The United Coconut Planters Bank (UCPB), among the major casualties of the 1997 Asian financial crisis was caught in the pits, saddled with real estate properties which their clients gave up, since they were unable to pay their loans.
But rather than let these assets stay idle and eventually deteriorate, UCPB sought creative solutions to turn these assets around.
"The idea is simple. Instead of selling these properties, we look at those with really good prospects and see how we can make it profitable again and then we can sell at a premium when the business becomes attractive to buyers," says Jaime W. Jacinto, UCPB vice president and head of asset management.
Jacinto was tasked by UCPB management to organize its Institutional Recovery Management Division (IRMD) in 1999 to assist clients in restructuring their loans, and at the same time, draft and implement strategies that will make the non-earning assets earn.
The IRMD is composed of people with various areas of expertise.
"We’re not hard-line bankers. We have a pool of architects, a mall expert, some retail specialists to package these properties so that we’ll have an easier time selling them," says Jacinto.
"We were one of the first institutions in the country to put together an arm that focuses on developing and implementing better alternatives on some of our acquired properties. The properties managed by the group are those the bank believes to have high potential but cannot be disposed of under prevailing conditions. It would be a waste to sell them at giveaway prices," he adds.
Jacinto likens the IRMD to the intensive care unit of a hospital, where the bank tries to restore really sick accounts back to good health.
"To do this, we try to make these ICU patients cooperate with us, though not without pain and resistance. We explain that by following a set of recovery strategies, they too have make sacrifices, and that’s the hard part, because their properties could be made profitable again, but they will no longer own them," says Jacinto.
These remedies include reducing their client’s loan by accepting payments in kind, either via services or products. Another is accept settlement by giving up their properties after an assessment is done, in this case, UCPB will have to assume other obligations such as managing the properties.
The strategy has so far worked well for UCPB. Some of its ongoing and planned asset management projects include a five-star beach resort in Nasugbu, Batangas previously owned by the Go family which also lost control of the Ever Gotesco mall chains; a couple of idle but prime vacant lots that were converted to paid parking facilities and a passenger terminal with commercial operations opportunities; a hotel and mall complex along Taft and Senator Gil Puyat Avenues.
Jacinto is particularly proud of what IRMD has done to the Taft Centrale Exchange, a six-storey commercial space along Taft Avenue and Gil Puyat Avenues.
"We didn’t have the expertise to run the place, so we hired a hotel management company and acquired the services of another company that handles mall operations. Since redevelopment was done a year ago, the number of tenants went up from 15 percent to 50-percent, foot traffic is up 50 percent and this should further improve when we open our foodcourt sometime this month. Right now, we are generating monthly revenues of about P1 million. You won’t believe it, but the hotel is fully booked," beams Jacinto.
Jacinto is quick to clarify the UCPB is diversifying is banking operations.
"We plan to dispose of the properties in about three years, our plans for these properties are on short-term basis. We just want to improve on the assets, wait for a turnaround and sell at a premium," he says.
Looking forward, Jacinto says IRMD is going on a roadshow to drum up interests in the properties it has acquired.
"We want to look for investors now while the properties are still in good condition. We will either sell them or enter into a joint venture, we want to explore all options," says Jacinto.
In taking a more proactive approach in dealing with its acquired assets, UCPB is optimistic it will weather one of its biggest challenges so far, that is, turning idle assets into premium, more marketable properties.