What benefits do investors gain from the Trieu Son BT project?

Land offered at low prices?

The road project connecting Provincial Road 514 and National Highway 47C in Trieu Son district, with an initial investment of over 79 billion VND, was implemented by the joint venture of Tien Dat Construction Joint Stock Company and Viet Thanh Joint Stock Company (Trieu Son BT Company Limited). This was one of the last projects in Thanh Hoa province implemented under the public-private partnership (PPP) model, specifically the BT (build-transfer) contract type, before this model was officially abolished (effective January 1, 2021) due to numerous shortcomings, high risks of corruption, and significant losses of state assets.

To implement this project, Thanh Hoa province initially planned to use 5 prime land plots, with a total area of nearly 28 hectares, in Trieu Son town and neighboring communes of Trieu Son district as counterpart payments for the project.

Real Estate - Thanh Hoa: What do investors gain from the Trieu Son BT project? — The BT project for the road connecting Provincial Road 514 and National Highway 47C in Trieu Son district is still under construction.

Based on that, on November 27, 2020, the People's Committee of Thanh Hoa province allocated the first phase of land to the joint venture contractor, Trieu Son BT Co., Ltd., with a total area of 198,998.8 m2 (nearly 20 hectares), under Decisions No. 5086/QD-UBND, No. 5085/QD-UBND, and No. 5084/QD-UBND. Two of the five land plots intended as reciprocal payment to Trieu Son BT Co., Ltd. have yet to be handed over.

However, recently, Thanh Hoa province officially decided to adjust the counterpart payment from 5 areas down to only 3 of the aforementioned land areas, equivalent to a reduction of 9.3 hectares, due to "excess counterpart payment," after considering and ensuring the principle of equal value as stipulated in the Law on Management and Use of Public Assets 2017, and other relevant Government Decrees and legal regulations.

Alongside the land allocation, the People's Committee of Thanh Hoa province also issued a decision approving specific land prices as a basis for determining land use fees to be paid to the State budget.

For example, on November 3, 2021, the People's Committee of Thanh Hoa province issued specific land prices as a basis for determining land use fees to be paid to the State budget for the implementation of the Nam Cong Cheo new residential area project in Trieu Son town, Trieu Son district (phase 1). Accordingly, the specific land price corresponding to the land area allocated by the State with land use fees, after deducting costs (excluding land clearance costs), is 2,201,099 VND/m2.

The specific land prices mentioned above are determined under the condition that the investor must invest in all technical infrastructure according to the approved investment project and detailed planning for the land area allocated for the project, and that the State allocates 34,029.3 m2 of residential land with land use fees. Notably, based on the area and price at just one Nam Cong Cheo project, the State would essentially collect over 74 billion VND, equivalent to approximately 93% of the counterpart funding for the total BT project mentioned above.

Real estate - Thanh Hoa: What do investors gain from the Trieu Son BT project? (Figure 2). — The Nam Cong Cheo land plot boasts a prime location, divided into 330 land lots and utility facilities in Trieu Son district, Thanh Hoa province. (Photo: Lam Linh Land)

Returning to the issue of determining land prices corresponding to the land area allocated by the State with land use fees at the Nam Cong Cheo new residential area project, according to Ms. Pham Thi Thu Huong, a practicing land valuation expert, there are many methods for determination; however, typically in the above case, land price determination will be carried out using the surplus method, and the equivalent market land price at that time is only one input basis.

Specifically, land valuation using the basic surplus method is calculated by subtracting development costs from development costs from development revenue. In this method, basic revenue is the money received after project completion, basic development costs include infrastructure investment costs, contingency costs, project management costs, advertising and sales costs, and "soft" costs such as goodwill, other costs as stipulated by regulations, etc., along with the investor's profit.

Did the consortium "strike it rich" in the Trieu Son BT project?

According to observations, the Nam Cong Cheo new residential project (commercial name: Trieu Son New Central project) has immediately become a "hot" commodity since its launch, receiving widespread attention in newspapers and media outlets, and is being sought after by real estate agencies.

According to one of the aforementioned units, the Nam Cong Cheo new residential project possesses many favorable geographical features, making it very suitable for customers intending to buy land for residential and business purposes. Specifically, the north of the project borders Provincial Road 514, connecting to National Highway 47, linking Thanh Hoa City with Tho Xuan International Airport; the west borders a 36m wide dual carriageway connecting National Highway 47C with the Nghi Son – Sao Vang Expressway; the south borders the 20-hectare Xuan Hung high-end urban area planning area… From the project, residents only need 20 minutes to reach Thanh Hoa City; 15 minutes to Tho Xuan International Airport, and within a 500m radius are the cultural and sports center, hospital, Giatt Market, Trieu Son District administrative center, The City Supermarket, and a 50-hectare inter-communal industrial park…

Real estate - Thanh Hoa: What do investors gain from the Trieu Son BT project? (Figure 3). — The Nam Cong Cheo land plot has a prime location in Trieu Son district, as described by the media. (Graphic: Lam Linh Land)

In fact, at noon on July 15th, Nguoi Dua Tin (The Informer ) was present at the site of the Nam Cong Cheo New Residential Area project in Trieu Son district, posing as a "land broker" (freelance real estate agent). The land plot has a very wide frontage, approximately 300m along the central road of Dat town, while the depth is moderate, and it is close to amenities, just as advertised.

At the site, the reporter approached a middle-aged woman, a street vendor opposite the Trieu Son New Central project, who also acted as a "land broker." She stated that the land was priced at approximately 14 to 25 million VND per square meter, depending on the location.

"If you like, you can buy here, it's only about 1.4 to 2.5 billion VND per plot. Otherwise, I have another plot of land I bought at auction last year, a few kilometers away, also on this road but further from the city center, with an area of 100m2. I bought it at auction for almost 1.7 billion VND, and now I'll sell it for exactly 2 billion VND," she said.

Expressing interest in purchasing land at the Nam Cong Cheo project, the reporter was introduced to a man named Toan, allegedly a "relative" of the director of one of the companies in the BT project's joint venture. Since Toan was away on business, the reporter was then introduced to a man named Cuong, who worked at the project.

According to Mr. Cuong, his plot of land is located on the main road, purchased through a diplomatic allocation, and sold for approximately 25.5 million VND per square meter, equivalent to about 2.5 billion VND.

"The land here is beautiful, my plot has no issues, I bought it through a diplomatic allocation. However, if you buy my plot, you have to build a 4-story structure to get the title deed, while the plots further inside don't require construction; you get the title deed immediately upon purchase," Mr. Cuong said.

Real estate - Thanh Hoa: What do investors gain from the Trieu Son BT project? (Figure 4). — Mr. Cuong shared information about the land he owns in the Nam Cong Cheo project.

According to Mr. Cuong, while the revenue from selling 330 plots of land seems substantial, the company also had to pay for land clearance for approximately 120 acres of rice paddies, at 60 million VND per acre, totaling over 7 billion VND. Simultaneously, the company had to invest tens of billions of VND in technical infrastructure, including BT project investment capital and, importantly, other "soft" costs.

Thus, with the Nam Cong Cheo site and the remaining two sites, if they are lucky, the joint venture of Tien Dat Construction Joint Stock Company and Viet Thanh Joint Stock Company, familiar contractors who have won many projects in Thanh Hoa province, could completely "win big" in one of the last BT projects after deducting related costs.

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