Kuok Group rescues Alphaland

By Jenniffer B. Austria | May. 01, 2014 at 12:01am [ manilastandardtoday.com ]

Property developer Alphaland Corp. said Wednesday it sold its entire 20-percent stake in Shangri-La at the Fort, a new hotel being constructed in Bonifacio Global City, for P1.7 billion.

Alphaland said in a disclosure to the stock exchange a wholly-owned subsidiary sold the 20-percent stake in the five-star hotel to subsidiaries of Shang Properties, which is owned by the Kuok Group of Malaysia.

A company source said Alphaland sold the stake in Shangri-La at the Fort not because of financial difficulty, but because of the attractive offer made by the Shangri-La group.

“We sold the 20-percent stake at premium. We nearly doubled our investment,” the source said.

Shangri-La at The Fort is a premier hospitality property located within the west super block of the Fort Bonifacio Global City in Taguig City.

The project, designed by award-winning architectural firm Skidmore, Owings & Merrill, is expected to be completed by the second quarter of 2015.

Shangri-La at The Fort is designed as a 60-story mixed-use business, hospitality, residential and retail tower at the corner of 5th Avenue and 30th Street.

Alphaland earlier raised P272 million from the sale of 109 million new common shares to three foreign investors.

The share sale generated additional cashflow for the company and increased its public float to 11.02 percent from 8.04 percent, making it compliant with the minimum public ownership requirement of the Philippine Stock Exchange.

Trading of Alphaland shares, however, remained suspended and the Philippine Stock Exchange had initiated delisting procedures against the property firm for alleged failure to submit full, fair, accurate and timely disclosures of information.

The trading of Alphaland shares was halted and subsequently suspended on Jan. 20, 2014, when the company accused Ashmore Group of conducting a simulated share sale.

Alphaland filed an appeal with the PSE to lift the trading suspension.

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Property market insights

HIDDEN AGENDA By Mary Ann Ll. Reyes (The Philippine Star) | Updated April 30, 2014 -

The business process outsourcing (BPO) industry remains the driver of the demand for office spaces not only in Metro Manila, but the entire Philippines

In a recent study, Pinnacle Real Estate Consulting noted that after experiencing more than 20 percent annual average growth in the past 10 years, industry estimates point to a slower 15 percent annual growth beyond 2016 for the office market.

For 2014 and 2015, the average of 20 percent growth is still doable, it said. “At present, vacancy of Premium Grade A and Grade A buildings is at an all-time low of below five percent across the major business districts. Grade B and C buildings may have higher vacancy levels, but these buildings would eventually absorb the overspill of demand for office. Some of these buildings may even be up for redevelopment, whether into an office, residential or mixed used building.”

It added that big space users have been committing to pre-leasing agreements to avoid the space crunch. In recent months, pre-selling of office spaces have been picking up, which used to be unheard of after the Asian financial crisis in 1997.

Depending on the vacancy of the buildings, rents are projected to increase between three to seven percent this year.

There are a lot of opportunities in the office market, the study emphasized.

For instance, developers are now more confident in constructing office buildings since they can get pre-commitments. Meanwhile, owners of old buildings may consider capturing the demand by retrofitting their facilities or they may consider redeveloping altogether.

Also, joint developments with building owners, even with condominium corporations, are becoming common especially when they don’t want to sell the land or would want to share on the upside of the development.

For straight-forward office projects, developers may opt to sell to recoup their investment faster, or may choose the recurring income. In most cases, developers would want to find the balance between selling some floors and retaining some floors for leasing, it added.

Opportunities still abound for the office market given the high occupancy rate and an average yield of 10 percent. “Developers and landlords should take advantage of pre-leasing and pre-selling. Owners of old buildings would have to decide sooner or later if they want to retrofit their buildings to capture the pent-up demand for office, or redevelop their buildings altogether,” the study said.

I am often asked about how the residential market is doing and what the prospects are.

According to Pinnacle, the residential market will continue to be very active given that the demand for housing is projected at 3.9 million, and possibly reaching six million in the next few years without serious intervention.

And how about the mid-market which has been bustling with activity? Is the bubble about to burst?

The Housing and Land Use Regulatory Board (HLURB) and Pinnacle Research statistics show that from 2013 to 2017, there are 301 ongoing condominium projects in Metro Manila totaling to 134,421 units. The mid-market segment accounts for the largest chunk at 37 percent or 49,997 units. Studio and one- bedroom units account for 77 percent or 104,028 units. Assuming that all of these projects are completed on time, these numbers are still well below the target of one million housing units by 2016 of the Subdivision and Housing Developers Association, Inc. (SHDA) to bridge the gap in housing requirements, Pinnacle stressed.

As for the high-end segment, the study says it continues to be vibrant, especially with the sales abroad and to foreigners. This segment is only the active segment in leasing, with rents well above P200,000 per month, depending on the sizes. Rents in the villages generate the highest levels ranging from P 300,000 to P500,000 per month.

And now for the underserved affordable and socialized segments. Pinnacle mentioned that only 24,981 units are targeting these two segments in Metro Manila. This is understandable since majority of the socialized and economic housing projects are located outside Metro Manila to take advantage of lower land prices, it added.

“The residential sector is a very big market. Luxury segment on one end and the affordable and socialized housing on the other end remain to be underserved. Luxury is typically more expensive to build, but the margins are higher. Socialized and economic housing projects have lower margins on per unit basis, but developers may get a number of fiscal and non-fiscal incentives that would push profitability higher, Pinnacle study elaborated.

“Mid-market is very competitive and location-specific. This is the segment where due diligence would pay off in terms of market scanning the sizes, amenities and prices of the residential products to be offered, and perhaps, how much retail and office spaces to be blended in the mix. The leasing out of mid-market residential is another gap in the market that may need to be served soon,” the study pointed out.

As for the other sectors, this is what Pinnacle has to say:

“Commercial spaces in retail malls shall continue to generate the highest yields to the big retail owners. For niche players, they should consider location-specific opportunities, especially for smart shoppers that avoid long queues and tight parking in malls, and prefer relaxed shopping and dining.

“The hotel sector is riding on the investment grade status of the Philippines and record tourist arrivals. The ASEAN integration and the increased in air-link with Japan would further boost the total number of visitors. Finding the right location, the right size, right brand are some of the key questions for developers.

“The industrial sector is in a stable growth as more and more foreign companies and investors have been coming back to the Philippines. Applications to get PEZA accreditation to locate in economic zones and even to build new ecozones are on the rise as well.

“The Philippines is poised to sustain the growth in the real estate market. All of the sectors are on expansion mode due to real demand, liquid financial market and strong economy. Positive business climate and servicing the market gaps would likely be a continuous boon to diligent actors in the property market.”

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BPO to prop up property market

By Anonymous | April 30, 2014 [ Malaya.com.ph ]

The presence of a strong business process outsourcing industry continues to make the Philippines as an attractive investment destination for properties despite the presence of much larger markets in the Asia Pacific region.

                                                                                                 

Property consultancy firm Jones Lang LaSalle chief executive officer  Alastair Hughes said while the Philippines may be a “small dot” in comparison to other investment destinations like London, New York, and Hong Kong, it is still a “big dot” in the global real estate investment work when it comes to the offshore and outsourcing world.

“It’s a small dot and a big dot. It’s a very small dot in terms of international direct investment. But it is not a small dot when it comes to the BPO sector which involves some of the biggest sector in the world. It’s a very big dot when it comes to that,” said Hughes.

David Leechiue, Jones Lang LaSalle country manager,  said the country needs to undergo more reforms like allowing foreigners to own land.

Leechiu also noted that policies stipulated in the country’s labor code is also ripe for amendments.

Lindsay Orr, Jones Lang LaSalle chief operating officer, said the office segment of the property sector is poised for further growth given projected expansion of the BPO industry, expected to hit 1.4 million in the next four years, from the current 960,000.

“So that’s another 400,000 employees, which at an average of 6 square meters of work space per employee would mean that the Philippines will need some 2.5 million sq.m. in the next four years,” said Orr.

The office segment is seen to be flooded with a supply of 1.4 million sq.m. of office space, which is lower than the projected need.

This is expected to be beneficial for office space rents that is seen to grow between 4-5 percent a year for the next five years.

Prime office space in Makati current fetch at P1,200 per sq.m.

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SMIC sets rates for P15-b bonds

By Jenniffer B. Austria | Apr. 29, 2014 at 12:01am [ manilastandardtoday.com ]

Conglomerate SM Investments Corp. on Monday set interest rates for the planned P15-billion bond sale at 5.2958 percent for the seven-year bonds and 5.6125 percent for the 10-year bonds.

SM Investments said in a disclosure to the stock exchange the company would issue a total of P10 billion, with an option to issue an additional amount of up to P5 billion.

The bonds are scheduled to be offered to public investors from April 30 to May 2 while the issue date will be on May 19.

BDO Capital & Investments Corp. is the issue manager and joint lead underwriter together with BPI Capital Corp., China Banking Corp. and First Metro Investments Corp.

“Proceeds of the bond sale shall be utilized by SM to refinance existing debt, including its series A retail bonds due 2014, to finance retention payments for the completed construction of a commercial buildings at SM Arena and to finance to construction of a warehouse building on its Asiana property in Parañaque City,” SM Investments said.

The bonds earlier received a PRS Aaa rating from Philippine Rating Services Corp., indicating that such obligations are of the highest quality with minimal credit risk and that the issuing company’s capacity to meet its financial commitment on the obligations is extremely strong.

SM Investments earmarked P80 billion in capital expenditures this year, up 23 percent from P65 billion in 2012, primarily to fund expansion of property, retail and banking businesses.

It said at least P70 billion would be spent by property arm SM Prime Holdings Inc., P5 billion to P6 billion for the retail expansion and the remaining P4 billion to P5 billion for banking subsidiaries BDO Unibank and China Banking Corp.

SM Investments posted an 11-percent increase in net income to P27.45 billion in 2013 from P24.67 billion in 2012, on strong earnings from banking, retail, mall and real estate businesses.

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