Asia’s high net worth individuals have contributed to a $37m Vietnam real estate fund that may generate an investment return of between 20% and 25% annually. EXS Capital, an alternative investment and wealth management group, raised the fund from Asian investors, a large number of them from Japan, says Eric Solberg, Co-Founder and CEO. The fund will be invested into projects by Son Kim Land, a garment manufacturer turned real estate developer in Vietnam.
In addition to the initial $37m, EXS Capital has further commitments that may bring the investment up to $50m with further potential of up to $80m. “We’ve found that Asian high net worth investors are increasingly preferring direct deals rather than investing in a blind pool fund,” says Solberg, whose company’s wealth management division functions as a multi-family office for “smart money” high-net worth entrepreneurs and professionals.
“Japanese investors have been in a mood of expansion and diversification outside of Japan and as China has slowed down a little and there have been some tensions between those two countries, they have been looking at other places particularly around Asia.”
The fund is structured such that “investors receive far greater downside protection while the management receives additional upside participation and retains majority control throughout.”
Son Kim Land has six development projects in the pipeline including two large scale mixed-use developments comprising apartment, serviced apartment, retail and office space in the center of District 2 of Ho Chi Minh City, with direct access to the new Metro currently under construction. District 1 is the business district. Son Kim’s other pipeline projects include a hotel and a mixed-use commercial and office development in District 1, as well as a luxury beach resort.
Solberg says there are similarities between Vietnam’s capital crisis of 2010-2012 and China’s economic crises in 1994-95 and 2003-04, when China’s strong demographics and growth story was obscured by challenging fiscal policies and financial dislocation. “Our experience in China during that era taught us that smart investors who could see past the temporary dislocation and use it to make opportunistic investments in great companies, did extremely well over the long term.”
The fund’s investors may expect at least 20-25% return on a “best case perspective.” Exit strategies include selling the real estate projects from the portfolio or a listing on the stock exchange, he adds.
“Our goal is to get this company a listing on the local stock exchange because an IPO will provide a higher IRR exit, according to our projections, as much as four to five times profit or more,” says Solberg. “What we have is a structure that will allow us to stay in for five to eight years, allowing us to ride out at least this cycle or at least a couple of cycles such that when the right market window does come along for an IPO we will be ready.”
Solberg says raising the money from Asian high net worth investors, instead of institutional funds, gives the company flexibility with regards to the timing of the listing.