Primetown Property to build up its capital base, start new projects

Cash-strapped real estate developer Primetown Property Group Inc., will focus on a recapitalization program to build up its capital base and improve its liquidity.

In a financial report to the Securities and Exchange Commission, Primetown said the program involves inviting principal shareholders and prospective strategic investors to participate in the retirement and/or settlement of the company’s obligations to the banks and the buyers in uncompleted projects.

This is to allow Primetown to start new projects and new businesses on a clean slate.

Primetown earlier forged an agreement with a third-party developer on the construction of The Meditel, a condominium building in Mandaluyong City. Under the agreement, the building will be established in a joint venture with the land owner and the Meditel buyers.

A similar program is being planned for the company’s Goldcoast project in Mactan, Cebu which should take care of up to P300 million of paid-in amounts owed to buyers.

Primetown said that should weak economic conditions persist, the plan of the company for Goldcoast may be put in the back burner or may not materialize as the prospective investors may lose confidence in the market.

"The continued uncertainty in this regard, may affect the company’s future liquidity position and future operations," Primetown said.

To cut further losses, the company also plans to spin off its hotel operations and turn over management of rental pool units to the association of unit-owners. The hotel operation has been incurring deficit for the last three years.

The Asian financial crisis, which resulted in high interest rates, the significant devaluation of the Philippine currency and increasing cost of development and construction, has adversely affected the operations of Primetown.

For the first quarter this year, Primetown’s losses decreased to P2.08 million from P3.1 million the same period a year ago. But the loss for the quarter contributed to the ballooning capital deficiency, which has accumulated to P448 million from last year’s P446 million.

The company also attributed its losses to the lack of revenues to cover operating expenses as a result of the continued suspension of its projects since 1998.

With the continued suspension of its projects, the company was forced to suspend contracting new sales from affected projects. The consummated sale for the past quarter came from the remaining unsold inventories of completed projects.

Primetown has been able to sustain its operations by collecting receivables relating to its completed projects and liquiditating some of its assets. Last quarter, the company was able to finance its working capital requirements through collections of installment receivables on sales.

Incorporated in May 1989, Primetown completed its first project in 1993 — the Century Citadel Inn Makati, the first condominium-hotel project in the country. It has since then completed another condotel project (Makati Prime Century Tower) and launched several residential and commercial development projects within the Makati Central Business District, Fort Bonifacio, Cebu City, Tagaytay City and Boracay Island.