REAL ESTATE: MEGAWORLD READIES FOR TURNAROUND
MANILA, November 25, 2004 (STAR) By Mary Ann Ll. Reyes - Top real estate developer Megaworld Corp. is spending at least P4 billion next year in anticipation of a rebound in the Philippine real estate sector which is already showing clear signs of recovery, company chairman and president Andrew Tan told The STAR yesterday.
In an exclusive interview, Tan said there has been an increase in activities in the real estate industry during the last few months which he describes as a ‘good indication’ of a recovery in the sector.
Tan said the industry has suffered a slump for the last six years.
"The real property sector is now beginning an (uptrend) which presents a real opportunity for us. There is a recovery in both the high-end and low-end market but the opportunity is more in the middle-income market because we still have a big number of people who do not own a house," Tan said.
With the slump in the domestic economy, Tan said owning real property is a very good hedge against inflation.
He explained that more and more people have realized that it is better to invest their hard-earned money in real estate than in any other forms of investments.
Tan describes Megaworld as a ‘housing supermarket,’ which is both into horizontal and vertical development and which provides high-priced, medium-priced, and low-priced residential properties.
Megaworld is into high-end property development while Empire East is into the medium-priced market. Empire East Suntrust develops more affordable housing projects.
"We are definitely bullish about the industry’s prospects next year. We are going up the curve although we still do not know how long the good times will last and when we are going to get there. But we are now beginning an upscale," he emphasized.
Tan disclosed that this year, the company has a capital expenditure budget of P4 billion.
"Definitely, next year’s budget will not be lower than what we will be spending in 2004," he said.
Megaworld earlier reported a 28 percent increase in revenues, posting P1.37 billion as of end-September, compared with P1.07 billion during the same period last year. Residential sales accounted for P601.5 million or 44 percent of total revenues.
The company said its net income stood at P564.11 million, on the back of increased sales of its residential condominium projects.
The company attributed this to the sales of condominium units in various projects such as Grand Eastwood Palazzo Towers 1&2, Eastwood Excelsior Towers 1&2, Olympic Heights Towers, One Orchard Roads and Eastwood CyberOne in Eastwood City; Forbeswood Heights in Bonifacio Global City; Paseo Parkview, Greenbelt Radissons and Greenbelt Parkplace in Makati.
Megaworld’s other revenue sources came from the rental from its entertainment and dining center Eastwood City Walk I and II and Paseo Center in Makati City; commercial and office space; interest and other income. This accounted for 56 percent of total revenues or P765.6 million during the first nine months of 2004.
However, Megaworld incurred higher market costs because of its aggressive marketing campaigns to promote its residential projects. This led to a 28-percent increase in operating expenses to P662.4 million.
Meanwhile, Empire East Land Holdings, Megaworld’s middle-income housing unit, posted a 42-percent jump in net income to P56.4 million for the January to September period, versus P39.7 million last year.
Empire East said its gross profit went up 334 percent to P100 million, as compared to P23 million during the nine month period.
The company attributed the higher profits to sales of its projects such as Laguna Bel Air 3 and 4, Greenhills Garden Square in San Juan, California Garden Square in Mandaluyong, Xavier Hills in San Juan and The Cambridge Village in Pasig and Cainta.
Like its parent company, Empire East also recorded four-percent higher operating expenses at P362.1 million as compared with P348.5 million during the same period last year.
"With its strong financial position, the group will continue investing in and pursuing expansion activities as it focuses on identifying new markets, maintaining established markets and tapping business opportunities," the company said.
Earlier, Megaworld said it was earmarking about P20 billion for the next four to five years to complete major property projects using internally generated funds.
The company is planning to complete a number of high-rise residential developments in Eastwood City, Quezon City, by 2008.
It aims to finish the development of its luxury twin tower Eastwood Excelsior by 2005, residential tower One Orchard Road by 2006, The Grand Eastwood Palazzo in 2007 and Eastwood Parkview by 2008, a 40-floor twin-tower project.
Tan said that during the first half of the year, there has been a rise in the value of residential subdivision land in Metro Manila and of commercial properties in the Makati and Ortigas central business districts.
"Some analysts forecast a 12-percent increase in real estate values in the next 12 months. Given these encouraging developments, we project Megaworld’s net income to improve by 30 percent in 2004," Tan said.
Reported by: Sol Jose Vanzi
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