Cebu’s Crown Regency starts 3 key projects next year

Written by Willy Rodolfo III / Reporter

CEBU-BASED hotel chain Crown Regency is set to commence key projects in Makati, Tagaytay and Bohol next year to add to already ongoing projects in Cebu and Boracay. Crown Regency Hotel and Tower general manager Hitesh Sampat said the projects are aimed to push the company’s objective to become the largest hotel chain in the country. “When you look at the concept it is not just a hotel, it is a lifestyle,” Hitesh said. Fuente Triangle Development the property arm of J. King and Sons Co., is already rolling out P1.2 billion for a 480-room resort hotel and convention center in Boracay. The group is also in the middle of construction works in two more towers in the middle of Cebu’s midtown district to complement the two existing Club Ultima and Crown Regency tower buildings. Fuente Triangle vice president for sales and marketing Jose Maria Gianzon said the company is set to break ground on its three-hectare project in Panglao island in Bohol. There is also an ongoing P1.2-billion project in Tagaytay over a 1-hectare property that will host a Crown Regency Hotel and the group’s lifestyle brand Club Ultima. Gianzon said the company is also looking at properties for a high-rise project at the heart of Makati City. Crown Regency already operates a total of 800 rooms in its hotels in Davao, Makati and in Metro Cebu. It has also taken over operations of Milennia Towers in Ortigas and Regalla Park Condominiums in Cubao. Gianzon said the company is the only one in the country to offer a “rotating lifestyle” model as the lifestyle, residence and hotel operations are integrated, offering a complete package to investors. He said purchasing a membership at Club Ultima, for example, entitles a member to buy a condotel unit which also entitles the member to at last 45-days free accommodations passes to any of the Crown Regency hotels natiownide and partner hotels worldwide

Filinvest Land plans to raise P5 billion

Written by Miguel Camus / Reporter

THE listed real-estate development unit of the Gotianun family bared its plan on Wednesday to tap the debt market and raise up to P5 billion to cover part of the company’s remaining spending requirements this year until 2010. In a disclosure to the local stock exchange, Filinvest Land Inc. (FLI) said it will issue and float through a public offering three and five years fixed-rate debt securities. “Proceeds of the issue will be used by FLI to finance its capital requirements in 2009 and 2010,” said the developer in a statement. The issue date, which is still subject to the approval of the Securities and Exchange Commission, is slated for the last quarter of this year. Company officials could not be reached for additional details. This year, FLI has allotted P5.3 billion to fund new and ongoing projects. the company is targeting to launch 29 new projects and phases estimated to be worth P7.4 billion in terms of sales value. Among the developments to be launched is FLI’s first high-rise project, The Linear, in Makati City. The 23-story structure is expected to break ground before the end-2009. FLI said it succeeded in launching 11 of these projects in the January-to-June period, hitting 43 percent of the full-year sales target. Earlier, the company said profits in the first semester rose 6 percent to P759 million on sustained interest for affordable and mass housing projects. Revenues likewise increased by 11 percent 2.47 billion, buoyed by an 11-percent increase in real-estate sales, which account for the bulk of total revenues. In addition, FLI attributed growth to the increase in rental rates for its office and retail leasing business. Rental income from Festival Supermall, PBCom Tower and Northgate and Cyberzone in Alabang contributed 24 percent to total revenues, the firm said. Meanwhile, FLI’s total office building portfolio stood at over 132,000 square meters as of June, with an average takeup rate of 90 percent. The real-estate company also said its medium-rise building developments, continue to generate interest for the firm. Projects under this line are mostly inner-city cluster condominiums, targeting those who work in Metro Manila but live outside the capital such as in Laguna and Cavite. FLI currently has four medium-rise buildings—One Oasis Ortigas, located on Ortigas Avenue Extension in Pasig; Bali Oasis Marcos Highway, also in Pasig City; One Oasis Davao; and One Oasis Cebu. To be added soon is One Oasis Santa Mesa in Manila City.

Sale of mortgages part of housing cleanup–VP

THE sale of mortgages by the National Home Mortgage Finance Corp. (NHMFC) to Deutsche Bank Real Estate Global Opportunities (DBGO) was part of the cleaning up that had to be done to the housing sector, according to Vice President and Housing and Urban Development Coordinating Council Chairman Noli de Castro. The Vice President said the sale was the first step in turning around NHMFC so it can perform its mandate of developing the secondary mortgage market and promoting the growth of a sustainable source of funding for the housing sector. The revitalized NHMFC recently issued P2.1 billion worth of “Bahay bonds,” which was accepted enthusiastically by local investors. De Castro also noted the need to remind borrowers to repay their loans. “A substantial number of borrowers have not been paying regularly the loans they obtained from the NHMFC under the Unified Home Lending Program [UHLP]. The issues with the sale came out when the servicing corporation, Balikatan Housing Finance Corp. [BHFC), started to undertake serious efforts to collect from the borrowers. Now the borrowers realized that they have to pay their loans, which some of them were not accustomed to. We should change that mentality among our borrowers that just because it is a government loan, they can ignore payment or take it for granted. A loan must be repaid. Borrowers signed a loan-and-mortgage agreement, stating the terms and conditions of payment, and saying what will happen if payment is not made,” the Vice President said. “Remember that the P42 billion borrowed by NHMFC from SSS, GSIS and Pag-Ibig has to be paid as well with corresponding interest and penalties. Imagine, the P42-billion NHMFC loan has ballooned to more than P80 billion inclusive of principal, interest and penalties. What happened was that because borrowers did not pay through the years, NHMFC defaulted also on its payment to these funders. At least the individual borrowers can seek a condonation of penalties and interests. But NHMFC does not have this recourse, even in the ensuing restructuring agreements with the funders. NHMFC has to settle soonest, otherwise, the government will be forced to bail out its loans because the funds lent by the funders are private funds coming from the contributions of the members of these pension and provident fund agencies,” de Castro added. The UHLP was a financing program implemented by the government from 1988 to 1996 catering to individual borrowers. Because the UHLP’s repayment record was a low 40 percent, NHMFC piled up nonperforming loans in its portfolio. These nonperforming loans were classified by NHMFC according to degree of delinquency, and the most delinquent accounts were sold to DBGO. Most of these delinquent accounts have not been paid for 10 to 15 years and have a collection efficiency of less than 10 percent. Deadbeats criticized Meanwhile, NHMFC president Joseph Peter Sison has challenged borrowers complaining about the aggressive collection efforts of Bahay Financial Services (BFS) to pay their obligations to avoid further problems. “We should pay what we borrowed. It is not a good practice to borrow from government financial institutions and then complain to politicians when they encounter problems in repaying,” Sison commented. NHMFC was recently questioned by the Senate blue-ribbon committee on the sale of delinquent mortgages to DBGO. In May 2004, the NHMFC board approved the award of the sale of NHMFC’s high delinquent accounts with a joint-venture structure to DBGO. The sale covered 52,000 accounts with an outstanding principal balance of P12.8 billion. A bidding process was conducted by NHMFC following Commission on Audit Circular 89-296 for the sale of assets. The ensuing joint-venture structure was called Balikatan Housing Finance Corp., where NHMFC has a 49-percent share and DBGO has a 51-percent share. BHFC created another corporation, known as Bahay Financial Services, to serve as its servicing arm. BFS manages the collection and restructuring of the accounts sold to DBGO. The complaints regarding the sale emerged when Bahay Financial started implementing aggressive collection strategies. “Some of the accounts sold to DBGO have not been paid for 10 to 15 years, while others were not paid at all. But in the inspection that was conducted, some of these units are occupied, being rented out or whose rights were sold. So, some borrowers are even earning from it, and yet they are not paying. The concerned borrowers have already benefited from their loans and it is about time that they come forward to pay what they borrowed. Of course, those who are found to have legitimate concerns are being given due consideration. Bahay Financial is willing to sit down with them and discuss the options available to them,” Sison explained.

Automatic foreclosure of unpaid housing units MULLED

Written by Butch Fernandez / Reporter

VICE President Noli de Castro wants Congress to pass a law that would allow automatic foreclosure proceedings against delinquent beneficiaries of the government’s low-cost housing program. Appearing before a Senate inquiry into the National Home Mortgage Finance Corp.’s (NHMFC) auction of some 53,000 unpaid housing loans to Deutsche Bank Global Opportunities under a joint-venture agreement, de Castro laid the blame on lawmakers for passing an earlier law condoning delinquent loans the government granted under its Unified Housing Program. “Sa Meralco [Manila Electric Co.] pag hindi ka nakabayad, puputulin kaagad ng kuryente mo; ganun din sa tubig [With Meralco, if you don’t pay your bills, your electricity will be cut off immediately; the same with water],” de Castro, the Arroyo administration’s housing czar, told senators, adding that because they are not allowed to apply the same policy on delinquent housing-loan beneficiaries, the debts have grown to billions of pesos. The Senate inquiry, presided by Sens. Richard Gordon and Rodolfo Biazon, was triggered by a resolution filed by Sen. Francis Escudero,  citing complaints from housing-loan beneficiaries that the NHMFC auction to Deutsche Bank Global “resulted in higher interest rates and exorbitant down payment housing-loan restructuring scheme tantamount to a questionable public-service accountability.” Biazon voiced suspicion that the NHMFC-Deutsche Bank scheme was “structured to foreclose” the housing units so these could later be sold at higher prices. “If the government housing-loan beneficiaries cannot pay the 9-percent interest, how can you expect them to pay the 14-percent interest under the restructuring scheme?” Before adjourning the hearing, Gordon moved to create a technical working group that would meet with the housing agencies and lending institutions, including the Social Security System, the Government Service Insurance System, and the LandBank “to get to the bottom of the problem.” Interviewed after the hearing, de Castro admitted that the Unified Housing Loan program, implemented in the 1980s up to early 1990s, eventually “failed” because of nonpayment of these housing loans. “Under the Unified Housing Program, it was really a failure; that is why the unpaid housing loans were sold to the Balikatan,” the Vice President said. Balikatan is the joint-venture special- purpose vehicle formed by the NHMFC and Deutsche Bank Global. He explained that his automatic foreclosure proposal was made in response to questions from lawmakers on what they plan to do with the problem of delinquent housing loans. “Well, they’re asking what’s the best way to resolve that problem. In my view, that’s the best: automatic foreclosure. If you can’t pay, your property will be foreclosed; you also won’t have the right to sue the housing agency that lent the loan. I wish that’s the setup, i.e., that we’d have a law like that,” he said partly in Pilipino. At the same time, de Castro conceded that foreclosure is a long process because there are people living in houses, and it’s not that easy to just boot them out.

Drop in rents to bottom out this year

Written by Miguel R. Camus / Reporter

THE continued drop in rental rates for office spaces may bottom out by the end of this year, as companies led by the business process outsourcing (BPO) sector snap up long-term lease contracts on what industry watchers say are bargain deals. As a result, real-estate service firm Jones Lang LaSalle Leechiu expects the current oversupply in office spaces to correct itself before 2011, as companies that earlier postponed expansion plans try to take advantage of the lower rates. “We went through a very rough second quarter in 2009, as many companies decided to postpone transactions [for office spaces] because of the uncertainty in the financial markets, particularly in the US,” said David Leechiu, country manager of the Jones Lang LaSalle Leechiu, during a lunch briefing. “But our [research] tells us that the end of this year will be the peak of supply, and every quarter thererafter, the supply will contract significantly.” He added that rental rates will start to increase by the third quarter of next year, indicating a faster recovery process compared with the 1997. Asian Financial Crisis, which took more than five years for prices to stabilize. In the months of April to June in 2009, rates for prime office spaces in Makati City have dropped 42 percent to P700 per square meter (sqm) per month from the comparable period last year. This is the steepest drop among the 12 areas in Metro Manila compared by Jones Lang LaSalle Leechiu- and is followed by Northgate Cyberzone in Alabang City, which saw a 39-percent decline in rent to P400 per sqm per month. Jones Lang LaSalle Leechiu chief operating officer Lindsay Orr said rental rates are expected to decline further in the second half of 2009, though at a slower pace, and will hit its bottom by the end of the year. “We see this as an opportunity for tenants to go long-term, because rents will not be this cheap forever,” said Leechiu. Much of the firm’s optimism is hinged on the uptake by large multinationals in the BPO, information technology and banking industries which previously committed in taking a total 195,000 sqm of office space in the first semester of the year. Leechiu explained these transactions were postponed until a more stable global economy was on the horizon, something he indicated is slowly emerging. “It’s a chicken and egg situation… these [transactions] have to happen first before the floor-rental prices are set,” said Leechiu, “But from the positive news reports we hear, like a recovery in the stock markets, we think in the next four to six months, these deals will all be completed.” Other factors helping the industry are the availability of credit and a ready pool of talent for the BPO sector, which corners a significant share of the office market. Another advantageous development: global “captives” undertaking their own BPO operations like JP Morgan Chase, Deutsche Bank and The Hongkong and Shanghai Banking Corp. and Citibank. Leechiu said that many companies are also “revisiting” the importance of being in Makati City as opposed to other locations nearer their labor sources such as the Manila Bay area, or Quezon City to the north. At present, third-party BPOs are looking to provinces like Cavite, Laguna, Rizal and Laoag for expansion but Leechiu admitted the lack of suitable infrastructure is hampering potential developments in these areas. In addition, data compiled by Jones Lang LaSalle Leechiu since the start of the decade indicates that political turmoil has no effect on the BPO industry. Jones Lang LaSalle Leechiu was created by the merger between Jones Lang LaSalle Inc. and Leechiu & Associates early last year. The new firm serviced more than half of the 1.4 million sqm of office space occupied by the BPO industry in 2008.