VinaLand (VNL) is a closed-end fund set up in 2006 to invest in property development in Vietnam. Following a difficult period for the country’s real estate market, an extraordinary general meeting (EGM) in November 2012 saw shareholders vote in favour of a three-year programme of divestment and realisation, which was extended by a further year at an EGM in November 2015. With the Vietnamese property market now more buoyant, VNL is well advanced towards its 12-month target of $165m of realisations and has recently made a capital distribution of $35m. The fund’s board, in consultation with shareholders and the manager, is continuing to develop options for a new strategy for a new term that would commence at the EGM likely to be held in November 2016.
Since November 2012, VNL has focused on realisation and divestment and has not made any new investments, except in existing projects where it has been required to inject further capital into the asset to the point where a sale is achievable. The current portfolio blends mixed-use (commercial/residential), residential and township developments, with a small residual holding in hotels. The pace of realisations has stepped up since the extension of the original three-year cash return period in November 2015, with $142.7m of net proceeds from divestments so far in 2016.
After a rocky few years for the Vietnamese property market and the economy, forecast GDP growth is now in line with the rest of emerging Asia, inflation is under control and property values are picking up. Tighter bank lending criteria may ensure that the housing market is insulated from future bubbles, while Vietnam’s growing middle class and high savings ratio should underpin demand, particularly in suburban areas that are benefiting from infrastructure investment.
At 31 August VNL’s shares were trading at a 28.7% discount to net asset value. While this is wide in comparison with property funds investing in more developed markets, it is narrower (in some cases significantly so) than its one-, three- and five-year averages (33.8%, 39.8% and 45.6% respectively), and close to a five-year low of 28.0% seen in late May. VNL’s assets are independently valued twice a year, and divestments since the November 2015 EGM have been at an average premium of 0.9% to the latest reported NAV, although dispersion has been wide.