FOR 8990 Holdings Inc. President and CEO Januario Jesus Gregorio B. Atencio III, 2016 is a watershed year for the mass housing builder.
Atencio explained the company will complete seven of its projects this year but is originally scheduled to launch 14 projects all over the Philippines.
“And so it’s a watershed year for 8990. We have projects ending but new projects are also starting. You will see that performance is skewed toward the end of the year because of that,” Atencio said.
The 14 scheduled project launches this year:
- Deca Homes Marilao in Bulacan
- Urban Deca HomesHampton in Cavite
- Urban Deca Homes Mahogany in Cavite
- Deca Homes Sta. Barbarain Iloilo
- Deca Homes Pavia RR2 in Iloilo
- Deca Homes Baywalk Talisay 3 in Cebu
- Urban Deca Homes Hernan Cortez in Cebu
- Deca Homes Mactan 6 in Cebu
- Urban Deca Homes Tisa in Cebu
- Deca Homes Toril in Davao
- Deca Homes Mulig 1 in Davao
- Deca Homes San Lorenzo in Davao
- Urban Deca Homes in Tondo, Manila
- Deca Homes Bacolod South
Of the 14 projects, Atencio said all three projects in Davao City may not be launched this year.
“The main reason is when Davao City approved its land-use plan, they placed in a new provision that puts in a new Committee for Land Use. It was only recently that the local government put in the necessary officials in the committee; and it’s only now that [8990] papers are moving,” Atencio said.
Atencio said that, with the scheduled launches this year, it is expected that the company’s performance, as measured by its revenues, is skewed towards the end of the year.
“I think if we can’t make it [hitting the target], we won’t be too far behind,” Atencio said.
“For example we will be turning over and recognize sales for Deca Tower [in Mandaluyong). This turnover is supposedly scheduled next year, in first half. Therefore, the project was completed way ahead of schedule. And this was not part of the guidance in 2016, so this can be a big help on our performance,” he said.
Atencio said 8990 is targeting over 600 units for turnover to its owners by the end of the year. The said number of units is roughly half of the building’s 1,148 units.
8990 is not using percentage of completion on its high-rise projects but continue to use the scheme of recognizing sales after the project turnover to the owners, much like the scheme for house-and-lot projects.
Other condominium builders normally use percentage of completion in recognizing revenues on its projects.
“Hopefully the 600 units can be recognized this year. So 2016 was a year of being a watershed year,” Atencio said, adding that the units amount to P800 million in sales.
“You’ll probably see in 2017 a more equitable distribution of performance in the quarters but this year is different; a start-up year in a way,” he said.
It was also in 2016 when the company completed its target of selling its contracts-to-sell to the local banks—a first for a property company.
8990 as early as May was able to hit its target of selling P11 billion in CTS after it was able to sign an agreement with BDO Unibank Inc., for the sale of the company’s P3 billion in contract-to-sell.
China Banking Corp. in April bought some P5 billion and Security Bank some P2 billion both in the form of securitization. BPI Family Bank, meanwhile, bought P1 billion of 8990’s receivables last year.
Under the plan, 8990’s subsidiaries will sell the said CTS receivables to a special purpose company that will be set-up by the banks, which will then issue tranches of asset-backed securities to investors. The said vehicle shall use the cash flows from the receivables to make principal and interest payments to the investors of the securities until each tranche is completely paid in order of seniority.
Terms of the agreement include the amount based on outstanding principal balance, one year seasoning, collection fee of 3.5 percent and optional marketing agency agreement for cancelled accounts. At the moment, 8990 has some P19 billion worth of CTS in its portfolio, a combination of home buyers that it had accumulated over the years and also new contracts.
The owners of these contracts-to-sell are composed of home buyers that have a good track record of paying their dues on time.
8990 claims that only 4 percent of their CTS are delinquent payers and the rest are current or are paying on time.
The company will be left with about P8 billion to P10 billion in CTS, including new ones that it can nurse to maturity. Atencio said significant amount of that will go to Pag-Ibig Fund, or the state-owned Home Development Mutual Fund.
“What is groundbreaking with these arrangements is that the banking sector has opened itself up to provide housing finance for the middle and lower middle class who, until today, have remained unbanked and outside their credit window,” Atencio said.
Another groundbreaking for the company was when it inked deal with life insurance firm Sun Life of Canada (Philippines) Inc. in June.
Through the cooperation, the two firms commit to various activities that will lead to the financial, housing and insurance needs of ordinary working middle and lower-middle income class of Filipinos.
The two firms said conferences and seminars focusing on empowerment, financial security, payment responsibility, family budgeting, savings, and investment will also be initiated.
The collaboration is the first of its kind both in the life insurance and real estate industries. The two firms said they have been separately pursuing projects to help raise awareness on financial literacy.
8990, for one, has been training their home buyers on the discipline of paying their amortization on time by not spending on unnecessary items. The company even requires its clients to attend a three-day seminar on the topic. With a very productive year, the company is expecting a rosy year ahead in 2017 with its projects in Metro Manila promising to deliver more for the mass housing builder.
As of the third quarter of 2016, in terms of housing value, Visayas contributed 50 percent while Mindanao and Luzon contributed 31 percent and 19 percent of total revenue, respectively. That may change next year as its projects in Metro Manila area contributes more to the company. Atencio said the company’s revenues could grow at least 20 percent by next year as part of 8990’s promise to double its size by 2020 when it listed at the Philippine Stock Exchange some three years ago.
The company may easily reach its target since many of its medium and high-rise projects—all located in Metro Manila area–are either launching or in the thick of construction. These projects can corner some 45 percent of sales by next year, leaving the rest to its house-and-lot projects outside of Metro Manila, where the company earned its revenues over the years.
“Today, I am reaching 20 percent growth without the NCR projects. But when NCR projects start to kick in, the growth couldn’t be in the 20 percent area. But I don’t want to over-promise,” Atencio said.
8990 said it is budgeting some P12.5 billion in total capital expenditures for next year as it plans to acquire more land and continue building more projects in the country.
Atencio said that, of the total amount, some P3 billion to P5 billion will be allotted for land banking and the rest will be for its operational expenses.
“The opex (operational expense] is the money I need to build buildings for sale. But for land bank, that will be the capital expense. But I think, spending (the P3 billion to P5 billion) depends on luck,” Atencio said.
This year, the company spent less than P2 billion on land banking as many of the areas that the company looked at for acquisition did not fit its criteria.
As of the third quarter, its Land is at 548 hectares with an expected yield of about 109,818 units worth P129 billion.
Additional land in during the quarter was a five-hectare lot in Brgy. Old Balara in Quezon City, which will host another 13-storey condominium complex with an estimated 7,500 units in seven buildings.
“Personally, I want to look at places like Dagupan. In Pangasinan. I want to look at places like San Fernando, La Union. More in the north because in the south, I think we’re actually good. We’re already in three places in the Visayas. We’re already two places in Mindanao. In Luzon, we’re only in, outside of NCR [National Capital Region), Marilao,” Atencio said.
With the company’s expansion at this pace, it will only take time before 8990 can cover these places—including Metro Manila—in the coming years to cater the working class Filipinos.