Real estate developer Visa Land and Lifescapes (VLL), owned by the family of Senator Manny Villar, is using the same strategy employed by Ayala Land Inc. (ALI) to simultaneously raise fresh funds and market to the public its residential units.
Vista Land recently announced details of its HomeBuilder Bonds which pay 5% interest per annum for a total minimum investment of P180,000.
Vista Land’s HomeBuilder Bonds is very similar to Ayala Land’s Homestarter Bonds which was used by Ayala Land Inc. to get additional funding from the public by issuing a debt instrument rather than new equity shares. At the same time, it supposedly provides seed funding for those wishing to purchase in the future a property developed by the company.
More details about Ayala Land’s bond offering can be found here: Ayala Land Homestarter Bond with ALI bonus credit
Vista Land’s HomeBuilder Bonds
In the case of Vista Land, their bond offering is meant to raise a total of P2.5 billion from the public, with the first tranche of up to P500.4 million set to be issued before the end of the year. The company said proceeds will be used for general corporate purposes.
Similar to our comment about the Ayala Land Homestarter Bonds, the bonds appear more like “special” deposit accounts (not to be confused with actual Special Deposit Accounts or SDAs by the BSP) rather than a traditional bond.
Minimum Investment and Interest Rate
Unlike a one-time payment in a regular debt instrument, investors of the HomeBuilder Bonds pay a monthly investment of at least P5,000 in equal installment amounts for 36 months (or 3 years). All in all, the investor will pay a minimum of P180,000 in order to participate in the bond offering.
Incremental investments may be done at a minimum of P2,500 per month, which means the investor will fork out an additional P90,000 over the 3-year period if they want to top-up their initial investment.
The coupon interest rate is 5% per annum payable on the maturity date.
The offering is very similar to Ayala Land Homestarter Bonds issued three weeks ago. Both pay 5% interest per annum. Minimum investment is also P5,000 per month over a 3-year period, for a total of P180,000 investment.
Step-Up Interest Rate and Bonus Credit
Vista Land’s bonds mature in three years and may be extended for two more years at the option of the bondholder. If extended, the step-up interest rate of 6.75% per annum kicks in.
This means after the initial 3-year investment, those who chose to extend their investment will not earn 5% p.a. anymore but 6.75% interest rate p.a. starting the third year.
Like the Ayala Homestarter Bonds, Vista Land also offers bonds investors a bonus credit if they decide to purchase a property developed by any of VLL’s business units.
If the investor will purchase a property before the 3-year maturity date, the bonus credit is equal to 16.5% of the amount of total bonds owned by the investor. If the investor extended the investment and purchased a VLL property prior to the final maturity date in 5 years, the bonus credit is 15% of the total amount of bonds owned.
This bonus credit is capped at 5% of the Net Selling price of the acquired property.
The Issuer: Vista Land and Lifescapes
Vista Land and Lifescapes (VLL) is a real estate development company owned by the family of Sen. Manny Villar, one of the richest people in the Philippines. As of June 2012, VLL had 198 developments under construction in 28 provinces and 60 cities and municipalities all over the Philippines.
It operates through five business units:
- Brittany – luxury houses and high-rise condominium for the high-end segment of the market;
- Crown Asia – housing for the middle-income segment in Mega Manila;
- Camella Homes – low-cost and affordable housing in Mega Manila;
- Communities Philippines – caters to the low cost, affordable, and middle-income housing segment outside Mega Manila; and
- Vista Residences – offers vertical residential projects in Mega Manila
In 2011, the company booked revenues of P13.51 billion and net income of P3.53 billion.
Why not go REIT?
@Paolo, it’d be easier for Vista Land to use the bond offering to raise cash rather than the REIT mode. I’m not even sure if the REIT rules have been finalized once and for all and if REITs can already be established in the Philippines. Vista Land is also using the Homebuilder Bonds not just to acquire funds but to promote its property developments. They’re basically hitting two birds with one stone with the Homebuilder Bonds.
I believe the rules were already set but no one dares to be listed. I prefer getting the interest of my investment (variable) than fixed. You get to own the company and real estate also. 🙂
I also look forward to the introduction of REITs in the Philippines. Unfortunately, no company seems to be interested to be listed as one at the moment. I read that the PSE is still working to work out the rules and regulations so as to convince more players to take part as REIT companies.
wala pang Implementing Rules and Regulation ang REIT, tama ba?