Megaworld allots P20-B for 5-yr capital expenditure program

Upbeat on the prospects of the Philippine real estate sector, property-based holding company Megaworld Corp. has earmarked P20 billion over the next five years for its capital expenditures.

At the sidelines of the company’s stockholders meeting yesterday, Megaworld chairman Andrew Tan said P3.5 billion of the total programmed capital budget will be spent this year for the development of various projects in Eastwood City and other large-scale-projects such as Forbes Town Center and Mckinley Hill in Fort Bonifacio.

Mckinley Hill will comprise of a residential subdivision, low-rise condominiums and a commercial center. The project is a 50-50 joint venture with Alliance Global Group Inc.

Megaworld has already started construction of luxury garden residences that make up the first phase of the P15-billion Forbes Town Center.

Tan said Megaworld will spend more next year and the coming years as it hopes to finish all residential condominium developments between 2005 and 2008.

Funding for the projects will come from internally generated cash. "I think we are quite capable to pursue various development projects as we have P30 billion in resources as of last year," Tan said.

Tan said the company, though, might borrow towards the latter part of 2005.

Megaworld executive vice-president Cirilo Manlangit said the company expects to complete the development of The Eastwood Excelsior, a twin-tower residential condominium building, by 2005. Slated for completion in 2006, 2007 and 2008 include One Orchard Road, The Grand Eastwood Palazzo, and the Eastwood Parkview, respectively.

The 40-story Parkview is a Miami-style twin-tower residential-mall development.

Tan said the company has a landbank of one million square meters, enough to cover seven to 10 years of development excluding potential joint ventures.

He said the firm will not make any acquisitions this year unless an opportunity comes up. "No planned acquisitions this year. We have quite enough on our plate. But we do receive offers from time to time. If there is an interesting one, we will look at it. If something good comes up, naturally, we’ll take advantage of that," Tan said.

Tan said the company is bullish on the real estate development sector which started picking last year.

The Housing and Land Use Regulatory Board has reported an almost 34-percent increase in license registrations in the first quarter this year compared to the same period last year. This was driven mainly by the residential sector.

Tan said in the past six months, there has been a rise in the value of residential subdivision land in Metro Manila and of commercial properties in the Makati and Ortigas central business districts. Some analysts, he said, have forecast a 12-percent increase in the above real estate values in the next 12 months.

Given the uptrend in the real estate industry, Tan expects Megaworld’s net income to grow by 30 percent this year. The company’s 2003 net income stood at P574.21 million, 33 percent higher than the previous year’s P431.84 million.

Tan said the group is also optimistic on the increasingly bright prospects of the business process outsourcing or BPO services. "The remarkable growth of BPO has substantially benefited the office sector of real estate industry. Studies show that the office vacancy rate declined from 17 percent to 12.5 percent in just a year’s time, driven by a robust demand from the BPO sector," Tan said.

Hence, Megaworld plans to build more cyberbuildings to take advantage of the increased demand for BPO offices. A new cyberbuilding in Eastwood City is currently in the pipeline and the company is looking to build more office space for BPO firms in other strategic locations.

Through the combined efforts of the Department of Trade and Industry and key BPO players, the Philippines is poised to capture a bigger share of the global outsourcing market, particularly call center services. BPO is the country’s fastest-growing sector and studies show that it will be a multi-billion dollar industry in the next few years.

"Megaworld is well-positioned to ride on this new wave of growth by providing office space tailored to the needs of the industry," Tan said.