VILLAR group-led Vista Land & Lifescapes (VLL) has acquired 79.43 percent of affiliate shopping mall developer Starmalls Inc. for P30.17 billion, completing the first phase of a consolidation strategy seen to create the country’s fourth largest fully integrated property developer.
On Tuesday, VLL acquired 6.69 billion common shares of Starmalls at P4.51 per share through a block sale at the Philippine Stock Exchange (PSE). The sellers were all part of the Villar-led Fine Group: Fine Properties Inc., Althorp Holdings Inc., Manuela Corp., Manuel Paolo Villar and Manuel Villar Jr.
Likewise, in line with the terms and conditions of the Starmall acquisition, VLL disclosed on Wednesday the completion of the second subscription by the Fine Group to 2.62 billion new common shares of VLL. This is in line with Fine’s earlier commitment to plow back to VLL 97.5 percent of the proceeds from its sale of shares in Starmalls by subscribing to new VLL shares which will be created as part of the increase in authorized capital.
In addition to the 79.43 percent stake already acquired by VLL, the latter has committed to buy 743.29 million more Starmall shares held by Fine Properties equivalent to 8.82 percent equity in the shopping mall developer. These shares are currently subject to a mandatory lock-up under PSE rules but the intention is to buy these additional shares once the lock-up period expires on Jan. 29, 2016—at the same price of P4.51 per share.
All in all, VLL is set to acquire a total of Starmalls’ 88.25 percent equity worth P33.5 billion.
VLL and Starmalls have a combined market capitalization of over P100 billion as they are valued by the stock market at over P50 billion each.
This trend of consolidation among local property developers is seen as a means to scale up businesses and create a good balance between the residential business and commercial property development. Earnings from residential development are dependent on the macroeconomic backdrop and follow certain cycles while commercial property—such as those from the rental of shopping mall and office space—provide a more stable source of recurring earnings. As such, investors typically favor property developers with a good mix of pro-cyclical and recurring earnings.
Previously, SM Prime Holdings created Southeast Asia’s most valuable property firm by consolidating with affiliate residential developer SM Development Corp. Tycoon Andrew Tan-led Megaworld Corp. also consolidated key property units in its books to realize operating synergies.