand. In HCM City alone, an estimated 100,000 new apartments, or 50 million sqm, are needed in HCMC from now to 2010. Housing space in Vietnam is between 6 – 10 sqm/person, comparing to that 20 sqm+ / person in developed countries.

The demand for new housing is driven by the following factors:

•The majority portion of the population is living in sub-standard, narrow, and poor quality accommodations, a very high urbanization rate
•Increasing purchase power of the general population
•Emergency of the middle class
•Availability of mortgage financing

The demand drivers for and the foundation of the Vietnamese residential market are solid and sustainable and will continue to generate high growth for this segment in the coming years.

OFFICE

Compared to other countries in the region, Vietnam’s office segment is in its infancy. Regional cities such as Bangkok has 17 times more modern office stock per population of 1,000 than HCM City. The total inventory of Grade A office is 150,000 sqm in both HCMC and Hanoi, which is less than IFC tower in Hong Kong.

The demand for modern office space is solid as an increasing number of foreign companies setting up operations in Vietnam because of the WTO membership and the increasing FDI and local companies have been expanding to meet their growing business needs.

Due to high demand and limited supply, Vietnam has one of the highest rental rate as well as occupancy rate of prime office space in the region.

RETAIL

Retailers have in recent years have profited from change in lifestyle and increased purchasing power. Shopping in of modern shopping centers have also increased in popularity. Currently, there are only 5 Western style shopping centers available in HCM City.

Vietnam has a large and young population, which provides an ideal demographics for retail. • A.T. Kearney’s Global Retail Development Index 2008, ranks Vietnam number one in retail market (for investor view point) amongst 30 developing countries. The next countries in this list are India, China, and Russia…

With increasing purchasing power and the emergence of the middle class, many Vietnamese are shifting their shopping preferences from traditional shopping venues to modern multi purpose shopping centers. Due to increased globalization and WTO membership, and increasing number of international brands are starting their operations in Vietnam. • From January 2009 on, foreign retailers can invest 100% in its operations in Vietnam and no longer a Vietnamese partner

Vietnam has a severe lack of modern retail space due to shortage of land for new development. Currently, there is only approximately 150,000 sqm of modern retail space in Vietnam. Given the limited inventory and the lack of new supply, Vietnam has one of the highest occupancy rate and rent in the region. Rents on prime locations range from US$80 - 150/sqm/month

We see that the retail space will be a particular interesting space in the unforeseen future.

HOTEL / RESORTS

Renowned for its long coast line, white sandy beaches, multiple cultural heritage sites and reputation for safety, the number of tourists in Vietnam continues to increase. The World Tourist Organization ranked Vietnam as one of the fastest hottest tourism markets in 2007. Vietnam’s total number of foreign visitors was approximately 4.2 million in 2007 or a 17% increase over 2006. Vietnam is expected to exceed more than 5.0 million visitors in 2008 (as projected by Horwath Asia Pacific). The growing number of tourists should provide a good foundation for the country’s hospitality industry.

Even with the increase in the number of visitors, the currently inventory of hotel rooms remains limited. Vietnam’s two largest cities have a combined 75 hotels ranging from 3 stars to 5 stars with less than 13,000 rooms. The number of 5 star hotels is limited to 10 in HCM City with about 3,400 rooms and to 8 in Hanoi with about 2,400 rooms. Given the imbalance of market supply and demand, most hotels enjoyed high and stable occupancy rates, and the two cities witnessed a significant increase in average daily rate as of the last quarter of 2006 (source: CB Richard Ellis January 2008).

SERVICED APARTMENTS

With Vietnam recent membership in WTO and the growth in FDI, Vietnam is attracting an increasingly larger number of multinational corporations as well as Government entities. The number of expats is forecasted to continue to increase due to these factors. We see an increased demand for quality serviced apartments catered for these expats, especially given the lack of quality serviced apartments in the major cities HCM City and Hanoi.

There are around 10 Grade A serviced apartment projects located within HCM City and Hanoi, a total 800 units, offering one to five bedroom units. The total segment has approximately 3,000 units with close to 100% occupancy rate as of 2008. Increasing expat workforce and FDI after WTO accession promise high yield in for this market in short and medium term.