Alphaland’s windfall from BSP, speculative

In a news report, the joint Alphaland Corp.-Boy Scouts of the Philippines (BSP) real estate project, the Alphaland Makati Place, is said to be “now worth P21 billion” (“Ongpin firm files P100-M damage suit vs Mercado,” News, 1/28/15). This means BSP’s 15-percent share has increased to P3 billion (albeit an unrealized gain), five times BSP’s P600-million original investment in the form of a one-hectare tract of land. But with some pencil pushing, the P21-billion valuation appears to be speculative and without merit even. Why?

1. At the project cost of P4 billion, as reported in the Inquirer (“Alphaland: ‘Twas Mercado who demanded kickback,” Front Page, 1/23/15), the P21-billion appraisal is doubtful. But even if the appraisal is validated, still BSP would not be entitled to any appraisal surplus in the absence of ownership shares in Alphaland Makati Place Inc., the corporate vehicle that undertook the project. Besides what monetary benefit will accrue to BSP if the higher property valuation is not monetized and remains just fixed assets? BSP needs cash to fund its operations.

On hindsight, BSP could have been compensated at the outset through a combination of cash and shares of stocks in Alphaland (entitling BSP participation in board meetings and profits), thereby reducing its land contribution to an acceptable level. Six hundred million pesos appears to be an enormous investment to sink into a single project. But it’s now water under the bridge! Unless Alphaland is amenable to a revision of the agreement.

2. BSP’s “P3-billion windfall” looks unattainable even if reckoned in terms of the gross proceeds from condominium unit sales. In the absence of published BSP/Alphaland statistics to arrive at such estimate, we adopted data sourced from the website of a Makati-based developer that is constructing three “mixed-use condominium” towers (also on a one-hectare property adjacent to Alphaland’s): 569 condominium units on a 48-floor tower, with a weighted gross selling price of P5.3 million per unit based on the condominium mix. Given these assumptions, Alphaland’s three towers could generate a combined gross sales of P9 billion, and BSP’s 15-percent share would be worth P1.4 billion only, the selling expenses and taxes yet to be deducted. Looks fair if the units are sold. But if BSP’s share would come from just one Alphaland tower, as alleged in the Senate hearings, that would translate into P450 million only, short of the P600-million it originally invested, this at a time when land values appeared to have appreciated markedly. For the P21 billion to materialize, 1,707 units (studio to three-bedroom units) should command an average price of P12.3 million per unit. Tough act with the proliferation of units in the Metro.

We hope this observation—that the P21-billion valuation is unattainable—is incorrect. We stand corrected if proven wrong.

—MANUEL Q. BONDAD,

[email protected]