It takes about 24 minutes to go down a 30-story residential building with 1,200 units near a commercial business district in Metro Manila—sometimes longer than it takes to travel to work.
“This is because of the congestion in queuing at the elevator,” says Prof. Enrique Soriano, a real estate expert from Ateneo Graduate School of Business.
Soriano says “cookie-cutter” units like this now abound in Metro Manila. “It is happening to a lot that we have been monitoring. This is because their value proposition is low price. But in the end, it is going to boomerang in the industry itself. That’s what scares a lot of people like me. Watch out for developers who are cookie cutters, who have no value to offer,” he says.
He says unit owners of low-value real estate units are likely to default on their monthly amortization, because of the bad experience with the units. “If you compute that in multiples of 100 who will default, it is now a problem of the bank. Your default rate is going to affect the viability of the banking industry and the property sector,” he says.
This emerging situation in the real state sector is what Rex Drilon II tries to avoid. Drilon, an author and property executive, reemerged from retirement five years ago to establish a company that aims to offer better real estate products in the country. He is the author of “Patriots on the Street,” a novel about love of country.
Keyland Corp., a five-year-old company established by Drilon, started its business renovating buildings in Makati City like the one at the corner of Ayala Ave. and Paseo de Roxas. Seeing the need for better-quality condominium units, Keyland introduced Casa de Sequoia in Las Piñas City for first-home buyers and has recently launched 110 Benavidez Serviced Residences in Makati City for the investor market.
Casa de Sequoia is a one-hectare property project with six low-rise buildings that cater to the affordable market. Other ongoing projects are Signa Designer Residences and Southkey Place.
“We envision ourselves as a niche player. We started with zero landbank, as against Ortigas with 4,000 hectares to start with or Ayala with 600 hectares to start with. There are other bigger players. The intention of Keyland is really to create its own niche, no different from when we were running Ortigas,” says Drilon, a former chief operating officer of Ortigas & Company Limited Partnership who helped transform Greenhills Shopping Center into the most profitable mall in the country on per square meter basis. He also headed several units of developer Ayala Land Inc.
Drilon, the founding chairman of Keyland, says the company’s goal is to offer great value to homeowners and investors alike. “There is value in identifying your core competence, core market. Keyland is still a startup. Our board approved just last month a 10-year investment program that will invest significant numbers. The vision is to be one of the key players in the industry, not necessarily the biggest, but probably [with] the best value-for-money,” he says.
Keyland also teamed up with The Ascott Ltd. of Singapore, the world’s largest international serviced residences operator, to launch 110 Benavidez Serviced Residences in Legaspi Village, Makati City.
Keyland president and chief executive Jose Ma. Montinola says the company started by renovating old office buildings and leasing them out to business process outsourcing companies and other tenants.
“Our chairman’s strategy then was to buy existing buildings, do a quick retrofit, magically turn it around and start leasing. That’s what we did for three office buildings in Makati. They were all existing office buildings. We didn’t tear them down. Tearing them down would entail four or five years to finish. So we bought them, renovated them in nine months and leased them in 12 months. Our office buildings are all 100-percent leased out. Once we had the cashflow, we started doing residential,” says Montinola.
Keyland now operates five office buildings with a combined floor area of 50,000 square meters. Montinola says the next stage is the development of residential buildings such as Casa de Sequoia and 110 Benavidez Serviced Residences.
“It took us a year to get some traction [for the first project]. Now, it [Casa de Sequoia] is almost sold out. It took us a while, but once we finished our first building, the market saw the price point. It is really value for money. That’s why we now have a faster velocity with our projects,” he says.
Keyland has more projects in the pipeline. “Most of our projects are owned 100-percent by Keyland. But we also have a joint venture partner for two Alabang projects. We also have a joint venture with Robinsons,” he says.
“After this, we have a property that we recently acquired in Salcedo Village. We are in the planning stage for that. We have another property in Legaspi Village. That’s also in the pipeline. So we have two more in the pipeline,” Montinola says.
Montinola says 110 Benavidez Serviced Residences, a 32-story residential tower near Greenbelt in Legaspi Village, will have 209 units, including 67 private residences and 142 serviced apartments that will be managed by Ascott under the brand Citadines Benavidez. He says the project is aimed at the investor market, who can afford to shell out P7.5 million to P15 million for studio, one-bedroom and two-bedroom units that will have an annual return on investment of 6 percent to 8 percent.
The project is expected to be operational by the first half of 2022, according to Ascott regional general manager for the Philippines and Thailand Arthur Gindap.
Gindap says Ascott, which is led by Singapore-based Capital Land, is now the world’s largest operator of service residences, referring to hotel units that are designed for long staying guests. “In the Philippines, half of our business is in the hotel model,” he says.
Ascott, which owns the brands Ascott, Citadines and Somerset, aims to develop new brands for the millennials.
“In the hospitality space, the return that we offer is the highest in the industry,” says Gindap. “By 2020, we will have around 5,000 units in the Philippines. That translates to about 25 to 30 properties. So we are quite bullish.”
Montinola says the partnership with Ascott is in line with Keyland’s value proposition. “We always want to come up with a product that is unique, that has a certain appeal to whatever target market we are looking at. We don’t want to just keep doing condos, just like everybody else. We have a selling proposition,” he says.
Keyland is investing P1.2 billion in 100 Benavidez and expects to generate P2 billion in sales. The unit is being sold at P220,000 per square meter, but it will be fully furnished into a hotel room. The project will also have a rooftop infinity pool, fitness center and hotel lobby.
Keyland signed a 15-year partnership agreement with Ascott. “When you have a partner like Ascott managing the building for you, it retains its original form. After 15 years, it will still look like it’s new because the standards that they are following cannot be altered,” Montinola says.
Meanwhile, Soriano believes that the property sector still has room for growth, despite the presence of some “cookie cutter” projects. “It has been a boom and bust cycle within the property sector since 1987. I have seen three or four cycles in the sector. The only good thing about the sector is that it is technically an unreal estate market. Why? Because there are still many who have no houses,” he says.
“The papers report that the housing backlog is around 5 million units. That’s the official number. If you ask me, it is around 7 million. Every year, around 40,000 to 50,000 houses are in demand in the mid-market and around 400,000 units in the low-end market. We can only supply practically 22 percent to 23 percent. It keeps on building up,” he says.
“And the huge migration of people from the the provinces all the way to Metro Manila, that is around 200,000 to 300,000 a year,” says Soriano.
Soriano says the huge housing backlog is not an excuse to build “cookie-cutter” houses. “To be in the market, you need to be competitive. You need to have a compelling and a powerful value proposition,” says Soriano.
