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Vista Land buys Starmalls stake in growth push

Posted on November 10, 2015 10:51:00 PM [ BusinessWorld Online ]
By Krista A. M. Montealegre, Senior Reporter

BILLIONAIRE and former Senator Manuel B. Villar, Jr. is consolidating his residential and commercial leasing businesses under Vista Land & Lifescapes, Inc. in a deal valued at P33 billion, accelerating its transformation into one of the Philippines’ biggest integrated property developers.

The country’s largest homebuilder is acquiring 88.25% of Starmalls, Inc. from the Fine Group, owned by Mr. Villar and his family, both companies said in separate disclosures to the stock exchange yesterday.

Vista Land shares rose 1.23% to P5.75 apiece and Starmalls shares lost 4.89% to P7.78 each on Tuesday.

The acquisition of Starmalls will make Vista Land the country’s top four integrated property developer after Ayala Land, Inc., SM Prime Holdings, Inc. and Megaworld Corp., respectively, capitalizing on synergies as it transforms its Camella housing projects into integrated “communicities,” Vista Land Chief Executive Officer Manuel Paolo A. Villar said in a briefing yesterday.

“Without question, that changes the dynamics of Vista Land from a purely residential developer to now an integrated developer... We not only have a very strong, best-in-class residential business, [but] we also have a very good mass market-driven consumer retail platform, which is Starmalls. It’s a game-changer for Vista Land,” the younger Mr. Villar said.

Vista Land has identified about 100 areas or over 600 hectares of land from its existing Camella projects around the country with ready population catchment areas for potential Starmalls projects.

With Starmalls adding to Vista Land’s recurring revenue stream, the leasing side of the business may eventually account for 20% of revenues and earnings before interest, taxes, depreciation, and amortization (EBITDA), the younger Mr. Villar said.

Starmalls owns and operates 10 retail malls in key cities and municipalities, and two business process outsourcing (BPO) commercial centers in Metro Manila, with a combined gross floor area of 509,385 square meters. It also has four retail malls and one BPO commercial center currently under construction.

The integration will enable Vista Land to achieve higher selling prices, increased sales velocity and higher retail rental rates from its improved integrated product offering, as well as lower land acquisition and infrastructure costs, the younger Mr. Villar said.

With a strong leasing business, Vista Land can also take on the larger-scale projects being offered to the company by landowners, the former senator added.

Vista Land and Starmalls have the widest geographical reach in the real estate business, with an established presence in 92 cities and municipalities across 35 provinces.

“The move can also be seen as a way for the business units to effectively diversify and spread its portfolio across all other segments, ensuring that it is “well-insulated” from any external shocks to the local property sector,” Claro dG. Cordero, Jr., head of research and valuation at real estate advisory firm Jones Lang LaSalle, said in a mobile phone message.

Vista Land is buying the Starmalls shares at P4.51 each, a 44.87% discount to the latter’s closing price of P8.18 apiece on Nov. 9. The Fine Group will then subscribe to approximately 4.6 billion new Vista Land shares at P7.15 per share, a 25.88% premium to Vista Land’s last traded price of P5.68 per share on Nov. 9.

As a result of the transaction, Villar-led Fine Properties, Inc. will hike its stake in Vista Land to 67.45% from 54%.

A tender offer will be conducted for the remaining Starmalls shares under the same terms and conditions. Vista Land may apply for the delisting of Starmalls from the stock exchange following the completion of the tender offer.

Vista Land pocketed P1.9 billion in the third quarter, 35% year-on-year from P1.41 billion. This pushed the property firm’s nine-month earnings by 18% to P5 billion from P4.25 billion on higher sales.

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