THREE years ago, property veteran Francisco Licuanan III put up a boutique property development firm to keep himself busy after retiring as president of the country’s largest property developer. There couldn’t have been a better timing for him to infuse his real estate expertise into this entrepreneurial venture as the regime of low interest rates and cash-awashed banking system has aided the property industry well.
Licuanan’s new company Geo Estate Development Corp. will turn over by the middle of next year the residential units in the first tower of its maiden project, residential condominium The Beacon in Makati and may soon embark on new projects such as a subdivision development.
“We’re not a big company and we don’t want to become a big company, so we choose our products carefully,” Licuanan says.
The two prime movers of Geo Estate—Licuanan who sits as chair and chief executive officer and Miriam Katigbak who is the president—were both key executives of Ayala Land Inc. prior to their retirement. Licuanan was of course the founding president of ALI who led the property firm to the top of the industry for nearly two decades while Katigbak headed the Ayalas’ mall group and was later on responsible for signature projects such as the master-planning of Nuvali, the Ayala Center redevelopment and Bonifacio Global City.
“We are semi-retired. We just want to do interesting stuff. But of course we want to ensure growth for the people we hire so we want to grow at a reasonable pace to allow them to grow professionally and financially,” Licuanan says.
Geo-Estate wants to make a name for itself as a player, although not aspiring to be the major player. When he retired from ALI, he had an offer to join another big company that was then set to go public. But having been-there-done-that, so to speak, Licuanan chose to set up a small property business of his own.
The advantage of running a privately held company, he explains, is that it’s not under pressure to grow at a certain pace or to declare dividends. “So you can choose your battles and in fact, no matter how much profit you make, you don’t have to answer to anybody except yourselves. You don’t have securities analysts analyzing your margins every time,” he says.
As such, he says Geo-Estate can be happy chalking up modest profits so that it can give customers better products without pushing prices too high. It can easily turn down projects that are not worth going into as it need not be obsessed with maintaining a certain level of ROI (return on investment).
On the other hand, Licuanan admits that a small developer doesn’t have as much bargaining power with suppliers and contractors as a big player but he says there are ways to cope with this. “We just have to work harder at it.
“On the other hand, some big developers are very bureaucratic so sometimes they don’t get the best prices either because the bureaucracy doesn’t allow them,” he says.
A small company like Geo-Estate only has to work harder at looking for alternative suppliers, even if it means going to factories in China to directly negotiate.
“On basic commodities like steel and cement, we have a disadvantage. But in terms of steel which is more volatile, it’s also knowing when to buy and lock in your cost. A small company presumably pays more attention to those. In 2008 when steel prices surged, we were able to lock in prices before it jumped by 40-50 percent. So we didn’t have to buy at the peak and only started buying again when prices went down.
“When prices are low, we lock in a significant portion (of our requirements),” he says.
Having said that, Licuanan is not worried about global commodity prices causing another spike on input prices anytime soon.
“There is pressure but it’s not that great. If China revalues their yuan, there will be some pressure but the world economy is not that strong so pressure on commodities has diminished,” he explains.
The Beacon
The company’s business philosophy is embodied in its flagship project, The Beacon, an exclusive three-tower residential resort condominium now under construction at the corner of Don Chino Roces Avenue (formerly Pasong Tamo) and Arnaiz Avenue (formerly Pasay Road) in the Makati central business district (CBD). It is envisioned to change the landscape of condominium living in Makati, with its three towers seen presiding over expansive gardens, a large resort-like pool and other comforts and amenities that can only be found in resorts or country clubs.
“We think that we have the best location within our price range. We are adjacent to the CBD. The others in the price range are far out,” Licuanan says.
Geo-Estate was able to acquire a fairly large site for the property, about one hectare, and thus has ample room to offer “extensive” and “large” amenities, Licuanan says.
“Our premise is if you’re selling small units, you have to give lots of space in the amenity area,” Licuanan says.
A basic unit has a living area of 21 sq.m. Some have 20 or 24 basic square meters which can be combined to form a bigger unit. There are some 49-sq.m. two-bedroom units but bulk of what’s being sold consisted of the studio units. A 20 or 21-sq.m. unit is priced at around P1.9 million (value added tax-free) while a two-bedroom 49-sq.m. unit is priced at around P5 million.
Monthly amortization for a studio unit is around P12,500. Buyers may put up the 20 percent down payment via a two-year installment while the remaining 80 percent can be covered by long-term financing. The proposition has been attractive to many young upwardly mobile professionals or yuppies working in Makati, overseas Filipino workers and empty nesters or old people whose children have grown up and thus would like to stay in an easier-to-maintain residential unit.
The target market is basically those who have an income or combined household income of P50,000 to P100,000 a month. People or households earning P50,000 a month can afford to buy a single studio unit while those earning P100,000 can buy a bigger unit or buy two studio units combined.
Despite the small living space, a future resident can start the day doing brisk walking or jogging in the 300-meter jogging trail or swim in the 450-square-meter lap pool. There are also a two-story gym and a private 20-seater theater. The sprawling gardens also come with a lawn area with gazebos that can be used for private events. The amenities area, if combined, will be around one hectare or equivalent to the land area where the project stands on.
Roces Tower (Phase 1), which has close to 1,090 units, is nearly sold out.
Geo-Estate is thus now selling units in Arnaiz Tower (Phase 2) and has sold over 800 or 65 percent of the available units. And because the property is right at the corner of major roads, it has access to three sides of the area.
“The first tower is almost finished. We’ll be able to deliver middle of next year,” Licuanan says.
Licuanan says the company expects to finish selling units in The Beacon within the next three years.
Strong demand
Licuanan says the strong economic growth momentum seen this year has indeed translated to robust property sales. A 50-percent increase in industry-wide sales volume, he estimates, would even be small for this year. Demand even for upscale projects has been very good while OFW money has continued to help perk up the sector too. In the case of Geo-Estate, about 25-30 percent of its sales may be attributed to OFWs.
But as to what stage of the property cycle the Philippines is in, the property veteran says that’s hard to predict.
“Normally, the cycle is predictable if you’re in a reasonably stable economic and political environment. Hopefully, the new government will provide that stable situation. Within the next two years, we may be in the middle of a cycle,” he says.
Geo-Estate harnesses both its internal workforce and brokerage network to generate sales. And which is more effective?
“When the market is very, very strong, we generate more business from brokers. When the market is very competitive like now—even when market is strong it’s very, very competitive, we rely more on internal sales force. That’s why you have to have both,” he says.
There was a time when 70 percent of sales came from brokers, who tend to sell what is easy to sell. But now, 60 percent of the business is generated by a more focused internal sales force. The new company is also setting up its overseas network to be able to generate more business from the lucrative OFW market which has been a boon to the industry over the years.
“The US is still the biggest (overseas) market and potentially Europe but Europe is hard to crack because it’s so diverse. There we have to use agents,” he says.
Having done very well with its The Beacon maiden offering, Geo-Estate is now exploring new horizons. The company is now developing several potential projects, likely starting with a subdivision offering house-and-lot packages for the middle income market. One site under consideration is south of Metro Manila. What about the possibility of a new high-rise project within the metropolis? Licuanan says: “We’re looking around.”
For details on The Beacon, please contact Reby Ramirez @ +63 916.4044.555 / +63 922.883.9308 / +63 919.699.3572 or e-mail her at reby_ramirez@yahoo.com.
Source: Philippine Daily Inquirer, 27 August 2010
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