By Mary Ann Ll. Reyes (The Philippine Star) Updated June 05, 2010 12:00 AM
MANILA, Philippines - Ortigas & Co. plans to speed around P90 billion over the next 10 to 15 years as it prepares for its conversion from a limited partnership to a corporation.
Company chief operating officer Rex Drilon II told The STAR that of the total amount, more than P20 billion will be spent for the redevelopment of Greenhills Shopping Center (GSC), P25 billion for the development of a new project in Pasig, P30 billion for Frontera Verde along C5 in Pasig, and more than P15 billion for Circulo Verde in Quezon City.
The redevelopment of GSC will take between seven to 10 years and will cost at least P20 billion, Drilon emphasized. The shopping component alone will cost P15 billion.
Phase I of the redevelopment, which began this year, involves demolishing the existing Gloria Maris restaurant, transferring it to a new location within the complex, and putting up a new Unimart supermarket at the site where the old Gloria Maris was.
“The redevelopment will consist of around eight phases. Phase 2 will include a new Unimart. Succeeding phases will include building a bigger tiangge in the old Unimart, putting up a new mall that would triple our shopping space from the present 100,000 square meters to more than 300,000, increasing the number of parking spaces from the present 3,000 to 10,000, tearing up VMall (used to be called Virra Mall until it was refurbished at a cost of P400 million four years ago) and building a new one, building three residential towers and one office cum hotel building, among others,” he said.
But Drilon stressed that all of these have to be done in phases so as not to disrupt the conduct of business at the shopping center.
In 10 years, all the buildings and structures that make up Greenhills Shopping Center will be gone, but Drilon promises that its character will remain the same.
Meanwhile, Drilon revealed that they hope to break ground by the end of this year to early next year Capitol Commons, a mixed-use development just like Rockwell, at a 10-hectare property that used to house the Rizal Provincial Capitol, thus the name of the project.
The property was donated to the Rizal provincial government 50 years ago but reverted to the Ortigas family after the seat of government moved to Antipolo.
Drilon estimates that the Capitol Commons project will cost more than P25 billion. Aside from the residential component, the first two floors of one of the buildings will be dedicated to a mall while three to four floors will be for office units, most likely BPOs.
Also in the pipeline is the development of the 18.5-hectare Frontera Verde at the corner of Ortigas Ave. and E. Rodriguez Jr. Ave. (C-5) in Ugong, Pasig City. Its anchor locator is Tiendesitas, which is owned and managed by Ortigas & Co., which also plans to put up two more buildings built-to-suit for BPO locators in the property.
Drilon said once the masterplans for Greenhills and Capitol Commons are finished, they will start preparing the masterplan for a new Tiendesitas as well as for the whole Frontera Verde property probably by next year.
While the group has not decided what the new Tiendesitas will look like, Drilon said there is a possibility that it will be something like Greenhills Shopping Center. “After all, we have been very successful with Greenhills. We know the technology. And we can replicate it at Frontera Verde. But of course, we have to consider the fact that Greenhills and Frontera Verde are not very far from each other,” he said.
The new Frontera Verde will probably cost around P30 billion.
Ortigas & Co.’s biggest residential project to date is the P15-billion Circulo Verde in Bagumbayan, Quezon City.
The group has already completed the foundation of the first two towers (Majorca and Ibiza) and is set to start on the third tower. The Circulo Verde project will have 15 residential towers. Phase I will be finished in five years.
“We still have around 60 hectares of prime land, including the one which used to house the Rizal Provincial Capitol but was reverted to the partnership. This does not include around 34 hectares of property inside Camps Crame and Aguinaldo which could revert to us if the military and the police stop using them,” Drilon said.
From a limited partnership, the group is now considering converting into a corporation, partly in order to raise more funds for projects it will be undertaking in the next 10 to 15 years.
“In the early 1900s, most of the businesses were partnerships, including those of the Ayalas and the Roxases. But in the ‘60s, there was this realization that the corporate structure was more efficient. Unlike in a corporation where the stockholders do not answer for the liabilities of the corporate entity, in the case of a partnership, the partners do to a certain extent. And it is easier to raise capital when you are a corporation,” Drilon pointed out.
He revealed that they have already set up five corporations, all special purpose vehicles, each one to be handling a particular business in which Ortigas & Co. is engaged in. “For instance, one of the corporations will be handling Circulo Verde while another will take care of Greenhills Shopping Center and another for Capitol Commons,” he explained.
In case Ortigas & Co. finally decides to convert into a corporation, Drilon emphasized that the creation of the five new subsidiaries will not be futile. “They will be REITs,” he said.
A REIT or real estate investment trust is defined as a tax designation for a corporation investing in real estate that reduces or eliminates corporate income taxes. The REIT structure was designed to provide a similar structure for investment in real estate as mutual funds provide for investment in stocks.
Republic Act 9856 or the REIT law was recently enacted and provides for the regulatory and tax framework for REITs, which are companies that own and operate income-producing real estate assets. Shares of these REITs are to be listed on and traded at the Philippine Stock Exchange (PSE).
To encourage investments in REITs, the REIT law provides certain tax incentives to the REIT. However, in order to enjoy these incentives, the REIT must be listed with a stock exchange and annually give out at least 90 percent of its distributable income to shareholders.
Drilon said they expect the environment to be favorable to a conversion by Ortigas & Co. into a corporation towards the latter part of the year. “Timing is important. After all, we have to raise capital,” he added.