In a report to the Securities and Exchange Commission (SEC), Philrealty said since it will not have the means to pursue its various high-rise real estate projects in the medium term, it will explore more joint venture agreements whereby it will merely contribute the land and other pre-development expenditures while the partner takes care of the cost of construction.
An example is the agreement forged last year with Spain-based Comunidades Developers Inc. wherein Philrealty will contribute a 1,986-square meter lot in Fort Bonifacio for a residential condominium in exchange for 67 out of the 261 units valued at P330 million.
The company said the completed condominium units it will acquire in exchange for the land should be much easier to dispose of than the lot which has a value of at least P250 million.
In the first three months of this year, Philrealty remained mired in losses due to the continued decline in sales compounded by high interest rates, an offshoot of the slump in the local real estate industry caused by the regional financial crisis that started in 1997.
"The property market depends heavily on bank financing for its growth, but the economic crisis not only brought prohibitive lending rates but also restricted credit to the real estate industry," Philrealty said.
For the first quarter, its losses reached P491 million, higher than the P114-million loss a year ago but lower than the P895-million loss in 1999.
It said that early this year, it conveyed to Metrobank by way of "dacion en pago" its 9,131-sqm property in Ortigas as a component of its loan restructuring. But due to the depressed value of real estate, it still incurred a loss on the dacion of P419 million.
At end-March 2001, the company’s consolidated assets stood at P6.16 billion, a 13-percent drop from the end-2000 level due to the dacion of the Ortigas lot.
In the same period, Philrealty’s borrowings reached P2.23 billion, slightly higher by P61 million from end-2000 level as a result of the capitalization of some interest charges.
"The company’s current financial position indicates that sufficient cash flow has to be generated to fully service its liabilities and finance its working capital requirements," Philrealty said.
Starting in 1998, the company offered land properties to the banks as payment for its obligations through dacion en pago to substantially reduce its bank loans. It has also divested its interest in the Metro Pacific-led Bonifacio Land Corp. in partial payment of installment payable for land acquisition. It has also temporarily suspended the development and completion of real estate projects such as the Manila Golf Crest, Ivy League Square and Urdaneta Country Plaza and implemented cost-cutting measures including the reduction of its workforce.