$625M for infra deals

Businessworld - A $625-MILLION fund has been launched by four investment firms with the aim of supporting infrastructure deals in the Philippines, including those under the government’s flagship public-private partnership (PPP) program.

The Philippine Investment Alliance for Infrastructure (PINAI) will be bankrolled by state pension fund Government Service Insurance System (GSIS), Dutch pension asset manager Algemene Pensioen Groep (APG), Australian financial services giant Macquarie Group and the Asian Development Bank (ADB).

Macquarie Infrastructure and Real Assets (MIRA) -- a division of the Macquarie Group -- will be the fund manager.


“It’s all systems go for the PINAI and the fund is now open for business,” GSIS President and General Manager Robert G. Vergara said in a press conference yesterday.


The GSIS will be the lead investor, pouring in $400 million, while ADB will add $25 million. The two other firms declined to reveal their contributions.


At an estimated P25 billion, the PINAI was said to be the first and largest private equity fund in the country devoted solely to infrastructure development.


“We aim to finance five to 10 investments with approximately $50-125 million for each project. The fund should be fully deployed within the next three years and given the robust pipeline in the Philippines, we are confident we can deploy it well,” MIRA Asia Senior Managing Director Frank Kwok said.


Among the sectors being eyed by the PINAI are telecommunications, utilities, transportation such as airports, mass transit and toll roads, as well as power -- both traditional and renewable energy, and including generation and distribution.


“These assets deliver suitable risk returns and relatively predictable cash flow lines,” Mr. Kwok said.

The PINAI will initially focus on existing projects that need expansion, rehabilitation or capital recycling, he explained. Later on it will be on the lookout for new projects, especially as the government rolls out big-ticket deals under the PPP program.


As a private equity fund, the PINAI will invest by purchasing shares in the project companies.

“We have no participation limits. We can be the 100% shareholder or the minority shareholder. What is key to us, though, is to hold a significant shareholding so we can help influence and operate the projects,” Mr. Kwok said.


“We are not a passive fund manager. We believe we can be an attractive partner to other firms because they can leverage off our knowledge. We have expertise from the assets we own and operate around the world.”

The ADB estimates that Asia needs to invest approximately $8 trillion in infrastructure from 2010 to 2010 in order to sustain its high growth trajectory.


The government currently shoulders about 70% of infrastructure financing requirements while the private sector accounts for only 20%, ADB Director-General Philip Erquiaga said. Official development assistance (ODA) is responsible for the remaining 10%.


Given budgetary constraints in most Asian countries, it will be difficult to further increase public funding for infrastructure, Mr. Erquiaga said. ODA will likewise be limited given the post-crisis environment.


"The private sector’s share will need to expand to cover the gap in funding needs,” he said.

Under the Philippine Development Plan -- the government’s economic blueprint for 2011 to 2016 -- the country needs $120 billion in infrastructure investment, with $14.3 billion expected to come from the private sector. The PINAI can help bridge this funding gap, Mr. Erquiaga said.


The Philippines, moreover, is one of the most promising countries in the region to establish an infrastructure fund, Mr. Kwok said.


“The economy is performing well but there is still a strong demand for infrastructure. The administration has also formed a clear agenda for the development of infrastructure,” he said.

“Under its framework, investors are certain that projects will happen and that they will operate based on how they are governed by their contracts.”


The fund’s creation is a vote of confidence in the Aquino administration after numerous PPP setbacks last year when it managed to roll out just one deal -- the South Luzon Expressway-Daang Hari link that went to Ayala Corp. -- out of 10 in the pipeline. Economic managers have claimed that a rigorous review of feasibility studies and contracts delayed the process.


Mr. Erquiaga lauded the government for taking its time.


“The success of PPP is often based on an appropriate structuring and tendering process. It cannot be rushed, and it must be transparent, with a sensible distribution of risks,” he said.


“I am gratified that the government has managed its PPP program with prudence.”


Eight PPP projects are scheduled for implementation this year.


The P10.04-billion PPP for School Infrastructure Project is set to be awarded this month. Investors have also been invited to prequalify for the P59.2-billion Light Rail Transit Line 1 Cavite extension and the Ninoy Aquino International Airport Expressway Phase II deals.


GSIS and APG officials said they were eyeing the PINAI for good investment returns, saying infrastructure projects provide the longevity needed by pension funds.


“Strong economic conditions together with favorable population demographics make the Philippines an attractive destination for long-term investors,” APG Director Hans-Martin Aerts said.


The GSIS is still open to investing in other infrastructure funds, Mr. Vergara added.


Still on the table is a plan to pool debt capital from the government financial institutions -- the GSIS, Social Security System, Land Bank of the Philippines and the Development Bank of the Philippines.

For latest update on real estate development and its RA 9646, the Real Estate Service Act of 2009, visit www.ra9646.com.

BSP requires banks to secure eTitles for real estate assets

GMA News - The Banko Sentral ng Pilipinas is now requiring banks to secure electronic land titles for all their capital and foreclosed assets.

In its Memorandum Number M-2012-037, the BSP explained that the requirement reinforces “an institution’s risk management system”.

Furthermore, the BSP said electronic versions of land titles, compared with manually issued ones, are more secure and less prone to tampering, fraud, and destruction.

“To safeguard the claims of banks and other BSP-supervised institutions over securities and collaterals constituted over real properties, the aforementioned institutions should promote the conversion of manual titles to eTitles for properties received as collateral or security to loans,” BSP Deputy Governor Nestor Espenilla Jr. said in the memorandum issued Friday.

The central bank’s memorandum also states that banks are encouraged to secure eTitles on land lodged as collateral by their borrowers, even as the loans of said borrowers are active and are not non-performing.

Data from the BSP showed that the combined real and other properties acquired (ROPA), or foreclosed assets, by universal and commercial banks in the country were valued at P107.84 billion as of end-May. This was down by 11 percent from P121.34 billion as of the same period last year.

The Land Registration Authority of the Philippines and the Land Registration Systems, Inc. launched the Voluntary Title Standardization, or eTitle Program, March of this year.

The program gives registered landowners the chance to replace their existing titles with eTitles which are printed on security paper with unique technological features.

For latest update on real estate development and its RA 9646, the Real Estate Service Act of 2009, visit www.ra9646.com.

Car factory, a new sustainable model for homes, buildings

FERRARI buildings inside the Maranello factory in Italy employ glass and steel designs that allow more natural light to penetrate.

Ferraris may be red, but their factory is green. This thought hit my mind when I recently visited the Italian sports car maker’s factory in Maranello, a small town in northern Italy.

But before you wonder why Ferrari, one of the most elite names in motoring, is being featured in a property section, allow me to explain that what was set up within the company’s 25-hectare facility should give anyone insight on how be sustainable.

The philosophy behind the renovation and redesign of the factory—known as the Formula Uomo—dictated that buildings and their functions should be designed with the needs of employees firmly in mind.

This means the whole place now combines carefully designed lighting systems, green areas, a new restaurant, climate control, noise damping, and special measures aimed at reducing environmental impact, with advanced technologies.

As our guide explained, Formula Uomo puts Ferrari employees firmly at the heart of the company, a reason why the factory went beyond building lush gardens and lining up streets with trees.

Solar energy
As a matter of fact, Ferrari installed solar photovoltaic array on the roof of the Mechanical Machining facility, a move that reduced the company’s energy use by 210 MW in its first year alone. This solar panels enable Ferrari to produce 213.9 mWh per year, making the company almost independent of the power grid.
According to Ansberto Padua, president of CFS Continental Technologies, a company that converts homes and small communities to utilize solar energy, solar panels are clever solution to reduce or even eliminates a household’s electric bills while generating “clean” energy.

“With household electricity bills rising, I believe now is an excellent time to take into consideration using photo voltaic energy to power your property. Having a solar panel installed can mean that a family or business can save a good portion of money each and every month by tapping into this source of renewable energy,” assured Padua.

Ferrari also invested $12 million (P511 million) in installing a trigeneration plant, which simultaneously produces power, heat and cooling from a single source (runs on more environmentally friendly natural gas).

OVER 100 red commuter bikes are provided for the employees moving around the factory.

By combining this trigeneration plant with the solar array, Ferrari has been able to reduce its carbon dioxide emissions by 40 percent or about 30,000 tons annually. These two upgrades allows the Ferrari factory to meet the objectives of the Kyoto Protocol 10 years ahead of schedule.

The Kyoto Protocol treaty, negotiated in 1997, is a legally binding agreement under which industrialized countries will reduce their collective emissions of greenhouse gases by 29 percent (compared to the emissions levels that would be expected by 2010 without the Protocol).

In 1997 a new assembly line at the factory was redesigned courtesy of famed architect Jean Nouvel, who also won the 2008 Pritzker Prize, the Nobel Prize of the architecture world.

The new Ferrari assembly lines feature large skylights and reflective plates that fill the interior with more natural light than usual at a car plant.

The result is a building that enables employees to depend less on artificial lighting system that utilizes electricity.

Trees
Of the 25,000 plant species that could be found within the Ferrari factory, a great portion of these could be found inside buildings, scattered across factory shop floor or encircling various meeting areas.

The reason behind this is the fact that trees take in carbon dioxide and provide people with oxygen, cleaning and freshening the air.

In addition, over 100 trees are planted along the roads around the factory.

To further clean the air within the facility, Ferrari made sure cars are parked in designated areas and encouraged employees to run, walk, or cycle (there are over 100 red commuter bikes provided for use in moving around the factory (the only vehicles allowed to roam the roads are the newly crafted Ferrari models being tested, lifters and delivery trucks).

Maranello Village
Located just four kilometers from the Ferrari plant is the Maranello Village, the world’s first residential complex featuring over 120 apartments exclusively available for Ferrari personnel.

The residence is connected to the Ferrari factory via a bicycle lane although there is an external parking and a covered car park for up to 150 cars.

Ferrari believed that by providing on site cycling incentives and rewards—along with sending out clear signals from the top that cycling to and from the office is a good thing—can all help make cycling a realistic, alternative option for travelling to work.

After all, if more of Ferrari staff cycled to work it would result in a healthier, fitter workforce with the all associated benefits of increased productivity and reduced absenteeism that entails.

For latest update on real estate development and its RA 9646, the Real Estate Service Act of 2009, visit www.ra9646.com.

97 applications for new banking offices approved in Q1

Businessworld - THE BANGKO Sentral ng Pilipinas (BSP) approved 97 applications for new banking offices in the first quarter.

Approved were 78 regular branches, 15 other banking offices, three extension offices, and one microfinance-oriented branch, according to Circular Letter No. 057, posted on the BSP web site yesterday.

Banks that made the applications included BDO Unibank, Inc., Metropolitan Bank & Trust Co., Land Bank of the Philippines, and Philippine National Bank.

In the previous quarter, the central bank approved 85 applications for new banking offices.

Circular Letter No. 057 also showed 136 new banking offices were opened during the first quarter, bringing the total number of head and other offices to 9,186 as of end-March.

Among those that opened new offices were East West Banking Corp., which opened 22 branches; Metrobank with nine branches; Card SME Bank, Inc.-A Thrift Bank with 13 microbanking offices and one regular branch; and First Consolidated Bank, Inc. with 13 other banking offices and five regular brances.

For latest update on real estate development and its RA 9646, the Real Estate Service Act of 2009, visit www.ra9646.com.

Hong Kong rents rivaling 5th Avenue chase retailers away

Businessworld -- Hong Kong’s main shopping district is gaining on New York’s 5^th Avenue for the title of world’s most expensive retail zone as rents rise by 35% a year, pushing chains such as Hennes & Mauritz (H&M) out to the cheaper suburbs.

Swedish fashion chain H&M’s first store in Asia was a 30,000-square-foot (2,800-square-meter) flagship in Central, the heart of Hong Kong.

But with the lease up for renewal and the rent set to double, the world’s second largest clothing retailer will close the location next year and seek new store space elsewhere.

Space has always been at a premium in Hong Kong, an island-city, like Manhattan, where developers plant high-rises on every available inch. Retail rents in prime shopping areas are rising more rapidly here than in New York, London or Paris.

Average annual rent along Hong Kong’s Queen’s Road Central -- where H&M’s soon-to-be-closed flagship store is located -- soared to $1,831 per square foot in March, up 35% from a year earlier, data from real estate brokerage Colliers International shows. On New York’s 5^th Avenue, average rents rose 23% to $2,633 per square foot.

Colliers estimates Hong Kong’s retail rents will overtake New York as early as 2014.

“Hong Kong rents are going through the roof,” said Sally MacDonald, chief executive of Australian handbag and accessories maker Oroton, which has been looking to open a store in Hong Kong but could not find the right fit at the right price.

“It’s a concern because that’s a market that booms and busts and the rents are probably unsustainable,” she said.

Some firms are still willing to pay for a prime location in Hong Kong, long considered the gateway to mainland China -- a place to study Chinese buying habits before taking on Beijing’s bureaucratic challenges.

Zara, owned by Spain’s Inditex SA, is taking over the massive space being vacated by H&M, an unusual case of a direct rival replacing a competitor. It will pay a monthly rent of HK$11 million ($1.4 million), up from HK$5.5 million ($709,200), according to Helen Mak, director of retail services at Colliers, which advises companies on leasing shop space.

Zara did not immediately return calls seeking comment.

H&M spokesman Hacan Andersson confirmed that the Swedish retailer could not reach agreement with its landlord and was closing its central Hong Kong store next year.

“There is no drama in this,” Mr. Andersson said in an e-mailed response to questions from Reuters. “We open and close stores regularly to always have the best business location.”

Now some global chains are bypassing Hong Kong and jumping straight into China or starting out in Southeast Asia instead.

“In the past, even two years ago, you needed the store in Hong Kong in order to be successful in Shanghai,” Oroton’s Ms. MacDonald said in a telephone interview. “I think already, you can have the store in Shanghai without the store in Hong Kong and be respected.”

Debenhams Plc., the British department-store chain, has two stores in Malaysia via a local partner and plans to enter Singapore later this year. Industry sources say it scoured Hong Kong for years without finding the right location. Debenhams declined to comment.

“It is no longer essential to use Hong Kong as a stepping stone,” said Simeon Piasecki, former managing director of Marks & Spencer in Asia. “It’s not an easy place to get into.”

POP-UP SHOPS

Retailers have found one way around the high rents: “pop-up” stores that open for just a few months at a time to test demand.

Topshop, the British high-street chain, opened one in May in Shenzhen, just across the border from Hong Kong. The store will close in August. Oroton did something similar in Hong Kong between September 2010 and February 2011, catching both the Christmas and Chinese New Year shopping seasons.

The crush for space is good news for landlords such as Wharf Holdings, Swire Properties, Hongkong Land and Sun Hung Kai Properties, which can push up rents even in suburban malls.

Landlords are able to dictate terms in Hong Kong, and retailers often take two years to find a location, if they are able to get space at all.

“In the beginning they have this great plan, then after several months of planning and meeting with landlords, they realize it’s not easy to find retail space in Hong Kong,” Joe Lin, senior director of retail services at property brokerage CBRE, said.

Wee Liat Lee, the head of property research at BNP Paribas Securities in Hong Kong, expects retail rents for prime shopping mall space to rise 13% in Hong Kong this year and another 10% next year. “The core area rental will continue to grow and become the most expensive in the world,” Mr. Lee said, adding that growth would likely taper off within three to five years as more retailers decamp to suburban malls.

But with sales growth slowing, skeptics say retail property values look unsustainably high. Shop space has seen a flood of speculative interest since Hong Kong introduced a special stamp duty on home purchases in November 2010.

The average purchase price for retail space on Hong Kong island shot up 36% in 2011, according to government data, far outpacing the 4.6% increase in rents.

“Sooner or later the owner of the shops will have to rent the stores to cocaine retailers,” John Au-yeung, a property broker who runs the company Fidelity Realty, said. “I’ve been telling my clients not to buy retail space. The rents the retailers are willing to pay is directly based on the revenue they can make.” -- Reuters

For latest update on real estate development and its RA 9646, the Real Estate Service Act of 2009, visit www.ra9646.com.