April 2008 Archives

By Daxim Lucas Philippine Daily Inquirer THE CONGLOMERATE Ayala Corp. and its real estate arm said they hade entered into a joint venture with India’s Mahindra Group to develop an exclusive residential community in one of the subcontinent’s major cities. In a statement to the stock exchange, Ayala Corp. and Ayala Land Inc. said the deal involved development of a high-end housing enclave in the 1,500-acre Mahindra World City (MWC) in Chennai, India. The joint venture, Mahindra Residential Developers Ltd., will be 51-percent owned by the Mahindra Group and 49 percent by ARCH Capital Asian Partners L.P., a private real estate fund managed by Ayala affiliate ARCH Capital Management Co. Ltd. The project will be on about 55 acres of land in the MWC special economic zone, which is designated for low-density residential community development, Ayala Land said in a statement. The exclusive community of about 750 residential units will be planned and designed by international planners and architects with amenities, development standards and an urban environment not commonly found in India, Ayala Land said. The joint venture through ARCH Capital represents Ayala’s first major foray into the Indian real estate market, Ayala Land chairman Fernando Zobel de Ayala said in the statement. “We continue to see good growth prospects in India and we are delighted to have the opportunity to participate in this momentum through our partnership with the Mahindra Group.” Ayala Corp. and Ayala Land did not disclose the financial terms of the deal. Zobel said the Ayala group’s newly established regional property investment firm, Fidelis Holdings, had been “actively exploring opportunities to expand [its] international activities in this arena.” MWC, a pioneering effort of Mahindra Lifespace Developers Ltd., the publicly listed real estate and infrastructure arm of the Mahindra Group, reflects Mahindra’s vision for a world-class special economic zone catering to investors and manufacturers in automotive accessories, information technology and apparel industries. Ayala Land president Jaime Ayala (no relation to the Zobel de Ayala family) meanwhile said Ayala Land expected to report strong sales in the first quarter despite a market slowdown caused by the US subprime mortgage crisis. He said Ayala Land was refocusing its selling efforts for the US market—a major source of sales last year—from high-end property units to more affordable housing in view of an expected drop in spending power of US-based Filipinos. With editing by INQUIRER.net

By Daxim Lucas Philippine Daily Inquirer FINANCIAL losses of the tobacco tycoon Lucio Tan’s Eton Properties Philippines Inc. widened significantly at the end of last year as the company embarked on an aggressive spending program to get its first projects off the ground. But its total assets were close to hitting the P1-billion mark a year after it was founded, Eton said. In a statement, Eton said its net loss at the end of 2007 reached P146.7 million, 664-percent bigger than the P19.1-million loss it reported in April last year. It said it expected to start earning sales revenues this year. Eton said its assets had reached P980 million at the end of 2007, up 165 percent from the asset base it disclosed in its last reporting period. It said there was brisk take-up of its projects, two of which -- The Eton Residences Greenbelt and Eton Baypark Manila -- had been fully reserved from launch date. Cash and near-cash assets rose to P395.1 million as of the latest reckoning, up 324 percent from a year earlier, Eton said. It said its growth trend was expected to continue especially since deposits made by early buyers had reached P701.5 million, up 2,308 percent from April 30, 2007. It said the increase in deposits was due to “record reservations of its four other projects launched within the year.” The company’s projects include Eton Emerald Lofts in the Ortigas business district, Belton Place and Eton Parkview Greenbelt in the Makati business district, and One Archers Place in Manila. Edited by INQUIRER.net

By Rosemarie Francisco Reuters MERLY PAZ, a Filipina domestic worker in Hong Kong, has stopped sending money for the construction of her home in southern Iriga City because the peso value of her US dollar-pegged salary has fallen sharply. "My salary is limited so I placed the house on hold," said 31-year-old Paz who has been working in Hong Kong for nearly eight years. "But the longer I'm putting it on hold, the more that prices of construction materials are rising." A real estate boom in the Philippines has been powered by demand from overseas Filipino workers (OFWs) such as Paz who send home salaries to fund purchases and construction of family homes. But many OFWs have had to cut back on property purchases recently as the peso value of their salaries dropped by 19 percent in the past year due to the weak US dollar. A majority of the Philippines' eight million OFWs work in the United States. This drop in demand should have had a chilling effect on the Philippine property sector, where real estate prices surged 18 percent in 2007 and 38 percent in 2006 largely because of demand from OFWs. Indeed, share prices of property firms have plunged over a slowdown in overseas sales and worries of mortgage defaults. But domestic sales are being kept buoyant by a huge housing backlog, low interest rates and friendly payment terms, higher incomes of workers in the growing outsourcing industry, and a rising expatriate population. The slowdown in construction of new housing after the Asian financial crisis of 1997-98 has led to a housing backlog of 3.8 million units in the Philippines, said Alex Pomento, strategist and head of research at Macquarie Securities. About 70 percent of the country's estimated 90 million population do not have their own homes, he said. "It's end-user demand driven. It is not investor driven, that's the difference with the property boom before the Asian crisis," said Victor Asuncion, director at property services firm CB Richard Ellis Philippines. "It is not speculative. There is a specific demand being addressed." Construction is booming across much of the country, especially in Manila, a mostly low-rise city where dozens of residential towers are beginning to dot the skyline. At least 38,000 new apartments will be available by 2013 in the Makati financial district alone and in nearby Bonifacio Global City, property firms say. There is no let-up in demand. In just four days last month, market leader Ayala Land Inc sold about a third of the P3.3-billion value of a new residential tower at Bonifacio Global City. "They say the property market is slowing. But despite the slower US sales for our premier product, we really can't feel it yet because the local market is still strong," said Rex Mendoza, head of residential and corporate sales at ALI. Take-up rates or reservations for all its residential projects are up 39 percent in the first two months of the year, the same pace as the whole of 2007. But the surge in real estate prices seems to be a thing of the past. Pomento said he saw prices rising about 6 percent in 2008 and next year. "The days of aggressive growth appear to be behind us," he said. "We expect price hikes to be capped by the more competitive environment." At least partly because of that, local property firms have sustained heavy falls on the stock market, with ALI down nearly 25 percent and mass housing leader Vista Land and Lifescapes falling 50 percent in the first quarter against a 17.6-percent drop in the main index in the same period. "On a 12-month view, the negatives cannot be disregarded and the market is already trying to price in the concerns ahead of any negative news from property companies," CLSA said in a recent study on the Philippine property market. Real estate firms say the fall is more because of depressed sentiment overall and that while local demand for housing is strong, they haven't given up on the overseas market. In the first two months of this year, ALI says its sales to Filipinos abroad were down to 22 percent of total housing revenues against 35 percent for all of 2007. To offset falling demand from the United States and Hong Kong where the local currency is pegged against the US dollar and where many OFWs work, property firms are now aggressively selling their residential projects to OFWs in the Middle East and Europe. "I think our growth potential will continue so I'm hoping the market will recognize that," said ALI President Jaime Ayala, adding the share price was "very much driven by global sentiment."