CapitaLand Development (CLD) has divested Capital Place, its Grade-A office building in Hanoi, Vietnam, for S$751 million (US$550 million) to an unrelated third party.
Capital Place is held under the CapitaLand Vietnam Commercial Value-Added Fund (CVCVF). CLD, the development arm of Singapore-based CapitaLand Group, holds a 50% stake in the fund while the remaining interest is held by MEA Commercial Holdings. The CVCVF, created in 2017 with a fund size of S$177 million, is managed by CapitaLand Investment (CLI), the real estate investment management business of CapitaLand Group.
The agreed value of the property was arrived at on a willing-buyer and willing-seller basis. Upon completion of the transaction, CVCVF will be fully divested and closed, providing investors in the fund an internal rate of return (net of fees) of 34%, almost triple the fund’s hurdle rate.
The fund was also able to access regional debt markets to obtain an efficient capital structure which further boosted the fund’s returns. This will generate carried interest of S$23 million to CLI and provide a strong track record for CLI’s future private-equity funds.
Ronald Tay, chief executive officer of CLD (Vietnam), says: “The divestment of Capital Place is part of CVCVF’s exit strategy and in line with CLD’s ongoing capital recycling efforts to unlock the strong underlying value of our properties. Tapping on the synergies of our ONE CapitaLand ecosystem and working closely with CLI, we have successfully created value for our capital partner through our real estate development and asset management capabilities, divesting the prime asset at a premium to book value. CLD will redeploy the proceeds from this divestment into higher-yielding assets and as seed capital for future funds to be developed together with CLI in Vietnam.”
Tay adds: “Our strong fund management performance builds upon CLI’s success last year where it incepted seven private equity funds with more than S$1.4 billion raised from external parties. With CLI’s growing bench strength in private equity fund management and CLD’s deep experience in Vietnam, we will leverage our synergistic capabilities to launch new real assets private equity funds in Vietnam in the near future. CLD firmly believes in Vietnam’s excellent growth prospects, and we are committed to being a long-term partner to the development of Vietnam’s real estate market. We continue to seek attractive real estate investment opportunities in offices, residential and urban developments, as well as in new economy assets such as logistics facilities, data centres and business parks.”
Capital Place was acquired by CVCVF in 2018. Opened in 2020, Capital Place is strategically located in the heart of Ba Dinh District. The Grade-A development has 100,000 square metres of net lettable area across two 37-storey office towers. Capital Place is home to multinational tenants such as HSBC Vietnam, Porsche, Standard Chartered Bank Vietnam, TOTO Vietnam and more. It is the first office development in Hanoi to obtain Leadership in Energy and Environmental Design (LEED) Gold certification.
Vietnam remains one of CLD’s core markets where it has built an extensive presence over the past 27 years. Besides Capital Place, CLD currently has one office asset located within its integrated development in Hanoi. The integrated development has a net lettable area of 20,000 sqm and is slated for completion in the second quarter of 2024. Post-divestment, CLD’s portfolio will comprise two integrated developments, over 12,000 quality homes across 16 residential developments and one retail mall in Hanoi and Ho Chi Minh City.