Moneyed class drives property firms' growth

An article published in the Philippine Graphic, September 25, 2006
 

The combined net profit of the top five property firms - ALI, SM Prime, RLC, Megaworld and Philippine Realty Inc. - amounted to P7.47 billion, accounting for 83.8% of the combined earnings of the property sector for the first six months of 2006.

What do Ayala Land Inc. (ALI), SM Prime, Robinsons Land Corp. (RLC) and Megaworld Corp. have in common? They have the same market – middle to high class. The moneyed class, including junior executives on the way up, provides the revenues and profits to grown the property sector’s leaders.

The four, together with Filinvest Land Inc., posted combined revenues of P28.27 billions for the first six months of 2006, or 77% of the total revenues of the property sector in the Philippine Stock Exchange.

During the same period, the combined net profit of the top five firms – ALI, SM Prime, RLC, Megaworld and Philippine Realty Inc. – amounted to P7.47 billion, accounting for 83.8% of the combined earnings of the property sector.

Business has been good for the industry leaders. "We continue to experience brisk take-up across all our residential products and are lining up projects that will offer more quality, distinctive products to the market," says ALI president and CEO Jaime I. Ayala.

"Revenues from these projects, as well as from the five shopping centers now under construction, will significantly impact our earnings stream in the next few years," he adds.

For the first half of 2006, the property arm of Ayala Corp. posted revenues of P12.8 billion, 9% more than the P11.8 in the same period last year. The 2005 revenues included a P2.59 billion gain from te sale of preferred redeemable shares in Astoria Investment Ventures Inc. (AIVI), the holding company for the investment in the MRT-3 rail project. Excluding this gain, first half revenues were actually 39% higher year-on-year.

Net Income for the first half of 2006 grew by 4% to P2.06 billion up from P1.8 billion reported during the same period last year.

ALI spent P5 billion for capital expenditures during the first six months of 2006, equivalent to 31% of the P16.1 billion budgeted for the whole of 2006. To date, the bulk or 66% was spent on the company’s various residential developments, followed by shopping centers at 23% and strategic land bank management at 7%.

Project and capital expenditures are expected to accelerate in the coming months given current and newly launched projects.

In terms of profits SM Prime topped the property sector with P2.77 billion net income for the first six months of 2006, compared with 2.54 billion a year ago, on revenues of P6.13 billion.

The growth was largely due to rentals from new SM Supermalls opened in 2005 and 2006, namely, SM City San Lazaro, SM Supercenter Valenzuela, SM Supercenter Molino, SM City Sta. Rosa, SM City Clark and the Mall of Asia.

The new malls opened with a total gross floor are of 862,215 square meters. Currently, these new malls have an average occupancy level of 95%. Same store rental growth is at 6%.

SM Prime currently has 25 Supermalls strategically located nationwide with a total gross floor area of 3.4 million square meters. On May 21, the company opened the 380,000-square-meter Mall of Asia to a hug crowd of close to a million. Other malls scheduled to open in 2006 are SM Supercenter Pasig and SM City Lipa. Total gross floor area will increase to 3.6 million square meters by end-2006.

John Gokongwei’s Robinsons Land Corp., the main rival of SM Prime in the mall business, recorded gross revenues of P1.49 billion for the third quarter of fiscal year 2006, bringing up three-quarter revenues to P4.83 billion, up by 28% from last year’s P3.79 billion.

Net income for the three quarters of fiscal year 2006 stood at P1.232 billion, up by 20% from last year’s P1.025 billion.

The largest revenue contributor remains to be the Commercial Centers Division, contributing 49% of the company’s gross revenues. Revenues from commercial centers amounted to P2.352 billion as against last year’s P2.292 billion. RLC’s flagship mall, Robinsons Place Manila, continues to enjoy excellent rental income, while newer malls Robinsons Place Pioneer and Robinsons Place Angeles and the redeveloped Robinsons Place Novaliches are also contributing to the rental growth.

Megaworld Corp. reported a consolidated net income of P867.55 million for the first half of 2006, up from P553.51 million a year ago. Consolidated total revenues composed of real estate sales, rental income, hotel income, interest income and other revenues grew by 22% from P2.72 billion to P3.32 billion resulting from strong property sales and increase leasing and hotel operations.

The bulk of generated consolidated revenues came from the sale of residential lots, condominium and office units at 75% of total, amounting to P2.49 billion in 2006 up by 19% compared to P2.1 billion of the same period last year.

The group’s registered sales came from the following projects: Grand Eastwood Palazzo, One Orchard Road and Eastwood Parkview in Eastwood City; Forbeswood Heights in Fort Bonifacio; Greenbelt Radissons and Greenbelt Parkplace in Makati City, McKinley Hill: and Newport City.

Filinvest, the only company in the top five in terms of revenuies, is also the only one engaged in low-cost or socialized housing. It earned P1.23 billion for the first half of 2006, 4% higher than a year ago., on revenues of P1.19 billion.

Among the prominent property companies, Metro Pacific Corp reported a net loss of P437.4 million for the six-month period, but not because of problems in the property sector.

The company attributed its losses principally to non-recurring provisions made in view of the adverse short-term outlook for the Philippine domestic shipping industry and in respect of a particular real estate investment whose projects are uncertain.

A provision of P139 million was made against an unprofitable Negros Navigation Co. vessel. Given the present over capacity in the domestic shipping industry and the continued rise in fuel costs, Metro Pacific is reviewing a number of strategic options with respect to its investment in Nenaco.

The second provision, for P258.5 million, was made against an affiliated real estate investment, a company engaged in real estate development in San Juan, Batangas. Metro Pacific believes that while this investment’s long-term prospects are sound, its near-term outlook is challenging.

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