Philam Asset Mgm’t mulls real estate investment fund

Philam Asset Management Inc. (Pami) plans to put up a real estate investment fund that could be used as a special purpose vehicle (SPV) or special purpose asset vehicle (SPAV) designed to acquire the bad assets of the country’s banking system.

Pami president and chief executive officer Rex Mendoza said that this could provide a better approach in getting rid of the banking system’s bad assets without having to shoulder losses from the huge discounts.

Under the SPV, prospective buyers of a bank’s bad assets or foreclosed properties can negotiate for up to 80-percent discount.

The Pami-proposed real estate investment fund would be different from the SPV formula as it would not altogether acquire the properties but allow it to also turn into an investment asset.

"The real investment in property should be a total investment administration. Our idea is to buy land at depressed prices, and enter into a long-term lease agreement with property developers like Rustans, the SM or the Ayala group. Then securitize the properties, allow cash flow from the partners or developers. That in effect is like a secured investment loan," Mendoza explained.

He said that the proposed fund would provide a rate of return for its partners and even the present owners or custodians of the property.

"We will give them a real estate investment actively managed earnings at a rate of, for example 20-25 percent. They are secured, and they are not bothered by issues like real estate property taxes," he added.

Thus the real estate investment fund becomes a securitized financial asset which also helps mobilize savings. It would pool funds, provide liquidity like a mutual fund, but invest in properties either through the bad assets of the banks or troubled property developers.

Mendoza said the system has been successful in places where the American International Group (AIG) operates like Thailand and Indonesia.

AIG is the mother unit of the Philippine American Life and General Insurance Corp. (Philamlife), are of the leading life insurance companies in the country. In turn, Philamlife is the parent firm of Pami.