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Tycoon
Lucio Tan’s foray into real estate via a backdoor
listing is an unmistakable sign of the property boom, no
doubt, fueled by the continuing purchases of condo units
in Metro Manila and residential units in subdivisions
outside the metropolis by overseas Filipino workers (OFWs)
and their foreign friends.
The boom
in the property market has, in fact, given rise to a new
profession: that of condo unit “managers” whose job is
to rent out the units they sell to foreign investors.
These
managers provide the win-win situation to foreign and
OFW investors in condo units. What they do is to make
the condo units earn a portion of the monthly
amortizations such that the investors are afforded an
opportunity to later on make money while being assured
of a space when they travel into the country.
In a
sense, they get to have their own “hotel” room when they
visit the country while assured of rental income to
partly pay for the monthly amortization that goes with
their purchase of the condo units when they are out of
the country.
This
arrangement, which effectively benefits the condo buyer
through an interest arbitrage, propelled the property
boom to new heights, necessitating new players with deep
pockets like Mr. Tan and new players who go into the
risky leverage financing.
It is
not uncommon for property managers of these condo units
to have displays such as this: “Need to rent out your
unit while away? Come visit the office.” It is this
come-on which allows condo buyers to make money later on
when they make the “flip” or the sale that has attracted
hordes of OFWs and even tourists to buy condo units.
By way
of interest arbitrage, too, the purchase of condo units
allows investors to take advantage of the higher
“interest” represented by the rental payments to their
condo units, as against their earnings from their own
certificates of time deposits (CTDs) from their host
country. A studio unit that fetches, say P1.2 million,
can be rented out for P10,000 a month, which is
equivalent to a 10-percent “interest.”
This
compares with their earnings from their CTDs of 5
percent. The difference between what these investors
could earn from their savings and what they could make
from their condo-unit purchases is what partly fuels the
explosive growth in the property sector.
This is
the reason for the continued rise of condo units all
over the metropolis that spells more real-estate taxes,
especially since local government units tend to tax
condo units higher than residential houses.
The
property boom has even encroached into cyberspace with
Internet ads of new projects in Metro Manila and other
tourist destinations like Tagaytay that pop out when one
googles for news emanating from the Philippines. The
boom has also nudged the country’s gross domestic
product to a higher growth rate, aside from providing
employment to unskilled workers.
There is
a problem, though, that is serving as a disincentive to
the continued purchases by foreign investors of condo
units. This is the strong peso which cuts into the
purchasing power of the foreign investors. Now, with the
peso-dollar rate at the P46 to $1 level, the investors
find the condo units 17- percent costlier than before,
making them think twice before plunging more of their
money. This is understandable since they lose their
interest arbitrage and lose their interest as well in
the purchases of condo units.
PDIC
‘error’
It is a
good thing the Philippine Stock Exchange (PSE) did not
ask the listed Philippine Bank of Communications (PBCom)
to explain the results of its recent election exercise
during the bank’s stockholders’ meeting.
PBCom
officials, during the June 19 annual stockholders’
meeting, had to confront the issue of new nominations to
the board of directors of the bank, that was made by
Philippine Deposit Insurance Corp. (PDIC) which is
supposed to have four representatives in the bank by
virtue of its emergency financial assistance of P7
billion when PBCom suffered a run.
The PDIC
error arose from the production of a new list of
nominees that were sought to be voted upon, but which
was thumbed down by the bank’s officials after a heated
exchange on the propriety of the nomination.
The
nomination had to be set aside since there is a
prescreening process which the Securities and Exchange
Commission (SEC) requires for the election of
independent directors to listed companies. The
prescreening is meant to forestall the entry into the
boards of listed companies of directors who have
conflict-of-interest situations.
Meant to
prequalify nominees, the SEC circular stipulates that an
independent director “is independent of management, free
from any business or other relationship which could or
could reasonably be perceived to materially interfere
with his exercise of independent judgment in carrying
out his responsibilities as a director.”
The
nominees are also required to have been nominated five
days before the actual vote and not on the date of the
election itself, which is what PDIC’s officer in charge
Cristina Orbeta did.
Had the
PSE required PBCom to explain, the bank would have no
alternative but to fully disclose the conduct of the
annual stockholders’ meeting. The disclosure would have
opened a host of possibilities on the reason for the
sudden change in the list of nominees and even subjected
the bank to further scrutiny, especially on the turn of
events during the annual stockholders’ meeting.
The
disclosures are part of the governance and transparency
standards that the PSE requires of listed companies,
which is why even the surge in prices of listed issues
are commonly asked of listed firms.
E-mail: hugagni@yahoo.com |
