Protego Real Estate Investors has launched a new $200 million (€128 million) fund to invest in residential developments in Vietnam.
Protego Qudos Vietnam Property Fund will be invested in partnership with Vietnamese real estate development company Qudos Asia. Qudos and its sister company HBP have 80 staff located throughout Vietnam.
The vehicle is a residential development fund, targeting luxury apartments in prime urban locations as well as residential estates in prime suburban and coastal locations. It will also allocate no more than 10 percent to boutique branded resorts and villas. A minimum of 80 percent must be invested in residential projects.
Charles Weeks, head of business development at Protego, said the fund is being marketed to institutional investors in the UK and continental Europe, and the fundraising should be complete by the end of June. “We’re promising our investors that we’ll deliver 25 percent net IRR, though we expect at project level to show returns in the mid 30’s,” he said. “It’s a very attractive backdrop for investment. Vietnam is the second most stable country in the region after Singapore, and it has the third highest global GDP growth rate in the world.”
Though still technically a Communist nation, Vietnam has been undergoing rapid market reforms and is set to join the World Trade Organization shortly. In contrast to its Southeast Asian neighbors, Vietnam has a stable government, no history of modern terrorism, and the fastest-growing economy in East Asia after China. Foreign ownership of property has also recently been deregulated, prompting a major push into the country by Western real estate investors. Private equity firms that have entered the country include Indochina Capital, Jen Capital and Pacific Alliance’s VinaCapital.
Weeks said the firm has chosen to Focus on the residential sector because it is the lowest risk sector in emerging markets. He added that the fund has a specific strategy to take advantage of the fact that developers can do presales on residential projects in Vietnam, which will create a cash flow for the construction, allowing the fund to use much less leverage than it might in a different sector. At project level the fund will be able to leverage at 50 percent, Weeks said. The fund will focus on the area around Ho Chi Minh City (formerly Saigon) rather than the country’s other main city, Hanoi.
“The focus in Hanoi tends to be more of a political destination, but the real commercial growth in Vietnam is from Ho Chi Minh City,” he said. While GDP growth is currently at 8 percent for Vietnam as a whole, GDP growth in Ho Chi Minh City is at 12.5 percent, he added.
Launched in April 2004 as a Europe-focused firm, Protego has offices in London, Rotterdam and Stockholm. It currently has total assets under management of more than €3 billion. The firm has been active in Asia. In October of last year Protego launched a $400 million India-focused vehicle, the Protego WIRE Indian Office Development Fund. Which will invest primarily in office development projects in tier one and tier two cities in India.