ALI, SM see no asset bubble, eye dominance

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Although the World Bank recently warned of a possible property bubble in the Philippines, the country’s two property giants remain bullish and are even flexing their muscles to increase their presence in the country’s real estate industry.

To Ayala Land Inc. (ALI) and the SM Group, the Philippine property market looks like territory where large swaths of land have to be conquered, literally, with both firms ready to spend billions of pesos for new projects. Both firms also remain highly profitable.

On Monday, ALI announced that it exceeded its target profit in its five-year plan that is supposed to end this year.

Also on Monday, the SM Group said that it is eyeing another major fund-raising with the issuance of a P15-billion worth of retail bonds, and a tie-up with Jollibee Foods Corp. (JFC) and Injap Group for a new mall joint venture.


In a filing with the Philippine Stock Exchange (PSE) on Monday, ALI disclosed that it earned a record P11.74-billion net income in 2013, or a 30-percent increase from the P9.04 billion it recorded in 2012.

“Strong growth by each of our business lines showed good execution of the growth strategy with the increased delivery of new products in new geographies,” ALI President and Chief Executive Officer Antonino Aquino said.

In 2013, ALI broke ground for three new estates: the 21-hectare Circuit Makati; the 32-hectare Atria in Iloilo; and the 100-hectare Altaraza in Bulacan.

Also, ALI’s five residential brands launched a total of 28,482 units in 2013 worth P108 billion, pushing the company further to launch additional 30,000 units across all residential brands this year.

“During the same period of high profit growth, ALI also doubled its land bank, improved its organizational capability and strengthened its capital structure. These foundations will enable ALI to grow further in the years ahead,” Aquino said.

The company’s consolidated revenues reached P81.5 billion, 36 percent higher year-on-year, while its revenues from real estate, which comprised the bulk of consolidated revenues, increased by 40 percent to P76.34 billion mainly driven by the strong performance across its property development, commercial leasing and services businesses.

ALI spent a total of P66.26 billion in capital expenditures in 2013, which is 7 percent lower than the P71.29 billion for 2012. For this year, ALI has allotted another P70 billion earmarked for the completion of ongoing developments and new project launches. The property firm also plans to launch 78 projects this year with an estimated value of P142 billion.

“The company continued to take advantage of favorable market conditions with its successive fund-raising activities, ranging from the two equity top-up placements made over the last two years and the series of bond offerings which were all successfully priced and executed,” said ALI Chief Finance Officer Jaime Ysmael.

“These enabled ALI to fund its aggressive capex program, which allowed it to secure strategic land bank positions in key growth centers and support business expansion,” he added.

As a response to the calamities which affected the Visayas, ALI is now engaged in rehabilitation efforts using an initial P45.5 million from a company-wide fund drive.

SM forges partnerships
For its part, the SM Group, through SM Investments Corp. (SMIC), also informed the PSE on Monday its board of directors has approved the issuance of fixed rate peso retail bonds worth P10 billion with an option for oversubscription for another P5 billion. The bonds will be offered in one or two tranches with tenors of seven and/or 10 years.

The proceeds of the bonds, according to the group, will be used to refinance maturing debt and for various expansion projects. SM has appointed BDO Capital and Investment Corp. as issue manager for the offering.

In a separate document sent to the PSE on the same day, SMIC revealed that it has signed an investment and shareholders agreement for the acquisition of CityMall Commercial Center Inc. (CMCCI) shares, equivalent to 34 percent of the outstanding capital stock of CMCCI.

The remaining 66 percent of the outstanding capital stock is held by Double–Dragon Properties Corp. DoubleDragon is a 50/50 joint venture between Injap Investments Inc., headed by its chairman, Edgar “Injap” Sia 2nd, who is also the founder of Mang Inasal Philippines Inc.; and Honeystar Holdings Corp., headed by its chairman, Tony Tan Caktiong, who is also the founder and chairman of JFC.

Incorporated as a wholly owned unit of DoubleDragon, CMCCI was intended to be the umbrella company for all CityMall Community Mall projects around the country. According to DoubleDragon, CityMall is envisioned to become one of the largest independent community mall chain in the Philippines, with floor areas of approximately 5,000 to 10,000 square meters for in each CityMall which will be located in prime locations, mostly in the Visayas and Mindanao.

Expected to be completed by December 2014, the first CityMall will be built in a recently acquired12,654-square-meter commercial land in Arnaldo Boulevard in Roxas City.

Other than the CityMall community mall chain, DoubleDragon also intends to complete three office towers in the next six years in different central business districts in Metro Manila, which will be leased out to corporate and business process outsourcing tenants. Recently, DoubleDragon filed its initial public offering (IPO) application at the Securities and Exchange Commission and the PSE. The company aims to raise as much as P1.16 billion from its IPO.

After the completion of the offer tentatively scheduled in April 2014, the offer shares will comprise 26 percent of the company’s outstanding capital stock of 2.2 billion shares and a market capitalization of up to P4.5 billion.

Part of the proceeds from the IPO will be used to fund DoubleDragon’s flagship project, the CityMall. This, together with the investment of SMIC in CMCCI, will expedite the realization of the planned roll-out of 100 CityMall Community Malls around the country by year 2020.

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