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Construction sector: key contributor to PHL growth, 'mother of all industries'

Published on Thursday, 29 August 2013 20:09 [ businessmirror.com.ph ]
Written by Janica Monick Riego

THE importance of the construction sector on the country’s economy cannot be understated, especially for developing countries like the Philippines. Its strong performance urbanizes an area, making it more economically productive and efficient. It brings in investments, generates jobs, foreign-exchange remittances, and enhances the growth of other industries.

The development of essential infrastructure, considered a sign of economic progress, will not materialize without the efforts of the construction sector. Through the sector, there is an expected improvement of labor productivity, reduction of cost of goods and services, and expansion of local and global market opportunities.

The impact of the construction sector to the country’s economy was made evident in the first quarter of 2013, when Philippine gross domestic product (GDP) growth surpassed expectations and reached 7.8 percent. The National Statistical Coordination Board (NSCB) cited the construction sector as one of the key contributors to the better-than-expected economic performance of the country.

The sector was regarded as the strongest performer during the period, registering a staggering 32.5-percent growth from the previous quarter’s 18.4 percent. It contributed a total of P175 billion to GDP in January to March. Construction’s strong performance and that of manufacturing made the industry sector the main driver of the country’s  economy in the first quarter.

According to the Philippine Constructors Association’s (PCA) Country Report for the first quarter of 2013, the construction sector provided the largest contribution to industry growth, next to manufacturing.

Regarded as the “mother of all industries,” the construction sector is allied with other industries. It covers a very broad range--from small-scale residential structures to large-scale industrial facilities, roads, bridges, seaports and steel structures, among many others. It also affects the growth of industries such as tourism, mining, and business-process outsourcing (BPO).

However, unlike other industries, construction-driven GDP growth does not have any effect on inflation rate because construction is not a component of inflation computation. This allowed the country to enjoy a low-inflation environment despite the strong GDP growth in the first quarter.

According to the PCA, the construction sector is likely to grow 8 percent for the rest of 2013. The sector will be driven by the roll out of public- and private-sector projects.

Government spending on infrastructure, for one, increased by 35 percent in the first five months of 2013. In January to May, public spending for infrastructure projects reached P104.6 billion, compared to P77.2 billion last year.

The Department of Budget and Management said the government has also increased its spending on other capital outlays, which is largely attributed to the sizable current and prior years’ payables due to contractors of infrastructure projects and suppliers of equipment.

The increase in spending for infrastructure projects pushed the government’s total disbursements to P751.2 billion at the end of May 2013, a 12.4-percent increase from the total disbursements recorded in the same period last year.

Among the significant allocation this year is a dedicated budget for tourism infrastructure pegged at P12 billion this year and P17 billion next year. The money will be used for road constructions to link tourist destinations to major highways. This is to improve the travel experience of tourists in the Philippines.

To further drive up the country's economy, the government plans to increase infrastructure spending in 2014. For 2014, the government is targeting to spend P213.5 billion for the development, construction and rehabilitation of the country’s national roads and bridges. The figure is 40 percent higher than the allocation this year.

The expected implementation of large-scale public-private partnership projects is also expected to prop up GDP and also boost the performance of the construction sector.

“Increasing activities in these growth drivers would result in more civil construction works such as office buildings, roads and bridges, facilities for utilities, and the like,” the PCA said.

“Moreover, it is expected that public construction will continue to boost the sector in the next three years as the Department of Public Works and Highways rally will be sustained to garner more than P600-billion capital outlays by the end of 2016,” it added.

However, foreign businessmen had warned that the delay in launching other infrastructure projects could slow growth. Projects that have been put on hold are the Automated Fare Collection System for Metro Rail Transit and Light Rail Transit —a P1.72-billion deal to design and operate a smart card system for the elevated railway lines—and the P17.5-billion Mactan-Cebu International Airport deal.

Aside from a target of increased government spending, private projects are also seen to sustain the sector's growth.

The PCA said that demands and investments in building developments, such as housing and industrial, will continue to rise and further boost the construction sector's expansion.

Private construction projects has reached 24,400 in the first quarter of 2013, 71.7 percent of which were residential-type, 12.4 percent were non-residential, and the remaining 15.8 percent were additions, alterations and repair of existing structures. Around 26 percent of total number of projects was undertaken in Region 4A (Calabarzon).

The PCA said in its country report that the second quarter of 2013 appears to be better than the first considering the inflation rate; robust consumer spending; and the sustained increase in the government's investment and spending on key infrastructure projects.
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CONDORMITEL: Major Homes sachet-size condo, dorm leasing

Published on Thursday, 29 August 2013 00:00
Malaya Business News Online - Philippine Business News | Online News Philippines

Major Homes’  Space condormitels located in various key areas in Metro Manila promise to completely redefine and raise the known benchmarks on Philippine property investment.

With a total of three projects presently included in the Space condormitel series, these developments will employ the so-called “sachet business model” that will allow future owners to rent our units on a per bed basis.

This will give the Space projects a strong rental component that could guarantee good returns, the company believes.

Rising 28-storeys each, Space San Marcelino, Space Romualdez and Space Taft condormitels are combinations of condominium and dormitory units that will be operated as a hotel.

Each property will be built in proximity to various educational institutions, commercial establishments, hospitals, government agencies and other places of interest.

“Space is a condormitel concept. It’s a condominium, dormitory and hotel that operates as one. It is a real estate asset for it is fully secured with a Condominium Certificate Title (CCT), can be leased out like a dormitory, and with a service comparable to a hotel,” said  Jose Francisco  Oreta V, president of Major Homes.

Each of the units will be fully furnished with a minimum of three beds and study desks, thus giving unit owners the freedom to have their own spaces rented out on a “per bed” and not “per unit” basis, as well as greater chances to earn better profit. Unit cuts at the Space range from 15 square meters to 19 sqm.

According to Oreta, Space condormitels will particularly cater to students, BPO workers and transient residents seeking an upgrade from the typical bed space setting by giving them access to hotel like service, amenities and facilities.

“It’s a win-win situation for both investors and end-users. Through the condormitel, we are able to create for investors a profitable investment model for end-users, Space represents an upgrade from typical dormitory experience,” Oreta said.

“Compared to other investments which are prone to theft and maintenance issues, Space condormitels will be managed for you and you will just wait for the returns. Also, unlike other condominium units that often stay idle, units at Space can give owners the chance to earn real profit by turning them into passive income generating investment by renting it out on a per bed basis,” Oreta added. 

“An investor purchasing a three-bedroom unit at a little over P1 million and can have it leased out at the rate of P4, 000 per bed. With its profit earning possibilities, a Space unit owner can maximize his yield on rentals, receiving as much as 8 percent on return on investments, not to mention the asset value appreciation,” he noted.

Future tenants of Space can meanwhile enjoy hotel-like amenities such as air-conditioned lobby, large garden, lounge benches and a sky garden.

The condormitel is likewise equipped with fire and smoke detection system, water reservoir, standby emergency power, security card key, centralized garbage collection, high-speed elevator, CCTV, study hall, retail outlets- all of which would help ensure a convenient and secure living experience.
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Greenhills redevelopment taking shape

Published on Thursday, 29 August 2013 00:00
Malaya Business News Online - Philippine Business News | Online News Philippines       

The P25-billion redevelopment of the Greenhills Shopping Center recently completed Phase 1, and is currently on Phase 2 of the massive project.

More parking, high-tech cinemas, and a luxury residential condominium are highlights of the developments so far, which include additional retail space amidst more open areas and canopied walkways.

The Greenhills Shopping Center was first developed in the 1970s, quickly becoming a shopping and leisure destination in San Juan City, Metro Manila. After 40 years, developer Ortigas & Co. decided to embark on a redevelopment plan in 2010 that aims to bring the shopping center up to par with modern international shopping centers while retaining the old charm of the iconic shopping and entertainment center.

“We have delivered the best Chinese restaurant in town, Gloria Maris,” said Cathy Casares-Ko, general manager of the Shopping Centers Division, Ortigas & Company.  “We have also introduced Wafu, which has redefined modern Japanese dining in the metro, as well as the extension to the Promenade with its high tech cinemas and divine dining choices.”

“We have also constructed two levels of interconnected basement parking, which will eventually be connected with the basement parking of the rest of the complex.”

Three new cinemas opened at the Promenade Extension with the completion of Phase 1. These cinemas are the first in the country to feature the Dolby Atmos Surround Sound technology, and are the first in the region to feature this latest Dolby technology in more than one cinema within a complex. The cinemas have 204, 217, and 241 seats respectively.

The Promenade Extension, covering three floors with a total area of approximately 12,985 square meters, will also have a variety of tenants, including fast food outlets, casual dining, fine dining, health and grooming boutiques, entertainment centers, and specialty shops. The preliminary list of tenants at The Promenade Extension include Jesi Mendez, Sariwon, Tong Yang Shabu-Shabu, Cupcakes by Sonja, Breadtalk Silver, Uncle Cheffy, J. Co Donuts, Cowrie Grill by Manila Hotel, Pancake House, Dr. Kong, Soi Thai Restaurant, Tampopo Japanese Resto, Eric Kayser’s, Roots Moderne Bistro, Ebun, NYC Meatball, Zao, Wee Nam Kee, Seven Friday, Jamba Juice, Starbucks Coffee, Lord Stowe, TaiOne, Power Mac Center, Munchtown/Uptown, Jozukin/Yume, Krazy Garlik, Fully Booked with Press cafĂ©, Peri Peri Charcoal and Bar, World Music KTV, The Health Cube, and The Spa.

Currently under construction is the relocation site of Unimart, located along Club Filipino Road.  The building will have basement parking as well as five levels of parking on top of the grocery level that will add 1,300 additional parking spaces. Ortigas & Co. will spend Php1.4B over the next two years to build this new supermarket structure, with expected completion by 2015. When completed, the new Unimart supermarket will occupy 12,000 square meters on the ground level of the 75,000 square meter structure.
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Holding company exits Shang Properties

Posted on August 27, 2013 10:03:55 PM [ BusinessWorld Online ]

LISTED Anglo Philippine Holdings Corp. has divested its stake in Shang Properties, Inc., the holding firm said in a disclosure yesterday.

“Please be advised that Anglo Philippine Holdings Corp. sold a total of 214,145,742 shares of Shang Properties, Inc. by way of a special block sale today as approved by the Philippine Stock Exchange,” the disclosure read.

The shares, which represent 4.5% of Shang Properties, comprise the total stake of Anglo Philippines in the property developer, the holding firm’s 2012 annual report showed.

Officials were not immediately available for additional details, but an analyst said the move might signal a possible shift in investments. “The company will probably be venturing into new business or focusing on an existing business,” Astro C. del Castillo, managing director of brokerage First Grade Finance, Inc., said in a telephone interview yesterday. “If a company is eyeing a new venture, it would need cash to shift its investments.”

Anglo Philippine was incorporated in 1958 as an oil and mineral exploration company under the name Anglo Philippine Oil Corp.
The firm in 1996 amended its primary purpose to that of an investment holding firm focused on natural resources, property and infrastructure development, and changed its corporate name to the present one. It also has core investments in Atlas Consolidated Mining & Development Corp., United Paragon Mining Corp., MRT Holdings, Inc., and The Philodrill Corp., among others.

Anglo Philippine’s net income dropped 40.92% to P143.96 million in the first semester from P243.67 million from a year ago, as revenues fell 31.10% to P193.96 million from P281.50 million, while cost and expenses rose by 56.26% to P43.55 million from P27.87 million.

In the same comparative periods, Shang Properties grew net income by 30.23% to P825.78 million from P634.08 million, as revenues surged by 35.35% to P2.91 billion from P2.15 billion, while expenses increased by 29.92% to P1.65 billion from P1.27 billion.

Shares of Anglo Philippine and Shang Properties ended trading yesterday unchanged at P1.94 and P3.30 apiece, respectively. -- Cliff Harvey C. Venzon         
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