A CONSORTIUM of SM Prime Holdings, Inc. and Ayala Land, Inc. (ALI) won the bid to develop a portion of the South Road Properties (SRP) in Cebu City for P10 billion, marking the third partnership of the two real estate behemoths less than a year after burying the hatchet over a stake in the unlisted property holding firm of the Ortigas family.
The move of the Sy and Ayala families’ real estate companies to team up highlights the need for such cooperation to acquire prime land and boost operational efficiency as they target opportunities in the property market, analysts said.
In a joint statement attached to their disclosures yesterday, SM Prime and Ayala Land said SM-ALI Group consortium, which also includes the latter’s affiliate Cebu Holdings, Inc., will jointly develop the 26.34-hectare (ha) lot in the reclaimed 300-ha SRP area once a master plan is in place.
Yesterday, shares of SM Prime added 14 centavos or 0.71% to end P19.98 apiece, Cebu Holdings gained 10 centavos or 1.98% to P5.16 per share, while those of ALI dropped 35 centavos or 0.93% to P37.30 apiece.
JOINT MUSCLE
The consortium will combine the “financial muscle, technical expertise and the real estate experience” of the SM and the ALI group, the statement read.
“Ayala Land is pleased to have been awarded the 26-ha South Road Properties lot in Cebu, which we will jointly master-plan and develop with the SM group,” ALI President Bernard Vincent O. Dy said in a mobile phone message.
“We look forward to working with them on this project, which will be a mixed-use development in what we believe will be a major growth area in Cebu.”
SM Prime and ALI’s decision to work together can be viewed as a “strategic” decision to increase their operational efficiency at a time when prime lots are harder to come by, analysts said.
“Usually, we should see smaller developers partnering with big developers because one would need the expertise and scale of the other,” Julius Guevara, head of advisory services at Colliers Philippines, said in a mobile phone message.
“With these two major property developers joining together, this just shows that land is getting harder to acquire so we’ll probably see these kinds of transactions more and more.”
Claro dG. Cordero Jr., head of research and valuation at real estate advisory firm Jones Lang La Salle, said separately in a mobile phone message: “We can expect big property developers working together to raise the level of operational efficiency in order to create bigger value for the stakeholders of both companies, especially for the development of projects outside of the core business and investment areas.”
Fierce competitors in the areas of banking and real estate, the Sy and Ayala families decided work together following a decision to jointly manage and develop the Ortigas family’s OCLP Holdings, Inc. in November 2014 after a legal row that lasted two years.
Early this year, SM Prime and ALI teamed up with Megaworld Corp. and Aboitiz Equity Ventures, Inc. to form Trident Infrastructure and Development Corp. in vying for the P122.8-billion Laguna Lakeshore Expressway Dike Project -- one of the biggest infrastructure projects the Aquino administration has rolled out to date.
“With the closure of the agreement with Ortigas and the opportunity in Lakeshore, they have more experience with each other and -- going into this project -- they may have reached a certain comfort level,” Mr. Guevara said.
Miguel A. Agarao, analyst at Wealth Securities, Inc., noted in a telephone interview: “It’s too much to expect these companies to ally with each other moving forward, but in cases where there’s too much to be lost in competing, it’s better to ally.”
This latest development boosts the presence of both property firms in the booming Cebu real estate market.
The ALI Group has partnered with the Aboitizes for a 15-ha city center in Mandaue City, as well as with the Gaisano group to develop the latter’s 12-hectare property on Mactan Island into a leisure-oriented project.
SM Prime, on the other hand, is building the 30-hectare SM Seaside City in SRP and was awarded last month a 1,500-hectare reclamation project in the town of Cordova.
“This is definitely a positive development for both companies and the property industry as a whole since this shows that major developers are still bullish on the prospects of real estate,” Lexter L. Azurin, head of research at Unicapital Securities, Inc., said in a phone interview.
source: Businessworld
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