Business Mirror 04/15/2010

Property developer Ayala Land Inc. (ALI) plans to raise $300 million by converting some of its income-generating assets such as malls and office buildings into real estate investment trusts (REITs) during the second half of the year.

In a press briefing on Wednesday, ALI chief financial officer Jaime Ysmael said the company has already begun to identify potential assets for a REIT offer through financial adviser JP Morgan.

“We were advised that $300 million is the minimum size that will make it a successful issue for Ayala Land,” Ysmael told reporters following the Ayala Land’s annual shareholders’ meeting yesterday. He added that proceeds will go toward strengthening the company’s leasing business.

The REIT law’s final implementing rules and regulations are expected by mid-May.

The law provides a regulatory and tax incentive framework allowing real-estate firms to “recycle capital” through the public listing of their income generating assets on the Philippine Stock Exchange.

This year ALI has allotted P27.2 billion to launch 46 new projects across its residential, commercial, office and hotel divisions as well as for landbanking activities—its most aggressive spending program to date.

While the bulk of the capex will be funded through internally generated funds and cash hoard of about P15 billion, Ysmael said the firm may also tap the bond market for additional capital.

He added that on the subsidiary level, ALI has access to as much as P12 billion for short-term borrowings from the banks.

“We have not included REITs as part of the funding source for the [2010 capital spending]. That’s gravy,” added Ysmael.

For her part, Marivic E. Añonuevo, senior vice president and group head of Ayala Malls, said the company plans to launch nine commercial developments and eight office buildings in 2010.

The malls, to be located across the country, will also include the “smaller format” shopping centers offering not more than 10,000 square meters (sqm) of gross leasable area (GLA).

Añonuevo reiterated that the business process outsourcing sector continues to be the main driver for the office space industry. ALI plans to add another 144,000 sqm of GLA this year to the 204,000-sqm inventory at the end of 2009.

“Next year, we are going to our 300,000 [-sqm] level. Five years forward we intend to be in the 700,000-sqm level,” added the company executive.

ALI also plans to launch five boutique-type hotels this year, noted Jose Jalandoni, who heads the company’s hotel new business and hotel division.

He said the new hotels, which will offer an average 150 rooms catering mainly to business travelers, will be in Alabang, Cagayan de Oro, Davao, Fort Bonifacio, Taguig City and North Triangle in Quezon City.

“We would like to build our hotels beside our malls. It creates a more powerful destination product,” he said, noting that the company plans to complete the five hotels within two years.

Meanwhile, ALI president Antonino Aquino said the bulk of the new projects will be devoted to new residential developments. The company plans to launch 9,275 units this year, or roughly four times what it introduced in 2009.

Sales in the first quarter have been “good,” said residential group head Bobby Dy, buoyed by the strong take- up in high-end projects Park Terraces in Makati City and Santierra at Nuvali in Laguna.

Aquino said it also remains bullish on its first project under economic housing brand Amaia Land Corp., dubbed Amaia Scapes Laguna, which will launch an initial 1,300 units.

Aquino expects the company to post “higher” earnings in the first quarter of 2010 compared with the first and fourth quarter of 2009.

Ayala Land’s net income dropped 16 percent last year to P4.04 billion due to a 10-percent dip in revenues to P30.5 billion.