Metropac on Fort Bonifacio: Biting off more than it could chew

by Anna Barbara L. Lorenzo, Reporter
BusinessWorld 2007 Anniversary Report

Note: This article appeared in the Businessworld 2007 Anniversary Report. Businessworld is a reputable Philippine-based news publication which focuses on business and economic news. I am very honored to be interviewed by Businessworld Reporter, Anna Barbara Lorenzo, for this Anniversary Report. Thank you!

The sun may be shining brightly in the east but when Edward Tortorici opens the windows of his Pacific Plaza Towers condominium unit every morning, he can’t help but let out a sigh.

His gaze, after all, would fall on the rapidly developing Bonifacio Global City which is now led by the Ayalas – the group which lost when the Fort Bonifacio land was put up for bid in 1995 – and its partners, the Camposes.

Years after the land was sold to the Ayala-Campos group, Mr. Tortorici still shakes his head. Did he regret that Metro Pacific had to sell 50.4% of its stake in the promising track of land?

“Of course. It was a good project but selling was also a good decision at the time,” Mr. Tortorici said in an interview on June 14, right after the Metro Pacific stockholders’ meeting at the Dusit Nikko Hotel. He now sits as an adviser to the board of Metro Pacific Investment Corp. (MPIC).

Mr. Tortorici was a member of the Metro Pacific Corp. board, MPIC’s predecessor, when the company decided to bid P33,283.88 per square meter for the 214-hectare Fort Bonifacio property.

The P39-billion deal would earn Metro Pacific a 55% stake in developing the Bonifacio lot in a partnership with the Bases Conversion Development Authority (BCDA).

The amount baffled industry players and market analyts alike given the huge amount that Metro Pacific would have to shell out for the developement.

“I just couldn’t imagine how Metro Pacific could earn from that investment. Honestly, it was financial suicide on their part. It was really mind-boggling because P33,000 was too high in 1995 for land that had no infrastructure, no underground electrical wiring, no water system and road network,” said Cynthia Yap, president of Real Estate Movers, Inc., in a phone interview last month.

In 1995, Ms. Yap was working with First Pacific Davis, in which First Pacific Ltd. of Hong Kong had a minority share. First Pacific is the parent of Metro Pacific.

Under BCDA rules, Metro Pacific had to pay 50% of the total land cost along with a bank guarantee or a surety bond to secure the balance by Feb. 13, 1995.

Before the end of January that year, however, Metro Pacific already came up with a new payment scheme that could result in the Bonifacio land being returned to the government should the company fail to pay.

Metro Pacific also started losing partners within its group. The company paid P5.4 billion for the stake of Filinvest Land Inc. in August 1997, and P918 million to Urban Bank in January 1998.

By 1997, the Asian crisis crippled many industries, hitting the property sector hard.

Cash-strapped and debt-laden as it was, Metro Pacific held on to the Bonifacio property until it was left with no choice but to announce its sale in 2002.

“There are always ups and downs when it comes to big investments. Unfortunately for us, the down came too soon with the regional crisis. We had to do it,” Mr. Tortorici said.

While it had to let go too soon, Metro Pacific had managed to develop some properties in Bonifacio Global City such as The Fort and some high-end condominiums.

The condominiums, however, were also priced too high given the investment the company had put in when it bid for the raw Bonifacio lot.

Ms Yap said with over P33,000 investment on the land alone, a condominium development would already cost too much. True enough, she said units at the Pacific Plaza Towers were on the market for as much as P30 million when the condo first opened. When the market crashed after the 1997 crisis, the units dropped to P22 million. today, the going rate is between P27 million and P28 million.

Ayala Land, Inc. forged a partnership with the Camposes’ Greenfeild Development Corp. to catch the golden egg which Metro Pacific was about to throw away. The joint venture, named Bonifacio West Development Corp., signed a binding agreement to buy out Metro Pacific’s 50.4% stake for $90 million in November 2002.

Based on a BCDA map, the high-end residential and commercial complex Serendra now stands on the former site of the Philippine Army’s commissary. Market! Market! has eaten up the area of the Philippine Army Museum, while part of the golf course where high ranking military officials used to tee off is now occupied by Bonifacio High Street where posh botiques are opening.

BCDA President Narciso Abaya, who was the chief of the Southern Command in 1995, said he is satisfied with the current development in the former army camp. He said the sale of the property was timely because there was already a “pressure for urbanization.”

“The area was too big for an army headquarters. It was more than 1,000 hectares. It was a wise move for the government, but on hindsight, it was really overbidded because it was just raw land at the time,” Mr. Abaya said in a phone interview last month.

While Metro Pacific managed to pare its debts by $90 million with the sale of its stake in Fort Bonifacio, it also lost out on an obvious cash generator. Had it kept and developed the Bonifacio property, it could be making as much as five times its offer price in 1995, according to Mr. Abaya.

“The cost of the land varies now. At the center, where the High Street is located, the land can sell for about P150,000 per square meter. In the North Bonifacio Triangle where the old Bonifacio Chapel used to stand, it is now about P50,000 per square meter,” Mr. Abaya said.

Ms. Yap, who also offers consultancy services for residential, commercial and office spaces in Bonifacio Global City, said corner units at The Bonifacio High Street can go as much as P185,000 per square meter based on September 2006 rates.

Losing the opportunity to cash in on an investment is just something that Metro Pacific has had to swallow like a bitter pill. But one is left to wonder whether it has learned its lesson as the company recently announced new plans to bid on what are again unchartered territories for the conglomerate – power utility and port operations.

Some clarifications on the article:

1) On Pacific Plaza Tower prices – I was interviewed June 13, 2007 for this article. At that time, the going rate for the Pacific Plaza Tower condos was Php 27-28M. In July 2007, the going rate now is Php 30-34M.

2) Corner lots at the City Center (which is very near Bonifacio High Street) – The price quoted in the article refers to the corner lots at the City Center and NOT corner units at Bonifacio High Street. Commercial units at Bonifacio High Street are for lease only and NOT for sale.

Thank you!


Cynthia Palad-Yap
28 July 2007