Ayala Land Takes on Sy in Manila Bay Reclamation: Southeast Asia
Ayala Land is considering a counter offer for the 300-hectare (741-acre) project to gain a foothold in Manila Bay, an area being developed into the capital’s new entertainment and business district, according to Chief Operating Officer Bobby Dy. The developer is open to tying up with a partner who has reclamation experience, he said in an interview yesterday.
The announcement came two weeks after SM Land Inc. made a 54.5 billion peso ($1.3 billion) offer for the reclamation project to the Pasay City government, where the bay is located. The site is next to the Mall of Asia complex, the single biggest property in Manila for SM Land, which is controlled by billionaire Henry Sy.
“We’re just focused on the market opportunities right now and every market we participate in, there are obviously competitors and that’s good for the industry and consumers,” Dy said. “It’s in no way in relation to any particular industry player.”
Ayala Land, controlled by the billionaire Zobel family, has clashed with Sy’s group over multiple deals in the Philippines, including a property company owned by the Ortigas family, another prominent group in the country. The Zobels and Sys also fought over the development of a 7.7 hectare government property in Bacolod City in 2011.
“It’s these two developers that have the strongest financial muscles” to bid for projects, said Allan Yu, the chief investment officer at Metropolitan Bank & Trust Co. “Both Ayala Land and SM are headed towards outdoing each other. And this won’t probably be the last project that they will compete head-on.”
The two companies are focusing on the capital and its neighboring cities, known as Metropolitan Manila, as the area accounts for 36 percent of the $250 billion Philippine economy. A per capita income of 183,747 pesos, or three times the national average, is drawing migrants from the provinces, boosting demand for housing and services.
Ayala Land shares fell 1.8 percent to 29.85 pesos at the Manila midday trading break, heading for its biggest loss in more than three weeks. SM Investments Corp. (SM), SM Land’s parent, dropped 1.7 percent to 848 pesos, the most in two weeks.
The decline pared Ayala Land’s gain this year to 13 percent, matching the advance in the Philippine benchmark stock index. SM Investments climbed 20 percent this year.
“Some investors are wary of the prospective bidding war between the two groups that could be very costly for both parties,” says Astro del Castillo, managing director at First Grade Holdings.
Ayala Land, which developed the Makati City business district, views the reclamation as a “significant” opportunity to achieve its goal of boosting its presence in all major growth centers, according to Dy.
Ayala Land has more than 6,000 hectares of land for development nationwide, Dy said. It won a government bid last year to develop 74 hectares of prime land in an area called Food Terminal Inc. and has been building large-scale residential and commercial communities throughout the country. The company estimates a backlog of 4 million homes nationwide.
With Makati City maturing, “Ayala Land has to look for other areas of growth in Manila,” said Jomar Lacson, an analyst at Manila-based Campos Lanuza & Co. “It’s looking for long-term sources of growth, but it could be spreading itself thinly with this as it’s developing several large mixed-used property developments in various parts of Manila at the same time.”
Dy said the company will consider its spending plans before committing to any new projects.
For Sy, whose SM Investments owns banks, malls and grocery stores, Manila is the area of its focus because that’s where the consumers are, Vice Chairwoman Teresita Sy said in an Oct. 2 interview. SM President Harley Sy couldn’t be reached in his office after business hours yesterday for a comment.
Ayala Land will decide on the proposal when the local government grants the 60-day extension for its bid and a reduction in the 5 million peso non-refundable fee, according to Dy. The government only required a fee of 500,000 pesos for the Food Terminal auction, he said.
Ayala Land also asked the Pasay City government why it would need to have reclamation experience on at least 120 hectares to bid, according to its letter to Mayor Antonino Calixto. The local government may act on the request this week, Dy said. A call to Calixto’s office after business hours wasn’t answered.
“We’ve adopted a posture wherein you would try to be present” in every opportunity, Dy said. “If that means that we’re more aggressive now, then the answer is yes.”