Posted on 09:23 PM, July 15, 2010 [ BusinessWorld Online ]
ORTIGAS & CO. Limited Partnership, one of the oldest property developers in the country, wants to join the bandwagon of firms planning to raise funds through real estate investment trusts or REITs.
With its Greenhills shopping complex in San Juan, the company can easily generate more than $300 million, an executive said.
Meanwhile, revenues and profits are expected to rise by a quarter this year due to residential developments and a P75-billion spending program until the next decade.
“[A REIT] is a very interesting possibility. The problem is that the Bureau of Internal Revenue has not come up with the implementing rules,” Rex C. Drilon II, chief operating officer of Ortigas & Co., said in a chance interview.
“We have been studying REITs in the past two years. It has been very successful in Singapore and Hong Kong ... This is one way to develop the capital market,” Mr. Drilon said.
The company has yet to set a timeline for its REIT venture.
“Greenhills is more than $300 million. It is a possible vehicle for the REIT but until we know what the rules are, we are not going to [commit],” he said.
Republic Act No. 9856 or the REIT Act, which became law last December, will allow companies to use pooled capital of investors to buy and manage income-generating property and mortgage loans.
A number of property firms have unveiled plans to establish REITs.
Sy-led SM Prime Holdings, Inc. wants to raise as much as $600 million through a REIT while Ayala Land, Inc. is eyeing $300 million.
Ortigas & Co. has earmarked P75 billion for three projects in the next 10 to 15 years -- P25 billion each for the 197-hectare Greenhills subdivisions and commercial complex redevelopment, the 12-hectare Circulo Verde in Pasig, and the 10-hectare Capitol Commons in Pasig.
For this year, the 79-year-old property developer is expecting a record growth in earnings.
“We plan to increase our revenues this year by at least 25%,” he said.
“We hope to double our revenues within the next five years.”
The unlisted Ortigas & Co. recorded P2 billion in revenue and P600 million in net income last year.
“The primary growth driver of Ortigas in the next five to 10 years is the real estate. The retail industry grows by 5% to 10%, but you cannot increase it faster than that because you are concerned with size and space,” Mr. Drilon said.
The Ortigas real estate business began in the 1920s when the Augustinian friars sold 4,033 hectares to Frank W. Dudley and Francisco Ortigas.
In 1931, Ortigas, Madrigal y Cia., S. en C. was incorporated as a limited partnership with the sole purpose of acquiring the Hacienda de Mandaloyon, which spanned the municipalities now known as Mandaluyong, San Juan, Pasig, and Quezon City.
The Madrigals withdrew in 1956 and the partnership’s name was correspondingly amended to Ortigas & Co. Limited Partnership.
Ortigas developments led to the opening of the Barranca, Capitol, Wack-Wack, Greenhills, Valle Verde, and Greenmeadows subdivisions, as well as the Valle Verde Country Club, Green Valley Country Club, and Wack-Wack Golf and Country Club. -- Neil Jerome C. Morales
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