Roundabout ownership on China Beach
Although Vietnam’s new law allowing foreigners to invest in residential developments took effect in January, direct ownership of properties continues to be outlawed. But there are options.
IndoChina Capital, which is developing parts of the popular China Beach area, is offering investors a stake in a foreign company that, in turn, owns a Vietnamese one.
“Essentially all the owners own all the villas but agree through our offshore agreement to allocate one villa per owner, sharing income and expenses according to usage,” said Rick Mayo-Smith, the company’s managing director.
“The structure is similar to a New York co-op in the sense of sharing expenses and allocating usage of condo or villa through contractual rights,” said Dao Nguyen, a Saigon-based partner in the law firm of Johnson Stokes & Master, which devised the structure.
The first property to use the sales method is the all-villa resort attached to the Nam Hai Hotel, which opened in December. When villas are not occupied by their owners, General Hotel Management, the British-based company supervising hotel operations, will rent them as part of the hotel’s regular room pool.
There are only 1,000 hotel rooms along China Beach, but with tourist numbers growing about 15 percent a year, the authorities have allocated land for as many as 10 more developments within the next four or five years. The beach is just 15 kilometers, or 9 miles, from Da Nang International Airport, which has direct flights from Singapore, Bangkok and Taipei and is expected to get direct flights from Hong Kong soon.
About 30 of Nam Hai’s 40 private villas have been sold to international investors, mainly to people in the financial services industry. Prices for the remaining villas range from $1 million for a large one-bedroom villa to $2 million for a three- bedroom, bringing the average price per square foot to $280.
While these prices compare favorably with those of similar luxury properties in other sought-after destinations like Bali and Phuket, Thailand, investors may need some patience if they decide to resell the 50-year leasehold properties.
“I think it’s a very opportunistic investment for people wanting to capitalize on the tourism story,” said Nicholas Heaney, a banker who
is considering the Hai Nam project. “But even if the property price doubled in a few years, as is expected, you will need to find a buyer that can pay cash, as you can’t get a mortgage on those properties. That might be a bit more difficult if you’re in a hurry, because that’s a lot of cash.”
