Philippine billionaire Henry Sy plans to spend 54.5 billion pesos ($1.26 billion) to reclaim land in Manila Bay as large plots for development become scarce in the capital.
SM Land Inc., which Sy is shaping to become the nation’s largest builder, has offered to reclaim 300 hectares (741 acres) from the sea, parent SM Investments Corp. (SM) said. SM Investments is Sy’s publicly listed holding company that owns banks, malls and grocery stores.
“You can never escape Manila,” SM Investments Vice Chairwoman Teresita Sy-Coson said in an Oct. 2 interview. “You have to go where the consumers are.”
Manila and its neighboring cities, known as Metropolitan Manila and the country’s most densely populated region, account for 36 percent of the $250 billion Philippine economy. A per-capita income that’s three times the national average is drawing migrants from the provinces, boosting demand for housing and services. Sy-Coson said the spending power of Manila residents makes up for faster growth in some other parts of the country.
The Manila region’s economy expanded 7.3 percent in 2012, trailing the 9.3 percent increase in Central Visayas and 7.4 percent growth in the Davao region on Mindanao Island, both in the south of the country, according to the National Statistical Coordination Board. Metropolitan Manila’s per-capita income of 183,747 pesos compares with the 65,904-peso national average.
“Metro Manila will always be full of opportunities,” said Richard Laneda, an analyst at Manila-based COL Financial Group Inc. (COL) “It’s got a good location and a large market. Portions can get saturated, but the region will never run out of demand.”
The 246.5-square-mile (638-square-kilometer) Manila region was home to at least 11.86 million people or 13 percent of the nation’s population in 2010, according to the statistics agency.
The Philippine economy expanded 7.5 percent in the second quarter from a year earlier, matching China’s growth and the fastest pace in Southeast Asia in the period. The government targets growth of 6 percent to 7 percent this year, accelerating to 6.5 percent to 7.5 percent in 2014.
The nation’s debt was raised one level to investment grade by Moody’s Investors Service on Oct. 3. The ratings assessor cited “robust economic performance,” fiscal and debt consolidation, political stability and improved governance in giving its Baa3 rating with a positive outlook.
SM Land is pursuing the reclamation project because Manila doesn’t have a supply of single properties of that scale, Sy-Coson said.
Based on the estimated cost to reclaim the land from the sea, the project indicates a price of 18,167 pesos per square meter (10.76 square foot) for the 300 hectares. The company’s share of the reclaimed site will not exceed 49 percent, according to SM Land and government filings. The rest will be owned by the city of Pasay, where the area is being reclaimed.
An 8,300 square-meter plot in Fort Bonifacio had an offer of 280,723 pesos a square meter, according to a report in Manila Standard Today on Sept. 23. The site is in a commercial business district 7 kilometers (4.4 miles) from Mall of Asia complex, Sy’s single biggest property in the capital.
“Manila doesn’t have a supply of land this big anymore and it will be very expensive to come up with something similar in scale,” said Julius Guevara, a Manila-based associate director at Colliers International. “The big parcels are already in the hands of major developers and are not likely for sale.”
The 60-hectare Mall of Asia complex, Sy’s most valuable property based on price per square meter, is home to offices, a convention center, a sports arena and the nation’s second-biggest shopping center.
Property valuations around the Mall of Asia complex range from 100,000 pesos a square meter to 120,000 pesos a square meter and have a “big potential for future price appreciation” because of the projects being built in the area, Colliers’ Guevara said.
Sy, 88, has a net worth of $13.7 billion, making him the richest man in the Philippines, according to the Bloomberg Billionaires Index.
The Mall of Asia complex is adjacent to Pagcor City, a gaming and entertainment district the government has opened to private investors to get a bigger share of Asia’s casino revenue.
Sy’s venture with Melco Crown Entertainment Ltd. (MPEL) owns one of four casino licenses that the government awarded to build the entertainment hub. The other licenses are held by Philippine port magnate Enrique Razon, pachinko-maker Kazuo Okada, and a venture of Genting Hong Kong Ltd. (GENHK) and Philippine billionaire Andrew Tan.
Pagcor City’s first casino, Razon’s $1.2 billion Solaire, opened in March and will be followed by Sy and Melco’s $1.4 billion complex in the second half of 2014. The remaining two casino resorts are scheduled to open between 2015 and 2017.
The city government of Pasay, which has jurisdiction over the area of the proposed reclamation, has set a Nov. 4 deadline for other companies to match SM Land’s offer.