After years away from Boracay’s crowded beaches, ever-crystal blue waters, and bucolic sunsets, it was a respite for The Standard to visit the island recently. Clearly, property developers have been busy in the country’s number one tourist destination, with steady planeloads of of Japanese, Korean, European, and North American tourists mingling with sun-hungry Filipinos from Manila, who have been gravitating this summer to what has been named as the world’s best island by Travel + Leisure magazine in 2014.
AmerIllya Heng, CEO of D Prime, is one of these property developers. She is building a 750-unit project on two hectares of land in the island. She offers buyers 50 percent in-house financing, a move which can allow buyers to skirt any loan-to-value requirements banks might put on a mortgage, although she expects most will pay cash.
Heng, who claimed her project is seeing a lot of investor interest, plans to offer mostly around 52-square-meter (560 square foot) furnished units, at slightly more expensive prices than many similarly-sized units in nearby Singapore, one of the world’s most expensive property markets.
Heng emphasized that her units aren’t going to be as utilitarian as many Singapore properties, claiming they will offer Santorini-style design, referring to the Greek island known for blue-capped, white-washed buildings.
What bubble?
If Heng’s optimism about the Philippine property market is any gauge, then fears of a possible real estate bubble in the economy are over-sold.
“At this point in time, we don’t see any clear evidence of an asset bubble in the economy,” Amando Tetangco, governor of the BSP, told The Standard in December.
“We have required the banks to conduct stress tests on their real estate exposures,” he said, adding that individual banks will be contacted as the “need dictates.”
Others think whether there might be a problem depends on the location and the target customer.
Overall, “the market is very polarized,” said Alexander Karolik Shlaen, an economist and CEO of Panache Management, a luxury brands and real estate investment advisor.
“[In the luxury segment], competition is so tough, they need to sell high-end stories,” he said. For example, the Azure condominium in Paranaque city, southeast of the capital Manila, is offering a beach club house designed by Paris Hilton, while a Trump Tower is going up in Manila’s Makati area.
“But if you go to the periphery, it’s under-built,” Shlaen added, saying he sees a lot of demand there, both for end-users and foreign investors. “There are not enough condos in the provinces, while Manila is saturated,” he said.
“Under-built is good; under-built works”
The country’s biggest real estate players are ostensibly skewed towards the “under-built” school of thought. And they have been rewarded handsomely for their foresight, and aggressiveness in 2015.
Online real estate portal Lamudi Philippines recently listed down and analyzed the performance indicator of the country’s top real estate developers last year, based on their respective income reports.
The overall financial trend was good for largely all real estate companies.
Ayala Land Inc. (ALI) emerged at the top of the totem pole, at Php17.6 billion, 19 percent higher from the real estate giant’s 2014 figure of Php14.8 billion.
The jump in profit was attributed to ALI’s diverse offering of residential and commercial products, especially its master-planned estates all over the country. ALI also amplified its presence in key growth centers and introduced three new integrated mixed-use estates in 2015.
Megaworld Corp. also came in strong, with a net income of 10.58 percent from 2014’s Php9.40 billion. The company breached the Php10 billion mark in net core income for 2015, at Php10.40 billion.
Megaworld launched five integrated townships in 2015, marking a total of 20 integrated township developments across the country. Adding to the company’s success is the exponential growth of their rental business, especially BPO offices, for the last five years. Megaworld Chief Finance Officer Francis Canuto told The Standard they are confident they will reach the Php11 billion target by end of the year.
Federal Land of the GT Capital conglomerate recorded an Php8 billion profit for 2015, a 5 percent growth versus their Php7 billion in 2014. The company says it will continue to push its presence in the property industry with strong focus on residential development.
“We eye high-end and middle-income projects for Federal Land and Horizon Land, whichever is best suited for our present land bank,” Federal Land chairman Alfred V. Ty said.
Manny Villar–led Vista Land and Lifescapes Inc. announced a 14 percent yield growth in 2015 with earnings amounting to Php7.2 billion from Php6.3 billion in 2014 as it combined the income of recently acquired Starmalls Inc.
The bulk of Vista Land’s 2015 profit, though, was earned by the Vista Land real estate group. Alone, it secured a 10 percent profit growth from their Php6.3 billion earnings for 2015. The company said that its Communities Philippines brand contributed almost half or 44 percent of the said revenues, followed by the Camella brand (12 percent), Vista Residences (12 percent), Starmalls (10 percent), Crown Asia (5 percent), and Brittany (4 percent).
Filinvest Land Inc. of listed conglomerate Filinvest Development Corp. recorded a Php5.10 billion profit for the full year 2015, from Php4.61 billion in 2014. Revenues from rental assets alone increased to Php2.95 billion in 2015, 12 percent higher than the Php2.63 billion reported a year earlier. Filinvest operates 14 buildings in Northgate Cyberzone in Alabang and one building along EDSA in Mandaluyong, which according to Filinvest, all of which are fully occupied.
At Php5.1 billion, SM Development Corporation, the residential division of SM Prime, clinched an 8 percent growth from their Php4.7 billion reported in 2014 despite flat revenues. But this real estate sales figure is just 31 percent of the consolidated revenue of SM Prime, which recorded a 54 percent year-on-year uptick to Php28.3 billion for 2015.
Robinsons Land Corp. disclosed an unaudited consolidated net income of Php5.70 billion, 20 percent up year-on-year from Php4.73 billion. Sales went up 16 percent to Php19.73 billion, mostly driven by the double-digit growth of all its business segments led by Gokongwei-led company’s office buildings.
No way to go but up
Not all property developers were lucky to experience the upsurge of profit for 2015. Shang Properties and Rockwell Land reported flat performances. Shang grew from Php2.7 billion to Php2.8 billion, primarily due to higher condominium sales and rental revenue, while Rockwell Land maintained their Php1.6 billion 2014 profit.
Century Properties revealed that its net income dropped to Php1.519 billion in 2015, down 29.6 percent from Php2.158 billion in 2014. The upscale property developer noted a substantial decrease in sales because of projects that were turned over in 2015 and prior years. There were also fewer project launches in 2015 and the company focused on turning over, completion, and collection, said Teresita Fucanan Yu, Century Properties’ vice-president for corporate communications.