URBAN GROWTH THROUGH INVESTMENTS & INNOVATION

The Asia Pacific Real Estate Investment Meet and Expo was held last November 12, 2013 at the Hotel Intercontinental Hotel in Makati, Philippines.

asia summit 2013 for wordpress

The Summit, hosted by the Pinnacle Group International and Asia Pacific Real Estate Association (APREA), was honored by internationally  renowned and Multi-awarded Financial Czar, Honorable Secretary , Cesar V. Purisima, Department of Finance, as the Keynote speaker.

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Mr. Ramon CF Cuervo III with
Hon. Secr., Cesar V. Purisima, Department of Finance and Donna Racho, Megaworld PPG VP for Sales and Marketing

Secretary Purisima holds key positions with the Banko Sentral of the Philippines, Asian Development Bank, World Bank, Board of Governors and received numerous citations and recognized as an Exemplary, Most Outstanding Finance Minister.

In his brilliant extemporaneous speech, Secretary Purisima  said that “aside from the country’s own economic fundamentals, regional developments should likewise contribute to the real estate’s expansion”.

This is why I have been promoting the planning, development, integration of  a new urban Metropolis  North of Manila. My vision is to expand through infrastructure linkages of cities from Bulacan to Pampanga, and the Clark-Subic Corridor. In this way Manila be de-congested and the new “Smart Metropolis” will be the economic backbone of the Philippines. We shall dwell more on this in my next article on Safe, Secure and Smart Cities towards a better Philippines.

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Subic-Clark Corridor: Ideal site for developing The Central Luzon Project.

Secretary Purisima cited that the ASEAN 2015, will become a more integrated community. Competition will be wider, which will be good for consumers as this will spur growth in the market.

“Purchasing power will shift regionally as the young population will hit the labor force, widening the investor’s market.”

To paraphrase, Secretary Purisima however said, that  there are challenges. For example the continued increase in external risk that would affect real estate, such as vulnerabilities to earthquakes typhoons and storm surge.

“There is a need to share risks, and also plan communities better,” Sec. Purisima said.

Industry players and stakeholders said that while investors – particularly firms from neighboring countries – are starting to look at the Philippine real estate market, the business environment here could also still be improved.

In a report by Bettina Faye Roc of Business World Online, Mr. Purisima said
“Growth in the real estate sector will in turn drive economic expansion.  Long-term investments and commitment of capital will help the government remain on this growth trajectory and make it more sustainable.”

Secretary Cesar Purisima is still receiving criticisms from the Real Estate Sector because of the Real Estate Investment Trust (REITs).  Unfortunately the REIT LAW, although approved is faced with the IRR Challenge from the departments of Finance and BIR. The Philippine REIT failure is because of the tax imposition and the 67% public ownership requirement.

REIT

The Asia Pacific Real Estate Association (APREA) is a non-profit industry association that represents and promotes the real estate asset class in the Asia Pacific region. It is the industry body for the suppliers and users of capital in the real estate sector.

Jaime E. Ysmael, CFO, Ayala Land Inc & Chairman of APREA Philippine Chapter APREA Deligates Ramon Cuervo III Chairman and Miguel Camus CEO of CCGA Real Estate Services & Advisory    "Ayala Land spear headed the evolution what they call the Growth Corridor of the North in Central Luzon"

Jaime E. Ysmael, CFO, Ayala Land Inc &
Chairman of APREA Philippine Chapter
APREA Deligates Ramon Cuervo III, Chairman of CCGA Real
Estate Services & Advisory and
Miguel Camus ,CEO of CCGA Real
Estate Services & Advisory
“Ayala Land is spear-heading the evolution of The Urban Growth Corridor in Central Luzon”

With the objective of fueling the real estate sector’s growth, APREA organized world class think tank speakers to present broad strokes and ideas for the development of new urban expansion and linkages such as the Central Luzon project being initiated by Ayala Land Corporation.

The speakers and panel discussions led to focus on Urban Development through Investments and Innovation.  APREA representatives also suggested to encourage best practices and generally unifying and strengthening the real estate industry.

We see more reasons why there is a need to enhance regional and global networks for capital funds suppliers and users.

However, the private sector needs to get more involved in public partnerships. Creative means are needed to represent the Private sector in LGU governments.  Our advocacy for opening doors to capital investments has to be approved by Regulators,  i.e Central Bank, so as to improve the commercial operating environment for investors in property development.

It is through international funding, with local investments and innovations for development of new urban metropolis particularly north of Manila so that we can initiate smarter cities, towards a better quality of life, secured and safe from natural disasters and hazards.

The summit focused on issues in the global market that could affect Philippine Real Estate such as Fed Tapering, possible retreat of foreign funds into emerging markets and continued volatility in the capital market. APREA also made a special presentation about the impact of ‘REIT’s (Real Estate Investment Trust) on Asian Economies.

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The earthquake and super typhoon had a great impact to the economy and to the real estate condition of the Visayas area. However for every crisis there is an opportunity and I can see that Tacloban City can be rebuilt into one of the most modern cities of Asia.

However, many families have been displaced and the process of rebuilding may take up to ten years and the challenges will be in human settlements in improving the quality of life.

To achieve these we need the following

1. Infrastructure Development  such as the building of roads, bridges, dams, water distribution systems, power and electrical stations, waste management and the like.

2.     Sustainable Public Transportation Development and Operations.

There is a need for seem less travel between Manila, NRC and urban center, North and South of Manila. The best mode of transportation is a railroad system. In this way, we smoothen traffic flow and de-congest Metro Manila.

3.  Healthcare

We need to build more hospitals, tertiary cares and ambulatory clinics in communities and neighborhoods.

We are one of the countries that have the fewest and pitiful public hospitals yet  expensive private hospitals and medicine costs. Example: The Dentistry Department of Jose Reyes Memorial Hospital could not accommodate enough patients even for prophylaxis because of problems with their electrical wiring and damage to the high-pressured water injection pump.

4.     Education

In an article written by Max V. de Leon of the Business Mirror, Guillermo M. Luz, co-chairman of the National Competitiveness Council (NCC) said the Philippines ranks a poor seventh among nine Southeast Asian nations in the area of education and innovation.

In the area of primary education, the Philippines ranked 99th out of 138 economies. The Philippines ranked 69th in educational system, 112th in science and math, and 76th on Internet access. In all categories, the Philippines is behind Singapore, Brunei, Malaysia, Indonesia, Thailand and Vietnam.

Our public educational system needs to be overhaul.  The quickly and wrongly implemented K12 system does not solve the problem.  The government should increase the number of public schools; salaries of teachers and staff;  provide up-to-date equipment and books and most of all, remove politics. DepEd should integrate a work-study, “dual system”. There is, for example, Dual-Tech which is a training institution where students are working in their respective industries. DepEd can also introduce a five to six year commercial high school whereby graduates can be hired as IT personnel, Technicians, Mechanics and hired by companies without going to universities.

5. Manufacturing Industry

Secretary Purisima, in his interview with CNN, said “we should sell” more. It can be in the electronics industry, food or tourism.  The Philippine economy would increase if we are able to market more our most sale-able products and expand/explore to new profitable ventures.

Electronics and semiconductors accounts for forty percent of export products, followed by the woodcraft, furniture,  machinery and transport equipment and other mineral products.

The government, should also expand heavily on the manufacturing and technical testing/development. At present, other countries are noticing the quality of die-casting in the Philippines.

STRENGTHS

Philippines’ GDP Growth Beats Forecasts in Q1 2013

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In the 2nd quarter of 2013, Philippines’ economy expanded by 7.8 percent, up from 7.1 percent in the previous quarter, making the country fastest growing economy in Asia. The growth was driven mainly by robust domestic consumption and government spending.

With these continuing trend, the Philippine is forecasted to be the fastest growing economy with its steady financial system.

1)  Business Process Outsourcing

BPO’s is now of the chief economic drivers in this country, currently employing 770,000 people with total revenue expected to reach $6 billion as of 2013. Today, the Philippines are the world’s leading call center destination, beating out India, while Manila was just named the world’s 3rd top BPO destination. The BPO industry of the Philippines is on an upward trend and is estimated to hit revenues up to $25 billion by 2016.

2)  Remittances

The Bangko Sentral ng Pilipinas (BSP) said cash remittances amounted to $1.927 billion in July which was 6.6 percent higher than the $1.809 billion recorded in the same period last year.

The remittances are increasing as from January to July, cash remittances grew 5.8 percent to $12.627 billion from $11.936 billion in the same period last year.

Remittances from sea-based workers went up 7.8 percent to $3 billion, while money coming from land-based workers climbed 5.2 percent to $9.6 billion during the seven-month period.

3)  Education and New Skills Development

Filipinos love to study and learn when there is an opportunity and OFW’s who have gained experience while working abroad is venturing into shipbuilding.

With the opening of the shipyard operations of a global defense prime contractor in the country, Filipino workers are now gaining a reputation as world-class shipbuilders. The opening of Austal Philippines’ shipyard facility at the West Cebu Industrial Park in Barangay Arpili, Balamban, Cebu, made the Philippines the fourth largest shipbuilding country in the world.

4)  Housing Demand and Construction

Manila is already overpopulated and the demand for mass housing that will cater the poor, average to middle class is very high. In a research study by Marife Ballesteros  of the Philippine Institute for Development Studies, the Philippines have one of the highest rate of urbanization. Today 52% of the country’s population lives in urban areas and will increase to 68% by 2015. She also noted the emergence of metropolises in other areas of the country.

At least 3,000 housing units are being sold every month in Metro Manila’s peripheral provinces and cities as growth potential for these areas continue to soar over the past year as noted by CBRE.

Region IV which comprised of outlying provinces of Cavite, Laguna, Batangas and Quezon had the most number of units given license to sell by HLURB, with a large portion of supply in 2011 and 2012 from economic housing developments.

5)  Tourism

Despite negative travel advisories posted against our country, our tourism industry is gaining ground. Based on the statistics provided by the Tourism Research and Statistics Division,  the latest Visitor Arrivals for the month of August continued grew by 11.28% from 2,858,348 last year to 3,180,903 this year.

The 3.18 million arrivals marked another milestone as it is the first time that visitor arrivals achieved the three million figure in August.  Last year, the country received the three millionth visitor in September while in 2011, it reached the 3 million arrivals in October

CHALLENGES

Cost of power

In a media briefing, John C. Morris, International Energy Consultants managing director, said a study conducted by the company placed Meralco rates as the 9th most expensive out of 44 distributors.

The cost of high electricity will toil heavily on the overhead expense especially in the manufacturing, industrial and commercial sector.  With heavy taxes and mark-up not yet included, the total cost price of a product becomes higher and unmarketable compared to products produced by China and Taiwan.

Direct foreign investmens, funding and capital markets

On the assumption that the Real Estate Developers settle the tax issue and public offering with the Finance Dept and BIR, the REIT’s is highly profitable and will allow the average investor to invest and profit without actually buying the property.

REITs also allows the investor the opportunity to have her properties managed by a professional real estate team that knows the industry, understands the business and can take advantage of opportunities thanks to its ability to raise funds from the capital markets., thus limiting personal risks.

Coastal Development Plan vs. Urban Renewal & City Expansion

BCDA President and CEO Arnel Paciano D. Casanova with CCGA President Miguel Camus , and Chairman Ramon Cuervo

BCDA President and CEO Arnel Paciano D. Casanova with CCGA President Miguel Camus and Chairman Ramon CF Cuervo III

The controversial plan of Manila Bay Reclamation should be stop. Instead of endangering our coastal areas, we should instead, rehabilitate our mangroves, rich marine life, and protect our city from possible storms surge by building structures that are not damaging to the ecosystem.

An alternative to reclaiming land for the expansion of the city President and CEO Arnel Paciano D. Casanova of the BCDA described the Clark Green City as “Smart, Green and Global,” and projected it to be the next Philippine Metropolis after Bonifacio Global City.

“BCDA, Cisco and Centios intend to enter into discussions regarding a possible strategic relationship to align the approach and methodology to design and build sustainable communities and cities of the future,” Casanova said

He added that the strategic collaborate will be based on the  use of Cisco’s Smart+ConnectedCommunities offerings to help attain the BCDA’s vision of sustainable, innovative, and cost-effective solutions for community and city development.

Providing Shelter for “Unbankable” Urban Poor

Mr. Ramon CF Cuervo III with Chairman and Board Member, Subdivision and Housing Developers Association (SHDA) Honorable Bansan Choa

Mr. Ramon CF Cuervo III with Chairman and Board Member, Subdivision and Housing Developers Association (SHDA) Honorable Bansan Choa

SHDA Director Bansan Choa meanwhile said there is a need to quickly address the demand for economic houses.  He said the current price of socialized housing is capped at P400,000, the economic at P1.25 million, the low-cost at P3.19 million. Housing units exceeding P3.19 million are considered “open-market” which refers mostly to the mid- and the high-end market.

“The shortage of housing units in the low-cost segment totalled 484,325,”  Mr. Choa noted.

The Philippine economy despite recent setbacks is resilient, strong, financially and economically equipped to become the next tiger of Asia.

In conclusion, we have clearly seen the need and demand to build new safe, secure and smart cities to fuel growth and investments.

Secretary Cesar’s Purisima interview with CNN last Oct 4 2013:

http://www.youtube.com/watch?v=h3kittUxGuw

source:

http://www.kclegacygroup.com/reits-real-estate-investment-trust/

http://www.aprea.asia/

http://www.bcda.gov.ph/news_articles/show/280

http://www.sunstar.com.ph/pampanga/local-news/2013/09/14/clark-green-city-next-ph-metropolis-303230

www.clarksubicmarketing.com

manilastandardtoday.com

www.portcalls.com

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