The golden land of Kido is located right next to Diamond Plaza, but it is still being used as a parking lot (Photo: Tuoitre)
Main content:
- Kido has set aside 753 billion VND for investment in the Lavenue Crown real estate project located on the golden land in the center of District 1 – Ho Chi Minh City, causing the company to lose 544 billion VND in the fourth quarter of 2023.
- The project has been invested by Kido since 2010 and has encountered legal problems from 2018 until now.
- If the project fails, Kido will have to bear an additional loss of 316 billion VND from this investment.
In 2010, Kido Corporation (HoSE: KDC) poured 600 billion VND to own 50% of Lavenue company’s shares, the developer of the Lavenue Crown project with nearly 5,000 m2 in the center of District 1 – Ho Chi Minh City. After several capital increases, the amount that Kido poured into this project has reached 1,087 billion VND and maintained the ownership rate.
In the fourth quarter of 2023, Kido unexpectedly set aside 753 billion VND for this billion-dong investment. The one-time provision of 70% of the investment value shows that Kido no longer has much hope for the project to be implemented.
The provision resulted in Kido recording an equivalent expense in the fourth quarter of 2023 business results. The company recorded a loss of 544 billion VND in that period. In 2023, Kido’s profit after tax was only 102 billion VND, a 73% decrease compared to 2022. A major contributor to this declining business result is the provision for the “golden land” project at 8 – 12 Le Duan.
Compared to the 2023 annual business plan approved by the Annual General Meeting of Shareholders, Kido’s full-year profit only reached 1/3.
The “unstable” project
The 8-12 Le Duan land plot covers an area of 4,896 m2, located in District 1 – Ho Chi Minh City, adjacent to the city’s political and cultural centers. This land plot was established with state ownership rights in 1994, assigned to the Ho Chi Minh City Business Management Company, for leasing. According to the law, when exploiting this golden land plot, the state agency must organize an auction to select the investor, not assign the project.
Located at 8 – 12 Nguyen Du – District 1 – Ho Chi Minh City (Photo: Google Earth)
The Lavenue company was established with state-owned enterprises as shareholders (Ho Chi Minh City Business Management Company and 4 companies under the Ministry of Industry and Trade). Later, state shareholders transferred dominating rights, investment rights, and project development to other companies, including Kido with 50% of the share capital.
In 2018, 4 years after Kido invested in Lavenue, a series of Ho Chi Minh City officials were arrested for being involved in land allocation without auction. To this day, the project has not been implemented and the golden land is still being used as a parking lot.
The 2023 semi-annual financial report of Kido stated that the company is in the process of carrying out the next civil proceedings. Kido’s CEO is always “ready to make appropriate decisions to continue investing and developing the project” – the report said.
Therefore, after only six months, the perspective of Kido’s leadership on the project implementation capabilities that the company has been pursuing since 2010 has changed significantly.
Risks with public land projects
By the end of 2023, after setting aside 70% of the value, the investment in Lavenue still remains 316 billion VND. If the project is completely revoked to start a new auction, Kido stands the chance of “losing it all” with this project. This means that the company will have to set aside an additional 316 billion VND for the investment in Lavenue – directly impacting the company’s business results in the near future.
Implementing projects on public land has never been easy for real estate businesses.
Wrongdoings in project implementation can come from the auction process, such as the Tan Hoang Minh case, or from the licensing process, like the Lavenue Crown project.
Right in the center of District 1 – Ho Chi Minh City, in 2022, Vinafood II also had more than 6,200 m2 of land revoked due to the company’s cooperation with a private enterprise to transfer public land into private land.
At the beginning of 2024, the 30,000m2 golden land of Vinataba in District 5 – Ho Chi Minh City was also revoked when the company gradually transferred the project to private enterprises without auction, causing losses to the state budget.
Projects on public land facing legal issues are increasingly common, especially as land reserves in big cities are becoming scarce. Real estate businesses are always seeking investment opportunities to develop projects that will bring in huge profits in the future. The price to hold the investment rights for such projects is definitely not cheap!
