Smaller can be better

MANILA, Philippines – Many would think that managing a small upstart property company after many years of heading one of the country’s biggest real estate groups would be a walk in the park.

But not for Francisco Licuanan III, former president of Ayala Land Inc. (ALI) and now part owner and head of Geo-Estate Development Corp., the company behind The Beacon in Makati.

Licuanan works just and hard, maybe even harder, because competing in a sea filled with huge players with more resources, both financial and human, is definitely not for the faint-hearted.

Licuanan chairs New Pacific Resources Management Inc. and Geo-Estate, owner/developer and marketing arm respectively of The Beacon, a ‘residential resort’ consisting of three high-rise condominium towers located at the corner of Don Chino Roces and Arnaiz Avenues in Makati.

His resume is impressive. Starting out as an investment banker, he moved to the Ayala group’s property division and in 1988, set up ALI as a subsidiary of Ayala Corp. Upon his retirement from ALI, he joined government for a year as head of Clark Development Corp. (CDC).

And just when everyone thought he would choose to spend the next years laying back and enjoying the fruits of his 30-year career, 25 years of which were spent in real estate, Licuanan surprised the business community when he set up New Pacific and Geo-Estate. Joining him was Miriam Katigbak, also a veteran of ALI who headed the malls group, now president of New Pacific and Geo-Estate.

“We felt there was a need to develop projects that are priced for the middle class. Our goal is to deliver to the middle income market a product that is worthy of the upper income,” Licuanan said in an interview with The STAR.

There are advantages to being a relatively small player in the real estate industry, he pointed out.

“We do not have public shareholders and therefore, we do not maximize profits. Secondly, we pay attention to details and we are very focused. We stick to our values and this is something that big companies tend to forget,” Licuanan said.

In trying to understand the buyers’ needs, Geo-Estate’s top executive noted that they involve the sales people in the design since they are supposed to know what the buyers want. “We also do not leave the design with the architect. While we allow him room for creativity, we do not let the architect control the design completely,” he added.

And because Geo-Estate’s first salvo involves a project for the middle-class market, Licuanan pointed out that it becomes more challenging because they are constrained by price. “We have to strike a balance between cost and quality,” he said.

In trying to satisfy the needs of their buyers, Licuanan revealed that they have ‘as delivered’ units in the same showroom where the dressed up unit is featured. “Oftentimes, buyers are convinced into buying because they see the fully furnished units when in fact, what they are buying do not contain all these furnishings and features. We want them to see the units as they will be delivered to them,” he emphasized.

And as a newcomer offering its first project, Licuanan stressed that reputation and location becomes more important. “We are staking our own reputations in this project. We have chosen one of the best contractors for The Beacon. It is a buyers’ market, no doubt. Not only do they have a lot of choices, they can choose not to buy at all. And when you are pre-selling without the name of a huge company to back you up, reputation all the more becomes crucial,” he added.

The Beacon

Roces, the first tower of The Beacon, is expected to be ready for turnover by middle of next year while the second tower, Arnaiz, will start construction next month and hopefully will be turned over by 2013. The third tower will be named Amorsolo.

Roces, a 44-storey condominium, is already 99 percent sold while Arnaiz, comprised of 48 storeys, is about 70 percent sold. Amorsolo, meanwhile, will consist of 44 storeys.

The Beacon offers what any Makati resident could wish for: more room for rest, recreation, and relaxation. In fact, with a whole hectare devoted to pools, gym space, jogging paths, a private theater, and other amenities, the Beacon proudly calls itself The Residential Resort.

“After decades of being in the business of real estate development, of helping create some of the most desired pieces of residential property in the country, I’m a little harder to excite than most folks. And yet here I am, feeling exactly that. And the work we at GeoEstate have done here at The Beacon is behind it all. Together with our team of experts and EEI, the multinational construction firm, we’re creating nothing less than the perfect setting for the most relaxing Makati residential experience,” Licuanan said.

He adds: “From location, to architecture, to design, to appointments, to costs, we’ve managed everything to make sure we satisfy the demands of both prospective investors and would-be residents. Far from being just another residential condominium, The Beacon is, in all ways, the best, biggest, and brightest reason to live in Makati.”

In the next few years, New Pacific and Geo-Estate will stick to the middle-income market but will offer different projects. “We will do things that are interesting to us – maybe house and lot packages and townhomes for the same market. But not the upper end yet,” he said.

The market

Some say that the phenomenal growth in the urban residential condominium market is just a fad.

But Licuanan disagrees. “What is happening is the basic results of demographics. Expansion used to go outward (developers creating projects north, south and east of Metro Manila and even as far as the Calabarzon and Central Luzon) but we have reached close to the limit to expanding outward. The trend is going back in,” he explained.

He pointed out that unless an efficient mass transport system is established, people will choose more and more to live in places close to their place of work. “Condominiums located in central business districts used to be the enclave of expats and young urban professionals. But now, people from all walks of life choose to live in condominiums. The time they would spend travelling to and from their place of work are now better spent with the family,” he added.

There are those who forward the notion that the real estate industry in the country undergoes a cycle, and that it will soon be entering a downward spiral.

Licuanan however believes that while there are natural cycles of real estate, the Philippine market is unique.

“If the general economic and political situation in a country is stable, then the natural cycle of real estate will probably apply. The real estate sector is intrinsically cyclical after all. But when the situation is less predictable or if a country’s political and economic situation is volatile, then these override the cycle,” he said.

The real estate industry, he notes, is one where the “downs” tend to be exaggerated. “This is intrinsic in the industry because the lead times are longer. It takes around three years to build. And that is why one has to be prepared for the major ups and downs and structure itself to be ready for whatever comes. This is an industry where the barrier to entry is low. One can put up one building, sell it, and then call himself a player. The real skills however is in the implementation,” Licuanan explained.

Moving forward

Licuanan expressed confidence that the market for overseas Filipino workers (OFWs) will get bigger.

“The market for OFWs did not really go away. In the second quarter of 2008, there was panic resulting from the US financial crisis (triggered by the sub-prime problem) but middle of 2009, the dust settled. But take note that only less than 10 percent in the US lost their jobs. And only three percent in the US are fully employed,” he said.

But probably one good thing that resulted from that crisis is that the Philippines became a safer haven for investments, especially for OFWs.

He noted that there was a big jump in the number of OFWs in the last five to 10 years. “Since it takes another five years for them to save enough money to buy and invest, then this means that now is the time for us to build,” he pointed out.

Licuanan believes that the market is going to be stable, with slightly upward trending in the middle-income market. “The middle market is driven by real needs and affordability and that is where most of the growth will be coming from,” he said.

But the high-end market, he said, will experience some problems because it is mainly liquidity driven. “That market is scary and unpredictable,” he added.

The OFW market, he stressed, will continue to be a growing market, “unless we as a country have the ability to employ our own.”

Smaller can be better
By Mary Ann Ll. Reyes (The Philippine Star)

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