The privately held Ortigas property group, one of Metro Manila’s biggest landlords, has restructured its core unit into a new corporate entity to prepare for either the entry of a new strategic investor or a stock market debut.
Inquirer sources said retail tycoon Henry Sy has been the most ardent suitor of the Ortigas group, which has a vast urban landbank in Mandaluyong, San Juan and Quezon City, the most important of which is the 16-hectare Greenhills shopping center.
A spokesperson from Sy’s SM group said there was no deal with the Ortigas group but other sources familiar with the matter said there have been on-and-off buy-in talks since last year when one of the key shareholders, British bank HSBC, moved to transform the closely held limited partnership into a corporation that could accept new investors or going public.
The old holding company Ortigas & Co. Ltd. Partnership has been transformed into a corporation, OCLP Holdings, and is now “pretty much done” with the restructuring, HSBC Philippines president Tony Cripps told the Inquirer last week.
It took some time for the Ortigas partnership to take this corporate route because of the diverse ownership, the old partnership being a very old entity whose shares of stocks have been passed on from one generation to another. The Ortigas clan has historic roots dating back to the 300-year Spanish colonial rule.
HSBC, one of the first foreign banks to set up shop in the Philippines, is the single biggest stockholder of OCLP with a stake of 34 percent in the property unit, Cripps said.
Cripps, who himself sits in the OLCP board, said the property interest has been in HSBC’s portfolio for the past 60-70 years. Apart from different family groups within the Ortigas plan, the Catholic Church owns around 9 percent of the holding firm, he added.
“This [transformation into a corporation] provides all the shareholders with flexibility to take different strategies with respect to their ownership of the shares whether they want to stay with the company or dispose of those shares,” Cripps said.
“The reason for going into the corporate route was obviously twofold. One, it provides shareholders the flexibility. Two, it allows the company to go on an IPO. So we can take the company public at some point in the future,” he said.
Other industry sources said it was HSBC’s initiative for the property unit to take the corporate route and some private investors have considered joining the bank in a block sale, to unlock the best value for their shares. But previous talks bogged down as some Ortigas family members changed their mind, one source said.
Inquirer sources said SM group patriarch Henry Sy himself—who built a fortune out of retailing and shopping mall development and who now also owns the largest banking group in the country—is still keen on pursuing a potential deal to invest in the Ortigas property group.
“Obviously, discussions about the future are confidential but the ‘corporatization’ of the entity has made it possible for some interesting potential outcomes—whether it’s an IPO or whether it’s the involvement of a private investor. There’s a lot of conversations so I’m not obviously confirming confidential internal discussions,” Cripps said, when asked about SM’s interest. “But there’s a lot of things going on.”
“It (OCLP) is an interesting company with very valuable assets and a large landbank. The development plan is very good. The company is very strong. The cash flow is great,” Cripps said.
Cripps said under the old structure, it was difficult to leverage even on the group’s strong asset base. “Under a partnership it could not be as aggressive [as other developers]. As a family group, they didn’t want to take on leverage,” he said.
Under a limited partnership, general partners team up with one or more limited partners who, in turn, enjoy limited liability as long they do not participate in the control of the business. The general partners under this structure are the ones who carry more liability.
The restructuring of the Ortigas property group, Cripps said, was thus not only for HSBC’s sake but for the good of all shareholders and the company itself.
“There’s a feeling that going forward, it will become a new entity, with public investors from different places, local investors, offshore investors. It will become a professional company managing property development and property ownership and lease,” Cripps said.
As it is, he noted that the property company had a rich history and a good story in terms of development pipeline.
“Under a professionally run board and corporate structure, investors who may be in the same business themselves can perhaps bring professional directors. That could happen over time,” Cripps said.