GBA Meeting 16-01-2012 - CBRE Presentation

Fearless Forecast
Do not let a good crisis go to waste

January 2012
Presented by:
Marc Townsend Managing Director CB Richard Ellis (Vietnam) Co., Ltd.
HCMC 2011 Changes
Times Square
Saigon M&C Tower
Taken on January 2, 2011 Eden A
Taken on January 12, 2012

CBRE Vietnam | Page 2
CBRE CBRE Vietnam Vietnam
Fearless Forecast 2012
HCMC 2011 Changes
Taken on January 2, 2011 Vietcombank Tower VietinBank BIDV Tower

HCMC 2011 Changes
Saigon Centre (phase 2)
Taken on January 2, 2011 Ben Thanh Towers

2011 MOST Fearless Forecasts

Office Tenants
Multiple choices and softening rents
Hospitality
Ritz Carlton, St. Regis, Mandarin Oriental, Shangri-La and Four Seasons to enter market within the next 5 years
Retail
Refurbished retail areas appear (Saigon Square #3) Shipyards moving towards development Growth of mini-malls due to lack of land (< 3,000 sm) Larger retail areas coming up outside of traditional areas District 5 (Tan Da Shopping Center), and Binh Duong (Becamex New City)
Fearless Forcast 2012
2011 MOST Fearless Forecasts

Investors
Property investment remains dangerous for your health Change in asset class as gold dips and people moved in other directions
Developers
Marketing spend TRIPLES as developers search for new ways to sell / lease their units Increased use of technology in property building management systems, CRM systems Local companies seek capital through IPOs and more sophisticated financial structures Some residential developers will convert units for sale to units for lease due to unsold units in completed buildings, or instituting rental pools (guarantees) Demand for data centres grows due to the continuing movement online, as our businesses become more immediate with wi-fi, smart phones and iPads. Developers prepared to deliver with the requirements needed to support these trends will profit.
2011 Vietnam Economic Overview

2008 GDP Growth Rate (y-o-y) Lending Rate Inflation (Average, y-o-y) Exports Imports Gold Price (per Tael) US$/VND (Commercial banks) US$/VND (Unofficial market) 6.2% 12% 22.9% US$62.7 bil US$80.7 bil VND17.8 mil
(Dec. 31, 2008, up 7.2% y-o-y)
2009 5.3% 12.75%

Down from 21% in Q3
2010 6.8% 16%-17.0%

(Late 2010)
2011 e 5.91 22% - 25%2 18.58%1 US$96.3 bil US$105.8 bil VND41.8mil4
(Dec. 30,2011. up 15.8% y-o-y)
2012 f 6.3 3 N/A 12.1% 3 US$105.4 5 US$113.3 5
6.9%1 US$57.1 bil US$69.9 bil VND26.7 mil

(Dec. 31, 2009, up 50% y-o-y)
9.2%
(Dec10: 11.8%)
US$71.6 bil US$84.0 bil VND36.1 mil

(Dec. 31, 2010, up 35.2% y-o-y)
N/A
17,400
(Dec. 31, 2008)
18,497 (Dec. 31, 2009) 19,470

(Dec. 31, 2009)
19,500
(Dec. 31, 2010) Devalued by 5.4% vs. Dec. 2009
21,036
(Dec.31, 2011) Devalued by 7.9% vs Dec. 2010)
21,7357
17,510 (Dec. 31, 2008)
21,010 (Dec. 31, 2010) US$18.6 bil

(US$6.8 bil real estate)
21,275
(Dec. 31, 2011)
N/A
Committed FDI
US$71.7 bil
US$22.6 bil
US$14.7 bil 1
(US$845.6 mil real estate)
US$15 - 16 bil 6
Implemented FDI
US$11.7 bil
US$10 bil
US$11 bil
US$11 bil1
N/A
Source: Historical data by GSO, 1GSO , 2SBV, 3 IMF, 4 SJC, 5 World Bank, 6 Ministry of Investment, 7Oxford Economics
2011 Regional Economic Comparison

Hong Kong Thailand Singapore China Malaysia Vietnam Indonesia
GDP Growth Rate
4.9%
1.6%
5.0%
9.0%
4.9%
5.9%
6.3%
Consumer Price Index
5.3%
3.9%
5.0%
5.6%
3.2%
18.6%
5.4%
Gold Price ( per gram in US$ equivalent)
US$53.00
US$51.80 US$50.50 US$52.18 US$51.88 US$52.17
2.2% higher than regional average US$52.72
Trade Balance
-$55.4 bn
$27 bn
$48.3 bn
$111.9 bn
$47.1 bn
-$9.5 bn
$38.2 bn
FDI (net inflow in current US$, 2010)
$8.0 bn $68.9 bn $6.3 bn $38.6 bn $185.1 bn $9.5 bn

(Source: World Bank) $13.3 bn
Source: Oxford Economics, Vietnamese General Statistics Office, World Bank, Goldprice.org, goldpricethai.com, pecunix.com
A look ahead to 2012

With demand from the eurozone and US expected to remain weak for some time, emerging East Asia should continue to work toward increasing intraregional trade and financial integration, and expanding links with other emerging economies.
- ADB, Asia Economic Monitor, December 2011 -
2012
Vietnam Thailand Singapore China Malaysia Indonesia
GDP (% y-o-y) 5.8 4.5 3.3 8.1 4.9 6.2
CPI (% y-o-y) 11.5 3.6 2.9 2.8 3.5 2.8 5.0
10% 8% 6% 4% 2% 0% -2% -4% -6% -8%
Hong Kong 3.5
2000 Q1
2001 Q1
2002 Q1
2003 Q1
2004 Q1
2005 Q1
2006 Q1
2007 Q1
2008 Q1
2009 Q1
2010 Q1
2011 Q1
2012 Q1
World
Western Europe
Asia-Pacific
United States
Source: Oxford Economics. Note: GDP growth for Vietnam in 2012, The World Bank, IMF and ADB range between 6.1% 6.5%.
2013 Q1
2011 Economic Overview FDI

Implemented FDI
COMMITTED FDI, 2010

24.9% 36.8% 1.7% 9.3% 27.3%
COMMITTED FDI, 2011

Real estate Processing Manufacturing Industry Construction Hotels and restaurants Others
48.5% 2.9% 8.5% 34.3% 5.8%
Real estate Processing Manufacturing Industry Construction Hotels and restaurants Others
Source: Ministry of Planning & Investment
2011 Vietnam Stock Market

At the beginning of 2011, some expected a rise. Going into 2012, some are wondering where the bottom is. VN Index drops 27.5%, real estate companies fell by approx. 45% Little support from those holding gold.
550 500 450
2,000 1,800 1,600 1,200 1,000 800 600 400 200
400 350 300 4-Jan 1-Feb 1-Mar 29-Mar 26-Apr 24-May 21-Jun VNIndex 19-Jul 16-Aug 13-Sep 11-Oct 8-Nov 6-Dec
Trading value
Source: FPT Securities
Trading Value (Billions VND)
1,400
Index
2011 International Arrivals

2011: 6 million international arrivals to Vietnam (19.1% y-o-y) and 3.5 million to HCMC (13% y-o-y)
7 6 5
Millions
4 3 2 1 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Vietnam HCMC
Tourism arrivals by country 2011 China 1,416,804 South Korea 536,408 Japan 481,519 US 439,872 Cambodia 423,440 Taiwan 361,051 Australia 289,762 Malaysia 233,132 France 211,444 Thailand 181,820 Others 1,438,779
Source: General Statistics Offices; bistrochic.net
Car Sales
Nguyen Van Linh the automobile hub, further growth expected; Kia New Morning VND357,000,000 (US$17,000); Entry Level Mercedes VND1,500,000,000 (US$70,000);
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Mekong (Fiat, Ssangyong, PMC) VMC (BMW, Mazda, Kia) GM Daewoo VinaStar (Mitsubishi) Mercedes-Benz Vietnam Visuco (Suzuki) Toyota 7% 2% 34% 34% 22% 79% 82%
CAR SALES IN VIETNAM

$120000.0 $100000.0
Car Sales (unit)
$80000.0 $60000.0 $40000.0 $20000.0 $.0 2007 2008 2009 2010 11M/2011
Car Sales by Manufacturer in Vietnam
2011 Government Decrees

New in 2011: Pricing in Dong
Decree 95/2011/ND-CP states that VND must be used for quotation or advertising of goods and services, etc.
Relating to Apartment Service Fees

Decision No. 4520/Q-UBND provides that the statutory Apartment Service Fee Rates shall be applied only when the parties has not yet agreed on the Apartment Service Fee in advance
Non-Agricultural Use Tax

Decree No. 53/2011/ND-CP Pilot program for NALU Tax, Prior to enforcement of Decree No. 53 on January 01, 2012, The Ministry of Finance is unrolling a pilot program to collect non-agricultural land-use tax in certain local areas of H Ni, Cn Th cities and the Bc Ninh province. The pilot stage will focus on identifying taxation areas as well as connecting and exploiting the databases of local agencies on tax and natural resources.
Requirement for Environmental Impact Statement

Decree No. 29/2011/ ND-CP dated April 18, 2011 is the first guidance on the assessment on environmental impact Proscribes many requirements and procedures to that are required for specific development projects
The Original Golden Sites
Of the 20 Golden sites: 2 completed 2 under development 16 sites awaiting action

Infrastructure 2011 Milestones

Roadways
T3 Thu Thiem Tunnel The ten year Nhieu Loc - Thi Nghe Canal Road widening project is completed On August 24, the first Bus Rapid Transport (BRT) route in the city opened from Ben Thanh Market, to Mien Tay Bus Station.
Metro lines
The expected cost of Metro Line 1 has almost doubled, with progress in compensation. Tramway Line No. 1 is being restructured into a Bus Rapid Transit (BRT) system at reduced cost.
Nhieu Loc - Thi Nghe Canal Road

Source: www.info.vn
Air
Da Nangs new airport terminal opens! Prime Minister Dung officially approved Long Thanh International Airports master plan. The airport has an area of 5,000 hectares with investment capital of US$6.7 billion for the first phase. Vietjet Air, a new private airline, started operation. (1 Airbus, 2 on order).
Da Nang New Terminal

Source: Tuoi Tre
2012 Infrastructure
Roads:
Construction of the four main roads in the Thu Thiem new urban area will start in July, 2012 Completion is expected 2015. East West Highway
Bridge:
Saigon Bridge No. 2, with four lanes, will start constructed in April, 2012, and will take 22 months to be completed.
Bus system:
In 2012, the city will focus on improving the bus system and services, implementing solutions to improve the backbone of the citys transportation.
According to BCI Asia

All Future Projects HCMC Hanoi Da Nang Can Tho Nha Trang (Khanh Hoa) Vung Tau Hai Phong
Office Retail Hospitality and SA Residential
267 86 44 311
245 33 53 268
43 18 28 134
22 7 12 10
16 4 37 22
35 11 19 32
13 5 6 9
Projects Under Construction
HCMC
Hanoi
Da Nang Can Tho
Nha Trang (Khanh Hoa)
Vung Tau
Hai Phong
Office Retail Hospitality and SA Resi
166 42 25 142
88 24 32 104
15 6 17 19
15 6 5 3
6 3 10 5
19 1 8 14
7 3 2 5
Source: www.bciasia.com; CBRE Vietnam

Office - Rents
Grade A Rents (US$ psm)
$60 $50 $40 $30 $20 2009 2010 2011
Rents Grade A Grade B Grade C
3 year -55.0% -44.0% -41.5%
1 year -8.3% -7.5% -8.5%
1 quarter -5.8% -1.5% -3.0%
Grade B Rents (US$ psm)

$30 $25 $20 $15 $10 2009 2010 2011
Grade C Rents (US$ psm)

$30 $25 $20 $15 $10 2009 2010 2011
Office - Vacancy
Vacancy Grade A Grade B Grade C 3 year 23.4 pt 14.4 pt -2.6 pt 1 year -14.6 pt 3.3 pt -1.9 pt 1 quarter -6.1 pt -0.7 pt -0.1 pt
Grade A Vacancy
40% 30% 20% 10% 0% 2009 2010 2011
Grade B Vacancy
20% 15% 10% 5% 0% 2009 2010 2011
Grade C Vacancy
20% 15% 10% 5% 0% 2009 2010 2011
3 Year Residential Price Movement

Luxury Condominium (US$ psm)
$4,500 $4,400 $4,300 $4,200 $4,100 $4,000 Q1 Q2 2009 Q3 Q4 Q1 Q2 2010 Q3 Q4 Q1 Q2 2011 Q3 Q4
$1,950 $1,920 $1,890 $1,860 $1,830 $1,800 Q1 Q2 2009 Q3 Q4 Q1 Q2 2010 Q3 Q4 Q1 Q2 2011 Q3 Q4
High-end Condominium (US$ psm)
Secondary Asking Price (US$/sm)

$6,000 $4,000 $2,000 Luxury Mid-end High-end Affordable
Mid-end Condominium (US$ psm)

$1,020 $990 $960 $930 $900 Q1 Q2 2009 Q3 Q4 Q1 Q2 2010 Q3 Q4 Q1
$0 2007 2008 2009 2010 2011

$730 $710 $690 $670 $650
Affordable Condominium (US$ psm)
Q2 2011
Q3
Q4
Q1
Q2 2009
Q3
Q4
Q1
Q2 2010
Q3
Q4
Q1
Q2 2011
Q3
Q4
Take-up vs. Hangover

Take-Up Rate (%)
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q1 Q2 2009 Luxury High-end Q3 Q4 Q1 Q2 2010 Mid-end Q3 Q4 Q1 Q2 2011 Affordable Q3 Q4
Unsold Units Accumulated (Units)

9,000 8,000
Unsold Units by Segment
20,000 18,000 16,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Q1 Q2 2009 Luxury High-end Q3 Q4 Q1 Q2 2010 Mid-end Affordable Q3 Q4 Q1 Q2 2011 Total Q3 Q4
Total Unsold Units
7,000 6,000 5,000 4,000 3,000 2,000 1,000 0
Some are waking up with their head in their hands
14,000
The Residential Nightmare

Dong Devaluation (9.3%) More strictly control on dolarisation price list in VND Intl banks stopped mortgage lending
Resolution 11
Q1
5,078 launches 2,229 sales
Q2
4,926 launches 1,390 sales
Discount Headlines
Goldora Villa sold to ICC

1,096 launches 846 sales 864 launches 1,867 sales
2012
Death, Discount or Opportunity ?
Q3
More incentives to stimulate sales
Q4
Property sector, the most attractive investment channel, but more cautious to invest in 1-3 years (survey by Grant Thornton Vietnam) Doc. 8844 /NHNN-CSTT: Remove 4 real estate groups out of the nonproductive outtsatnding loan category
US$6,000/unit in Binh Duong
The Ascott signed Diamond Island (D.2)
Retail
The past 18 months has seen shopping centre rentals create a buzz;
Department Store vs. Shopping Centre

CBD Asking Rents (US$/sm/month)
Department Store $140 $120 $100 $80 $60 $40 $20 $0 2008 2009 2010 2011 Shopping Centre
2012, we expect department store rentals to come back to the forefront: Lack of quality space in the CBD; Still a softening on rents 2012, shopping centre rentals in the CBD to remain soft; Saigon Centre phase 2, the CBD retail hub on the horizon; First new supply in CBD with department store;
Non-CBD Asking Rents (US$/sm/month)

Department Store $100 $80 $60 $40 $20 $0 2008 2009 2010 2011 Shopping Centre
Source: CBRE Vietnam
1st quality shopping centre outside the CBD Crescent Mall; However, rentals still softening as retailers have multiple options and established SHOPHOUSE location remain popular;
Source: CBRE Vietnam

Hotels 2012
Occupancy and RevPAR both showing signs of growth in 2011. Coastal markets such as Phu Quoc, Nha Trang and Da Nang showed a higher RevPAR growth rate than HCMC:
RevPAR (US$/room/night)
60 55 50 45 40 35 30 25 20 2009 HCMC Da Nang 2010 Phu Quoc 2011F Nha Trang
Phu Quoc continues to lead the coastal market with 20% y-o-y increase in RevPAR, expected to be an attractive destination for investors in 2012. The operation of new Da Nang International Airport terminal in December,2011 facilitates more direct international flights to Da Nang from locations such as Seoul and Kuala Lumpur.
Da Nang Hotels/Resorts/2nd Home 2012

2011 y-o-y increase in visitors was 34%, of which international visitors increased 44% y-o-y The Hyatt Regency came online in Q4 with 200 five-star rooms, 2012 expects InterContinental, Le Meridien, Melia and Pullman to enter DN In 2012, the DN hospitality market will target Russian tourists with direct Russia Da Nang flights in consideration Da Nang market continues to perform with 60% of the 40 villas launched at The Point sold within three months No construction expected in 2012 without pre-sales Projects away from the coast see action too WTC leasing (anchors already signed) and Azura to complete Q2
Serviced Apartments 2011

Demand derived from 3 sources:
Professional expatriates main source Returning Overseas Vietnamese Wealthy Vietnamese a new and growing trend
Both from Asia and the West Hanoi: employees in the Embassies
Proportion of Requested Area (sm)

0 - 60 100% 80% 60% 60 - 100 100 - 160 160+
Vietnam will be the 11th most common destination of companies sending staff on
international assignments up to 2013. Therefore, this is likely to ensure that the demand for accommodation from companies sending staff into Vietnam is likely to remain strong in the next three years.
--- Trends in Managing Mobility Survey 2010, ECA International
40% 20% 0% Q1/2011 Q2/2011 Q3/2011 Q4/2011

Source: CBRE Residential Leasing
TOP DEMAND!
Proportion of Housing Budget (US$/month) $0 -$1200 $1200 - $2500 40.0% 41.5% 48.2% 52.1% $2500 - $3500 40.0% 29.2% 24.1% 26.6% $3500+ 10.0% 11.3% 7.2% 9.6%
H1/2011 work permits issued to foreigners in HCMC:

Achieved 85.1% of entire 2009 Down 16.5% against H1/2010
Q4/2010 Q1/2011 Q2/2011 Q3/2011
10.0% 17.9% 20.5% 11.7%
Source: CBRE Residential Leasing

ILS 2012 Forecast

Logistics component becomes a must in industrial park zoning. Logistics to grow as Asian regional trade buoys economy through Eurozone crisis and slower US growth. Japanese investment KEY. Both from Japan directly, and from Japanese companies relocating out of Thailand. Potential growth areas:
Food & Beverage for South Vietnam Electronics for North Vietnam.
Ready Built Factory rental rates come down as more supply than ever before. With the increasing profile of industrial in Vietnam, more investors seek wholesale purchases of operating IPs.
The Rise of Investment - The Institutional Deal

And a notable variance in yield
Pacific Place, Hanoi Q4 2010 Reported 12%
CentrePoint, HCMC Q2 2011 Reported 10.6 11.3%
At At least least three three more more institutional institutional deals deals to to come come in in 2012 2012
Saigon Tower, HCMC Q4 2011 Reported 8.5%
CBREs 10 Most Fearless Forecasts

On December 31, 2012
1. Nguyen Trai still the retail king! 2. Square office buildings back in fashion! The best tenant deals will have happened in the first half of 2012. 3. Any residential project that hasnt broken ground will gravitate to the affordable (new middle class, less than 21,000,000VND psm) segment. 4. Luxury residential in the CBD WILL sell. 5. Golf Boom or Bust?!? 6. Revenue from cleared sites skyrockets as they are converted into drive-in movie theatres and Circle K. 7. Burger King opens at Da Nang airport and Sushi Bar opens in Phu Quoc as overseas visitors increase a further 20%. 8. In the short-term the new Pudong is not Thu Thiem, it is District 4. 9. Gold price declines with new supply from Vietnams two gold medals at the London Olympics 2012. 10. Registered FDI into real estate triples in 2012 as Vietnam sees 20 new foreign investors. 11. Jack Dorsey to spend Christmas 2012 in Vietnam, @Townsend_Marc to have 50,000 followers
2012: Gold Supply in Vietnam Increases
The magic from Trinh Ducs performance in the Rugby World Cup is overshadowed by: Quy Phuc is expected to win the gold in 100 m freestyle Anh Tuan is expected to win the gold in <56 kg weightlifting Ha Thanh is expected to win the gold in the floor exercise
Source: vov.vn; giadinh.net.vn; tuoitre.vn ; 1star1objet.fr
CBRE Vietnam - HCMC & Hanoi Quarterly Reports

The most insightful real estate publication in Vietnam! Plan your future with two quarter and eight quarter forward looking analysis.
Contact for free sample: quarterlyreports@cbrevietnam.com
THANK YOU
2012 CB Richard Ellis (Vietnam) Co., Ltd. This report has been prepared in good faith and with due care by CB Richard Ellis (Vietnam) Co., Ltd. We obtained some of the information above from sources we believe to be reliable. However, we have not verified the accuracy of the information which we obtained from other sources and make no guarantee, warranty or representation about it. We include projections, opinions, assumptions or estimates which are made with careful consideration of factors known to us for example only, and they may not represent current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis. CBRE Vietnam | Page 32

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GBA Meeting 16-01-2012 - CBRE Presentation

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Fearless Forecast

Do not let a good crisis go to waste

Marc Townsend Managing Director CB Richard Ellis (Vietnam) Co., Ltd.

HCMC 2011 Changes

Saigon M&C Tower

Taken on January 2, 2011 Eden A

Taken on January 12, 2012

CBRE CBRE Vietnam Vietnam

Fearless Forecast 2012

HCMC 2011 Changes

Taken on January 2, 2011 Vietcombank Tower VietinBank BIDV Tower

Taken on January 12, 2012

CBRE CBRE Vietnam Vietnam

Fearless Forecast 2012

HCMC 2011 Changes

Saigon Centre (phase 2)

Taken on January 2, 2011 Ben Thanh Towers

Taken on January 12, 2012

CBRE CBRE Vietnam Vietnam

Fearless Forecast 2012

2011 MOST Fearless Forecasts

CBRE Vietnam | Page 5

CBRE CBRE Vietnam Vietnam

Fearless Forcast 2012

2011 MOST Fearless Forecasts

CBRE CBRE Vietnam Vietnam

Fearless Forcast 2012

2011 Vietnam Economic Overview

2009 5.3% 12.75%

2010 6.8% 16%-17.0%

2012 f 6.3 3 N/A 12.1% 3 US$105.4 5 US$113.3 5

6.9%1 US$57.1 bil US$69.9 bil VND26.7 mil

US$71.6 bil US$84.0 bil VND36.1 mil

18,497 (Dec. 31, 2009) 19,470

17,510 (Dec. 31, 2008)

21,010 (Dec. 31, 2010) US$18.6 bil

CBRE CBRE Vietnam Vietnam

Fearless Forecast 2012

2011 Regional Economic Comparison

GDP Growth Rate

Consumer Price Index

Gold Price ( per gram in US$ equivalent)

FDI (net inflow in current US$, 2010)

$8.0 bn $68.9 bn $6.3 bn $38.6 bn $185.1 bn $9.5 bn

CBRE Vietnam | Page 8

CBRE CBRE Vietnam Vietnam

Fearless Forecast 2012

A look ahead to 2012

GDP (% y-o-y) 5.8 4.5 3.3 8.1 4.9 6.2

CPI (% y-o-y) 11.5 3.6 2.9 2.8 3.5 2.8 5.0

10% 8% 6% 4% 2% 0% -2% -4% -6% -8%

Hong Kong 3.5

CBRE CBRE Vietnam Vietnam

Fearless Forecast 2012

2011 Economic Overview FDI

COMMITTED FDI, 2010

COMMITTED FDI, 2011

CBRE Vietnam | Page 10

CBRE CBRE Vietnam Vietnam

Fearless Forecast 2012

2011 Vietnam Stock Market

2,000 1,800 1,600 1,200 1,000 800 600 400 200

CBRE CBRE Vietnam Vietnam

Fearless Forcast 2012