The old and new Ortigas & Co.

MANILA, Philippines - Here’s a bit of the past from the group’s company website.

The 4,033-hectare Hacienda de Mandaloyon originally formed part of the estate holdings of the Augustinian Order.

On January 20, 1920, the Augustinian Fathers sold this property to Dr. Frank W. Dudley and Don Francisco Ortigas. Dr. Dudley later surrendered his interest to Phil C. Whitaker, and the company became known as Whitaker and Ortigas.

In the following years, there were several changes of partners. Then, on July 10, 1931, the company was incorporated “Ortigas, Madrigal y cia., S. en C.” as a limited partnership. Its partners include Francisco Ortigas (Don Paco), Vicente Madrigal, B.C.M. Johnston, Fulgencio Borromeo, Clyde A. Dewitt and Manuel L. Quezon. All the incorporators, except Quezon, who was President of the Philippine Senate at that time, were constituted as managing and general partners (socios gerentes colectivos) while the other shareholders were designated limited partners (socios comanditarios).

The objective of the partnership was to acquire the Hacienda de Mandaloyon, which spanned the municipalities that are now known as Mandaluyong, San Juan, Pasig & Quezon City. The estate was to be disposed of either in large tracts or developed subdivided lots.

In 1956, Vicente Madrigal withdrew from the partnership and the partnership’s name was correspondingly amended to “Ortigas & Company, Limited Partnership.”

In 1985, the Ramirez and Lanuza groups of general and limited partners who held 42% of the entire partnership’s equity also withdrew from the partnership.

When Ortigas & Company took over management of the estate, it was a virtual wasteland. It was the vision of the management team, headed by Atty. Francisco Ortigas, Jr., who was president and chairman at that time that transformed this wasteland into a progressive industrial, commercial, and residential urban complex.

The transformation

Since the time the Ortigas family bought the estate in 1920, a lot has changed not only as far as how these lands now look like but also as to how the family is viewing its business.

“Almost everything north of Pasig, west of Marikina, east of San Juan, and south of Diliman was owned by the Ortigas family. And their strategy then was to unload land as fast as possible,” Ortigas & Company chief operating officer Rex Drilon II said in an interview with The STAR.

Ortigas & Company, a limited partnership and possibly one of the very few partnerships remaining in the country, has to its credit the highly successful Greenhills Shopping Center (GSC), which has been copied but never surpassed, and a number of plush subdivisions in the Ortigas area such as the Greenhills subdivisions, Green Meadows (built in the ‘80s), Wack-Wack, and Valle Verde (Corinthian Gardens was developed by the Madrigals who originally were partners while the property where Acropolis now stands was acquired by Sta. Lucia and was originally Green Meadows phase 2. Corinthian Hills meanwhile was developed by the Puyats and was part of the vast Ortigas landholdings).

But prior to 2001, the partnership was no longer developing any new real estate activity (the last one was probably Green Meadows) and was just managing GSC from which it was deriving huge revenues in terms of lease rentals.

After Drilon joined the group in 2001, the partnership virtually woke up from a long hiatus and entered a new phase in its long existence. In 2005, Tiendesitas, a shopping complex located inside the 18.5-hectare Frontera Verde property along the C-5 road in Pasig, began operations. Luntala Valley Verde, a 77-unit residential townhouse development inside Valle Verde 6-A, was born. Circulo Verde, a 12-hectare master-planned development, began.

“With all these activities, we still have around 60 hectares of prime land, including the one which used to house the Rizal Provincial Capitol but was reverted to the partnership. This does not include around 34 hectares of property inside Camps Crame and Aguinaldo which could revert to us if the military and the police stop using them,” Drilon said.

But probably the most important change happening at Ortigas & Co. is the way it does its business. From a limited partnership, the group is now considering converting into a corporation, partly in order to raise more funds for the over P70-billion worth of projects it will be undertaking in the next 10 to 15 years, but also because this is the way to go.

“In the early 1900s, most of the businesses were partnerships, including those of the Ayalas and the Roxases. But in the ‘60s, there was this realization that the corporate structure was more efficient. Unlike in a corporation where the stockholders do not answer for the liabilities of the corporate entity, in the case of a partnership, the partners do to a certain extent. And it is easier to raise capital when you are a corporation,” he pointed out.

But it was only recently that Ortigas & Co. decided to prepare for the shift from a partnership to a corporation. Drilon revealed that they have already set up five corporations, all special purpose vehicles, each one to be handling a particular business in which Ortigas & Co. is engaged in. “For instance, one of the corporations will be handling Circulo Verde while another will take care of Greenhills Shopping Center and another for Capitol Commons,” he explained.

In case Ortigas & Co. finally decides to convert into a corporation, Drilon emphasized that the creation of the five new subsidiaries will not be futile. “They will be REITs,” he said.

A REIT or real estate investment trust is defined as a tax designation for a corporation investing in real estate that reduces or eliminates corporate income taxes.  The REIT structure was designed to provide a similar structure for investment in real estate as mutual funds provide for investment in stocks.

Republic Act No. 9856 or the REIT law was recently enacted and provides for the  regulatory and tax framework for REITs, which are companies that own and operate income-producing real estate assets. Shares of these REITs are to be listed on and traded at the Philippine Stock Exchange (PSE).

To encourage investments in REITs, the REIT law provides certain tax incentives to the REIT. However, in order to enjoy these incentives, the REIT must be listed with a stock exchange and annually give out at least 90 percent of its distributable income to shareholders.

Drilon said they expect the environment to be favorable to a conversion by Ortigas & Co. into a corporation towards the latter part of the year. “Timing is important. After all, we have to raise capital,” he added.

The conversion into a corporation and an eventual initial public offering (IPO) will also help the group raise the more than P70 billion needed to finance a number of projects.

Redevelopment of GSC

Ortigas & Co. was just waiting for the right opportunity to redevelop Greenhills Shopping Center (GSC) which was built in 1969.

The redevelopment of GSC  over the next seven to 10 years alone will cost north of P20 billion, Drilon emphasized. The shopping component alone will cost P15 billion.

Phase I of the redevelopment, which began this year, involves demolishing the present Gloria Maris, transferring it to a new location within the complex, and putting up a new Unimart at the site where the old Gloria Maris was.

“The redevelopment will consist of around eight phases. Phase 2 will include a new Unimart. Succeeding phases will include building a bigger tiangge in the old Unimart, putting up a new mall that would triple our shopping space from the present 100,000 square meters to more than 300,000, increasing the number of parking spaces from the present 3,000 to 10,000, tearing up VMall (used to be called Virra Mall until it was refurbished at a cost of P400 million four years ago) and building a new one, building three residential towers and one office cum hotel building, among others,” he said.

But Drilon stressed that all of these have to be done in phases so as not to disrupt the conduct of business at the shopping center.

In 10 years, all the buildings and structures that used to make up Greenhills Shopping Center will be gone, but Drilon promises that its character will remain the same.

Capitol Commons

Drilon revealed that they hope to be groundbreaking by end of this year to early next year Capitol Commons, a mixed-use development just like Rockwell, at a 10-hectare property that used to house the Rizal Provincial Capitol, thus the name of the project.

“It was unusual that Rizal province was having its seat of government in Pasig. But Governor Ynares said they didn’t have the funds to finance the construction of a new kapitolyo in Rizal so we spent for it. The 10-hectare property in Pasig was donated by the Ortigas family 50 years ago with a provision that if it is no longer being used by the provincial government, it will revert to us. And so it was reverted to us.

Drilon estimates that the Capitol Commons project will cost more than P25 billion. Aside from the residential component, the first two floors of one of the buildings will be dedicated to a mall while the succeeding three to four floors will be for office units, most likely BPOs.

Frontera Verde

Frontera Verde is an interim 18.5-hectare development project at the corner of Ortigas Avenue and E. Rodriguez Jr. Avenue (C-5) in Barangay Ugong, Pasig City. Its anchor locator is Tiendesitas, which is owned and managed by Ortigas & Co. Other locators in Frontera Verde are SM Hypermarket, Fun Ranch, Ark Avilon, Transcom Center, Silver City, and Shell Gas Station. Ortigas & Co. plans to put up two more buildings built-to-suit for BPO locators.

But why interim?

Drilon said that once the masterplans for Greenhills and Capitol Commons are finished, they will start preparing the masterplan for a new Tiendesitas as well as for the whole Frontera Verde property probably by next year.

Tiendesitas caters to foreign and domestic shoppers looking for the best Philippine products. It showcases the best that the Philippines can offer — native food, fashion wear and accessories, furniture, antiques, handicrafts, personal care and novelty items, pets, plants, and other locally made products. More than 450 traders, mostly entrepreneurs from Luzon, Visayas, and Mindanao are offering specialty merchandise.

Tiendesitas, which houses 12 Maranao architecture-inspired pavilions called “villages, sits on a 30,000 sq.m. area within Frontera Verde. Indigenous materials used in creative ways adorn the villages : chemically-treated cogon grass is used for the roof, old kalesa wheels are turned into chandelier frames to light the restrooms, and duyans (hammock) are scattered around to allow short breaks amidst frenzied shopping activities. The result is a stylized and unique Filipino architecture. The design of the complex also gives attention to the needs of the disabled and the elderly.

While the group has not decided what the new Tiendesitas will look like, Drilon said there is a possibility that it will be something like Greenhills Shopping Center. “After all, we have been very successful with Greenhills. We know the technology. And we can replicate it at Frontera Verde. But of course, we have to consider the fact that Greenhills and Frontera Verde are not very far from each other,” Drilon explained.

The new Frontera Verde will probably cost around P30 billion.

Circulo Verde

Ortigas & Co.’s biggest residential project to date is the P15-billion Circulo Verde in Bagumbayan, Quezon City.

The group has already completed the foundation of the first two towers (Majorca and Ibiza) and is set to start on the third tower. The P15-billion Circulo Verde project will have 15 residential towers. Phase I will be finished in five years.

Drilon earlier said there remains a 1.2-million shortage of units in the mid-market, consisting of residential units with prices ranging from P2 to P6 million, which the firm intends to address with Circulo Verde.

“Even if you look at all the projects going on at this time, we are nowhere close to addressing the housing gap. And while there are many ongoing projects, we believe that we are able to offer something different,” he pointed out.

It is estimated that the backlog for the low-cost sector is around 3.6 million, and for the mid-market, 1.2 million.

And so while Ortigas and Co. has turned 79 this year, from both a legal and business perspective, life is just about to begin for the group that has transformed a large part of the Metro Manila landscape into the progressive commercial, residential, and industrial center that has become part of the lives of many.