Developer CapitaLand intends to expand its presence in Vietnam, with plans to set up a new commercial fund and to acquire more residential development sites.

The firm will establish a US$500 million (S$713 million) fund by next year to invest in commercial property, mainly in Ho Chi Minh City and Hanoi, it announced yesterday.

President and group chief executive Lim Ming Yan said: "We see opportunities in the commercial space in Vietnam... so we are prepared to take a position. I think the general trajectory... for Vietnam is favourable and we foresee that this trend will continue for at least the next 10 years."

The firm sees "strong potential upside" in the office market, particularly in Ho Chi Minh City, given its mismatch between demand and supply of Grade A offices.

Singapore-based CapitaLand has been operating in Vietnam since 1994, and has a portfolio comprising residential projects and serviced residences.

The developer said seed projects for the new commercial fund have been identified and it is in talks with capital partners.

Mr Lim noted: "If you talk to many of these sovereign wealth funds and pension funds, they feel they are underexposed to Asian real estate at this point... they are prepared to allot more capital."

This will be CapLand's second investment fund in Vietnam, after a US$200 million fund launched in 2010 that has been fully invested in the development of three residential projects in Ho Chi Minh City and Hanoi. The capital partners were sovereign wealth fund GIC and Mitsubishi Estate Asia.

The developer has set a target of raising funds with a total asset under management (AUM) of up to $10 billion from various private investment vehicles by 2020.

CapitaLand Vietnam aims to grow its fund under management to $1 billion by next year to support the group's AUM goal.

It also plans to acquire more sites in Vietnam for residential development - possibly yielding 2,000 to 2,500 units - as demand for housing is expected to increase amid rising urbanisation and a growing middle class.

"There are many opportunities to acquire land... we are focusing on sites... within a 10-minute radius from metro lines," said Mr Vincent Wee, deputy chief executive at CapitaLand Vietnam.

CapLand has launched nine residential projects with more than 9,100 units in Ho Chi Minh City and Hanoi.

About 18 of the 30 units launched at the 102-unit D1mension - a residential project in Ho Chi Minh City's prime District 1 - had been sold as at end-October. CapLand, which also marketed the project in Singapore, intends to launch more units in Vietnam next month.

The company said it had sold 656 homes, out of about 1,700 units of its Vietnamese stock, as at the third quarter, for a total sales value of $114 million.

Meanwhile, its key focus in China will be to complete projects under development, including the Raffles City Shenzhen integrated development which will open next May.

CapLand said it will maintain a pipeline of development sites through private negotiations or urban renewal projects, like the Datansha Island Urban Redevelopment project in Guangzhou.

It is developing 21 plots on Datansha Island that are expected to generate up to two million sq m of gross floor area. These plots will be developed in phases - the first residential project, La Riva, will offer 922 units. It is expected to be launched in the middle of next year.

Despite the challenging conditions in Singapore's property market, the city-state is still very much in the mix for CapLand. Mr Lim noted: "We will continue to look for new opportunities in Singapore. It is not a situation where we need to bid at all cost just to get a piece of land; we will bid at a level at which we are comfortable. If we don't get the land, we will still be able to deploy the capital somewhere else."

He added that it is also very difficult to execute en-bloc deals, which can take years to complete, given rules requiring developers to build and sell all units within a stipulated time frame.

"If you go through court process, it will delay two to three years; by the time you start, you have two to three years to complete and sell."