Ortigas & Co evolves into a corporation for possible public listing

MANILA, Philippines –  Ortigas & Co. Ltd. Partnership (OCLP), one of the country’s oldest business partnerships, has created a new corporation that will in turn, wholly own it.

The company, OCLP Holdings Inc., will mostly likely be the vehicle to be used if the group proceeds with plans to go public, senior vice president and real estate division manager Joselito Santos said in an interview.

OCLP Holdings will own OCLP but the latter’s assets will remain with it. Santos said no decision has yet been made on whether the partnership will be converted into a real estate investment trust (REIT).

There were earlier plans to create at least five special purpose asset vehicle (SPAV) corporations, later to be converted into REITs. These are corporations that will own the assets for major projects of the Ortigas Group such as Greenhills Shopping Center, Frontera Verde, Capitol Commons in Pasig and Circulo Verde in Quezon City.

Santos said there is again no decision yet on whether or not this will push through. “The final structure is still being worked out,” he added.

A REIT is a stock corporation established principally for the purpose of owning income-generating real estate assets. To encourage investments in REITs, the REIT law provides certain tax incentives to the REIT but they are also required to distribute at least 90 percent of its distributable income as dividends to its shareholders annually. Shares of these REITs are to be listed on and traded at the Philippine Stock Exchange (PSE).

Santos also revealed that OCLP Holdings basically has the same owners as OCLP. HSBC, which owns a third of OCLP, will remain as an owner.

OCLP is spending around P90 billion in the next 10 to 15 years. Of the total amount, more than P20 billion will be spent for the redevelopment of Greenhills Shopping Center (GSC), P25 billion for Capitol Commons, P30 billion for Frontera Verde along C5 in Pasig, and more than P15 billion for Circulo Verde.

Santos said for 2011, capital expenditure will amount to P4 to P5 billion, of which P2 billion will be for Circulo Verde and about P2 billion for Greenhills.

OCLP ’s biggest residential project to date is the P15-billion Circulo Verde in Bagumbayan, Quezon City.

According to Santos, OCLP’s real estate division, which accounts for around 40 percent of revenues, grew 179 percent last year mainly due to the sales of Circulo Verde’s first three towers – Majora, Ibiza and Seville. Circulo Verde will have 15 residential towers, five of which will be under Phase 1.

He said Majorca, launched in April 2009, is already sold out, while Ibiza and Seville, launched in April 2009 and May 2010, are 82 percent and 50 percent sold, respectively.

For 2011, Santos said they estimate OCLP’s real estate division to increase its revenues by 66 percent due to new developments such as Lleida, Circulo Verde’s fourth tower, and Circulo Verde Garden Homes.

Circulo Verde Garden Homes is a townhouse community of 62 units located within the 12-hectare Circulo Verde property. The townhouse units, with price ranging from P9 to P14 million and floor areas from 138 to 191 square meters in three or four-story buildings, are scheduled for turnover in 2012.

“Ortigas has experience in both vertical and horizontal developments and Garden Homes is not our first townhouse development. Last 2005, we constructed Luntala Valle Verde inside Valle Verde 6-A which sold out only less than a year after launching to the market,” Santos, who is also deputy chief operations officer, said.

He added that Garden Homes is just the start as things look bright for Ortigas’ real estate division. “In the past year, we have witnessed a boom in the industry and we intend to take our share of the market demand. This is the reason behind several new projects lined up this quarter, inside and outside Circulo Verde. This include Lleida, the fourth Circulo Verde Tower and Viridian, a residential high rise at Greenhills.”

Meanwhile, OCLP is spending about P24 billion for the second cycle of the redevelopment of Greenhills Shopping Center, which will take seven to 10 years. The first cycle involved mainly a facelift of existing structures.

Phase I of the redevelopment, which will cost between P5-P6 billion, involves demolishing the present Gloria Maris, transferring it to a new location within the complex by next year, demolishing Unimart, building a new Unimart at the site where the old Gloria Maris was, and then adding shopping areas at the old Unimart. The cost for the additional shopping building, which will increase shopping stalls from 2,000 to 4,000, will be around P3 billion, while the new building for Unimart and relocation of Gloria Maris will cost P2 billion and P500 million, respectively.

The next phase will include putting up three residential towers and one office-cum hotel building as well as adding more shopping space. The old Manila Bank arcade area and that of Greenlanes will be torn down.

Santos said the existing tiangge area will remain while V Mall will be torn down and a new building will be put up.

While OCLP’s real estate division, which accounts for 44 percent of total revenues, will increase earnings by 66 percent this year, Santos noted that the shopping center group, which earns about P1 billion a year, will most likely grow its earnings in line with inflation. “But once we double shopping space, we can easily double earnings for this group,” he said.

OCLP officials said the redevelopment will be done in phases so as not to disrupt the conduct of business at the shopping center.