City Developments Seeks Distressed Assets in Vietnam (Update1)
By Liza Lin
Aug. 15 (Bloomberg) -- City Developments Ltd., Singapore's second-largest real estate developer, may buy distressed assets in Vietnam as early as next year, Chairman Kwek Leng Beng said.
The company has explored Vietnam, though isn't making any immediate investments because the market is ``very toppish,'' Kwek said. Residential property prices in Ho Chi Minh City, Vietnam's biggest, declined as much as 40 percent between December 2007 and May of this year, according to Morgan Stanley.
``It's best to buy completed projects when they are distressed,'' Kwek, 67, said in an interview yesterday. ``Then, you don't have to do anything, you just collect income.''
The developer, which owns Millennium & Copthorne Hotels Plc, may buy hotels and residential and commercial projects in Vietnam, Kwek said. Distressed-asset investors will benefit from a wave of opportunities in Asia in the second half, when about $80 billion of debt will be refinanced, Cube Capital Group, an alternative investment fund that manages $1.2 billion of assets, said in June.
City Developments will target assets that have gone through foreclosure or that are being sold at below market value. More of those assets may become available this year in Vietnam, where the benchmark stock index tumbled by almost half and the central bank raised interest rates three times to combat the fastest inflation since at least 1992.
Limiting Bad Debt
Vietnam's central bank has asked lenders to limit bad debts to about 3 percent of their loans, Nguyen Dai Lai, deputy director of the central bank's department for development strategies, said by phone from Hanoi today.
CapitaLand Ltd., Singapore's biggest developer, said in June it's seeking distressed assets in Japan and China. Banyan Tree Holdings Ltd., a Singapore-based operator of luxury resorts, said earlier this month it also expects to buy troubled assets in Asia.
City Developments is also turning to Vietnam as growth slows in Singapore, which last week lowered its 2008 economic forecast for a second time. Vietnam's government expects the economy to expand 7 percent in 2008.
City Developments should venture into emerging markets such as Vietnam in the medium to long term, said Brandon Lee, analyst at DMG & Partners Securities Pte in Singapore.
The government expects as many as 22 million people in Ho Chi Minh City by 2020, and about 30 million by 2050, Thoi Bao Kinh Te Vietnam reported in May. The country's population of 86 million is increasingly shifting to urban areas as companies such as Nike Inc. and Intel Corp. expand production in Vietnam.
`Urbanization'
``Vietnam is riding on the fundamental story of urbanization,'' Lee said. ``The office sector rents are also looking good and yields are getting more attractive.''
City Developments relies on its residential developments and office buildings and malls in Singapore for the bulk of its profit. Most of its overseas earnings come from its hotels through its Millennium & Copthorne chain, owner of properties such as the Biltmore in Los Angeles. Hotels made up 30 percent of its second- quarter pretax profit of S$248.9 million.
The developer is already raising funds for its overseas investments. Kwek told reporters yesterday the company is raising as much as S$1 billion through Islamic financing to ``bottomfish at the right time.''
To contact the reporter on this story: Liza Lin in Singapore at Llin15@bloomberg.net
Last Updated: August 15, 2008 02:55 EDT |
