Fight for Ortigas heats up

Posted at 08/30/12 9:05 AM

MANILA, Philippines - Two of the country’s biggest conglomerates – Ayala Corp. and SM Investments Corp. (SMIC) – are gearing up for a potential battle to gain a foothold in the Ortigas family’s vast landholdings.

Ayala and SMIC officials said they are financially prepared to engage in a battle for control of OCLP Holdings, the private holding firm that owns the 16-hectare Greenhills shopping complex.

“The Ayala Group is prepared to make further investments. Ayala Corp. (parent firm) for instance has over P20 billion cash on hand and a low gearing ratio,” said Ayala managing director Eric Francia.

A low gearing ratio means the company has only a small amount of debt in proportion to its assets. A company with a low gearing ratio has greater elbow room to obtain loans to finance acquisitions or future growth.

Francia also noted that property unit Ayala Land Inc. (ALI) has significant cash on its balance sheet, amounting to around P36.8 billion as of end-June this year.

In earlier interviews, SMIC chief finance officer Jose T. Sio said the company enjoys favorable balance sheet conditions, having amassed healthy cash reserves of around $1 billion. Tycoon Henry Sy’s investment holding firm recently raised $150 million from an overnight top-up placement of shares to institutional investors.

Sio said SMIC is in a strong competitive position to seize any opportunities that might arise. Aside from its massive cash pile, the group also has an untapped credit line.

The tug of war for control of OCLP continues to heat up as both parties refuse to back down, capitalizing on the deep differences within the landed Ortigas family members.

The Ayalas have struck a strategic alliance with the group of businessman Ignacio Ortigas, allowing the former to participate in the development of the Ortigas clan’s various properties.

The Sy family, on the other hand, has found an ally in the group led by Francisco “Pacqui” Ortigas III. They, however, are now keeping their cards close to their chest to keep competition from second quessing their moves.

“No comment,” was Sio’s reply when asked whether the Sy family has gained board representation in the Ortigas property firm.

The Ortigas clan has a vast urban landbank spanning Mandaluyong, San Juan and Quezon City, the crown jewel of which is the Greenhills Shopping Center.

SMIC was close to acquiring a foothold in OLCP by buying British banking giant HSBC’s 34-percent stake. The Ortigas family, however, exercised its right of first refusal over HSBC’s shares to retain control of the property holding firm.

In its agreement with Ignacio Ortigas, ALI will pour in an initial investment of P15 billion to help develop residential, office, retail and hotel components in various properties owned by the Ortigas group.

The Ortigases, whose historic roots date back to the 300-year Spanish colonial rule, are among the largest landowners in the country. They developed upscale residential subdivisions Valle Verde and Wack-Wack as well as the 77-unit Luntala townhouse project within Valle Verde 6.

Aside from the Greenhills Shopping Center, the group’s retail portfolio also includes the 18-hectare Tiendesitas in Pasig.

Ongoing projects by the Ortigas group include Circulo Verde, a 15-tower residential development located on a 12-hectare property in Calle Industria in Bagumbayan in Quezon City and the P25-billion Capitol Commons, which will rise on a 10-hectare property previously occupied by the Rizal Provincial Capitol.

Capital Commons will include the development a high-end shopping mall to be called Estancia, slated for completion in 2013. Plans also include the development of a hotel and cinema complex.

Acquisition of a controlling stake in the Ortigas property firm will allow the SM Group to corner the lion’s share of the retail market in the burgeoning Ortigas-Pasig-Mandaluyong area.