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Should you invest in Ayala Homestarter Bonds?




You’ve probably seen this one already, as this investment product is being advertised recently on social media and on website banner ads. We’re talking about the Homestarter Bonds, a 3-year bond investment offering by property developer Ayala Land Inc. (ALI).

Ayala Land’s Homestarter Bond is actually no different from any bond offering by a corporation and, as such, it provides for the payment of regular coupon or interest every six (6) months.

What made the Homestarter Bonds different, though, is the additional two benefits given to investors:

  1. an option to apply the bond investment as downpayment for an Ayala Land property to be purchased within the next three (3) years; and
  2. additional discount to be applied on the selling price of the Ayala Land property to be purchased

Minimum Investment and Computation of Interest Income

Potential investors can avail of the Homestarter Bond for as low as P50,000. Additional investments must be in multiples of P10,000. The maximum investment allowed per investor is P10 million.

As an investment opportunity, the Bond pays coupon interest rate of 3% per annum. This means if you bought P100,000 worth of the Homestarter Bonds, you will receive gross interest income of P3,000 per year. That’s relatively high compared to interest rates of bank savings or time deposit accounts, but pales in comparison to the returns of well-managed mutual funds or unit investment trust funds (UITF).

Coupon payments are paid semiannually (twice a year), which means instead of receiving the full P3,000 per year, you’ll get P1,500 interest from Ayala Land every six months.

Additional benefit: Discount when purchasing Ayala Land property

If you invest in the Bond, you are entitled to use and apply the bond investment as downpayment for the purchase of any property sold by the Ayala Land group of companies.

At the same time, you are entitled to receive a discount on any Ayala Land property you will purchase in the next 3 years. The discount comes in the form of a Bonus Credit, which can range from 1% to 4% (depending on the Ayala Land company), and to be deducted from the selling price of the property you will buy.

The maximum Bonus Credit limit you will receive is as follows.

If the property is sold byYour max Bonus Credit is % of the selling price
Ayala Land Premier1%
Alveo2%
BellaVita2%
Amaia4%
Avida4%

Computation of Ayala Land discount

The actual discount you will receive will be the lower of these two amounts:

  • 10% of the amount you invested in the Homestarter Bond; or
  • maximum Bonus Credit limit (see table above) based on the applicable Net Selling Price (NSP) of the property

For example, if you invested P3 million in the Homestarter Bond and you’re looking to buy an Alveo property worth P2 million, your discount will be determined by comparing and getting the lower of:

  1. 10% of Homestarter Bond investment = 10% x P3 million = P300,000
  2. Bonus Credit limit (Alveo property) on the selling price = 2% x P2 million = P40,000

Thus, your discount for the Alveo property is P40,000 (lower of the two amounts above).

The final selling price, then, of the property you’re planning to buy is P1,960,000 (computed as P2,000,000 – P40,000).

How to invest in the Homestarter Bond?

Easy, you just have to visit and inquire with any branch of BPI, Chinabank, or PNB. Do note, though, that the bond offer period started last September 26 and will end on October 7, 2016.

You also have to ready the following documents:

  • Duly completed and executed Application to Purchase
  • Securities Account Agreement or equivalent document
  • Specimen signature card
  • Client Suitability Test
  • Customer Information Sheet
  • Photocopy of at least one (1) valid ID (for BPI and Chinabank); or two (2) photo-bearing IDs (for PNB)

Now, in case you’re ready to apply your Homestarter Bond investment as downpayment for an Ayala Land property you will purchase, you just need to contact the Ayala Land Corporate Sales Group.

If you opted not to use your Homestarter Bond as downpayment, during the Bond’s maturity after three (3) years, you have the option to receive the full principal and any accrued interest to your designated bank account or use the amount still as downpayment for any Ayala Land property you might purchase within six (6) months after the maturity of the Bond.

So should you invest in Ayala Land’s Homestarter Bond?

If you’re planning to buy an Ayala Land property within the next three years, you will benefit by investing in the Homestarter Bond because you get to receive a discount on the net selling price of the Ayala Land property you will buy.

Even if you’re not thinking of buying a property, the Bonds still provide decent interest income of 3% per year, guaranteed by a large corporation in the Philippines.

But if you think you can find another investment alternative that can beat the Homestarter Bond’s interest rate of 3% per annum and you’re willing to absorb the risk associated with it, then you might be better off putting your money in that investment instead.

Disclaimer

The content presented above are for information purposes only and are not intended as a solicitation to buy or sell the securities mentioned. They are also not meant to substitute for professional investment advice to readers of this article. PinoyMoneyTalk is not, in any way, related to the issuer of the securities or any of its underwriters.



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