Ayala, SM predict tough real estate times ahead
Jenniffer B. Austria
Manila Standard
PROPERTY giants Ayala Land Inc. and SM Prime Holdings Inc. expect 2009 to be a difficult year for the real estate industry because of the impact of the global financial crisis.
Ayala Land president Jaime Ayala said the company’s sales in its low- and middle-income residential projects remained strong for the third quarter, but the full impact of the US crisis may be felt in the country next year.
He said sales in the United States, which is in the grip of a credit squeeze because of bad mortgage loans, now represented only 25 percent of the company’s total foreign sales, although these used to account for close to 50 percent in the past.
Because of the slowdown in the US economy, Ayala Land is now targeting other regions, particularly the Middle East, where its subsidiary Avide Land chalked up a sales increase of 70 percent from January to September.
“It is hard to tell where 2009 will be,” Ayala said.
“We have to see how the global crisis plays out. A lot of it depends on confidence. Right now people are a bit rattled, but many of the underlying drivers in the Philippines remain pretty good.”
And despite the uncertainty, Ayala Land would neither slow down ongoing projects nor significantly reduce its capital expenditures for next year, Ayala said.
But the company would be careful in building speculative properties that still had no definite occupants, he said.
“I think we will finish existing projects on schedule, but for new projects, we’ll have to see how the global situation plays out.”
Ayala Land posted a higher net income for the first half of the year, to P2.91 billion from P2.13 billion, on strong residential sales.
Just last month, Ayala Land announced plans to develop “tourism estates” at its Anvaya residential beach resort project in Bataan, where the company is counting on the amenities it has put in place to draw investors.
Anvaya, which charges around P15,000 to P30,000 a night, has “now primed up that entire area.
“You put in place all the infrastructure, all the amenities, make it attractive for locators to come in, and the locators would be resorts.”
Ayala Land’s plan may help the Philippines boost tourism, which has underperformed in the industry because of a lack of infrastructure.
Tourist arrivals increased 8.7 percent to 3.09 million last year and rose 6.1 percent in the first seven months this year. The government hopes to hit five million tourist arrivals in 2010.
The new project may also help Ayala Land compete with rivals such as Megaworld Corp., which teamed up with Star Cruises in August in a $1.55-billion venture to build a casino, theme park, shopping malls and hotels.
“Things have moderated a bit, but we’re still experiencing fairly rapid growth from a market side,’’ Ayala said.
“From a margin side, however, there’s quite a bit of a challenge because of what we’re seeing on the construction cost side.”
SM Prime executive vice president and chief financial officer Jeffrey Lim agreed that 2009 was shaping up to be a difficult year for the industry.
“So far things are still okay, but 2009 definitely would be challenging,” Lim said.
SM Prime, the largest shopping mall developer, reported that its net income for the first six months grew 9.3 percent, to P3.17 billion from P2.9 billion, due to the consolidation of three China malls into the company.
Revenues increased 8 percent to P8.36 billion from P7.74 billion, but SM Prime was still wary.
“We will continue to expand our shopping centers. We will not slow down because of what is happening, but we are watching the market to see how things are being affected,” Lim said.
He said he expected sales to remain strong, particularly in the fourth quarter, because of holiday spending.