Deadly combination

If there is one Philippine company that has emerged most affected by the East Asian property bubble that burst in 1997, it is Fil-Estate Land, Inc., that embattled property development and marketing firm headed by that equally hounded businessman, Robert John Sobrepeña.

Fil-Estate and Sobrepeña are names that one cannot easily dissociate with controversy. In 1990, the company began pre-selling shares of Manila Southwoods Residential Estates and Golf and Country Club.

Being the first golf course to be built in over a decade in the country, and riding on a novel property rights selling proposition where real estate buyers get free membership in a golf club, there were quite a number of people who took the offer.

As new golf courses sprung up in several areas in helter-skelter fashion, it was just a matter of time when the market would come crashing down. In the aftermath, many who got their fingers burnt either shed their shares for huge losses or simply suffered the burden of paying dues in multiple clubs hoping that prices would rebound.

For Manila Southwoods, it was a tough time especially since Fil-Estate was also having its own problems and reportedly had to depend on the cash-rich operations of its sister-company, College Assurance Plan Philippines Inc., which later encountered actuarial-related cash flow problems.

Then there’s also Fairways and Bluewater, opened in 1997, located in the island paradise of Boracay. For years, it has been struggling to keep afloat, and has been beset by seasonal nature of tourist patronage in the area plus the construction of new, better maintained and located resorts.

And lately, the controversial Harbortown project in Batangas where indigenous farm families of the old Hacienda Looc are protesting the arbitrary reclassification of the land to non-agricultural, and in the process, taking their right of ownership under the government’s agricultural reform program.

Money and credibility problems

Financial dismemberment, a long-lingering image problem, as well as a seemingly insurmountable credibility crisis all weigh in on the company’s prospects. Fil-Estate may have big plans for its many land assets, but without cash – or a good customer base – the firm struggles.

With some people continuing to badmouth the realty firm, banks are reportedly hesitant to lend money for planned property development projects. As a result, you have properties like Fairways and Bluewater that are always on the verge of moving to the next phase, at least that’s what the company communications to external publics say.

Fil-Estate is listed in the local bourses, yet because speculators and traders are wary of the company’s prospects, its share price remains at a significantly low fraction of book value. Only the most gutsy investor takes a risk.

In fact, last month, Fil-Estate had to cancel its stock rights offer after shareholders responded wanly to it. The offer would have helped raised fresh funds for the company that could have been useful in several ongoing projects.

The real estate developer and marketer has resorted to joint ventures during the last couple of years in an effort to catch up on the construction boom and upbeat consumer market, mainly overseas Filipinos and expatriates looking at retiring here.

At John Hay, the firm had asked Ayala, one of the country’s biggest and respected property developers, to be a partner. Fil-Estate also threw open its doors to SM Development Corp. in Batangas for a possible teaming up. Even Ramon Ang’s San Miguel Corp. has not been missed in the hunt for possible business partners.

Best effort to move forward

To be fair with Fil-Estate, the company is doing all that it should be doing to find the cash that will spur growth and help it move forward despite the problems encountered.

There may be a brewing confrontation at the forthcoming Southwoods annual stockholders’ meeting this week, but this hasn’t stopped Fil-Estate from at least cleaning up the Southwoods clubhouse and giving it a respectable facelift.

Sales of the Forest Hills Residential Estates and Golf & Country Club in Antipolo City continue to provide the company with cash to support its day-to-day operations.

Despite a rumored snub, Sobrepeña announced that talks with Megaworld, another real estate developer, for a joint undertaking in Twin Lakes at Taal Ridge in Laurel town, Batangas and of a mixed-use complex in Sta. Barbara, Iloilo have resumed.

With the global financial crisis now seeming to fade away, invigorated interest in real estate is expected to once again kick in. If Fil-Estate does not get its act together, it may find itself left behind again, and perhaps totally losing the opportunity to lift its business. 

Sobrepeña had likewise announced that the company has managed to pay off all its debts, largely through debt swaps with banks, suppliers, contractors and other creditors. This has been made possible because property prices are on the rise.

Fil-Estate is now bent on accumulating funds in the next three years largely from the sale of its assets to generate the needed cash flow and investment requirements for the planned joint ventures. Some P17 billion is expected to be raised.

Perhaps things are finally going for Fil-Estates, at least in terms of finding the funds to move forward. But then again, after almost two decades of bad publicity, those who read Sobrepeña’s statements in the media are not just about to buy the news.

To be suckered once is enough.

Collegiate basketball update

Congratulations to FEU Tamaraws, Ateneo Blue Eagles, Adamson Soaring Falcons and La Salle Geen Archers for reaching the Final Four of the ongoing UAAP competitions. These teams automatically advance to the Sweet 16 Finals of the Champions League (PCCL) 2010 Philippine Collegiate Championship games. The grouping/positioning of these teams in the Sweet 16 Finals will be known after the UAAP tournament.

The National University Bulldogs and the University of the East Warriors, 5^th and 6^th placers in the UAAP, will compete in the Luzon-MetroManila Zonal Qualifying games to earn seats in the Sweet 16 Finals.

At the conclusion last September 3, 2010 of the PCCL survey on the final rankings in the UAAP, the following were the top choices: 1^st – FEU; 2^nd – Ateneo; 3^rd – Adamson; and 4^th – La Salle. Let’s see if the fans got it right.

Visit www.CollegiateChampionsLeague.net for more details about the 2010 Philippine Collegiate Championship games.

Should you wish to share any insights, write me at Link Edge, 25^th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.