MANILA, Philippines—The Securities and Exchange Commission has approved a plan by property giant Ayala Land Inc. to offer up to P3 billion in a new series of “Homestarter” bonds, which give holders the option to build up seed money to buy an Ayala-developed residential unit.
According to SEC documents, the offering of the first tranche of ALI’s new Homestarter bonds amounting to P1 billion will start in the next two days and run until October 26. The bonds will carry a fixed interest rate of 5 percent per annum and mature in three years.
Eligible investors, whether Filipino citizens or resident foreign individuals, may buy a minimum of P50,000 and in multiples of P10,000 thereafter. The maximum investment is P5 million.
The bonds will neither be listed nor traded but a bond holder may select an Ayala-developed property under various brands — whether the upscale Ayala Land Premier, the middle-income Alveo or Avida property or even the more affordable units under “Amaia” and “Bella Vita”— and apply their investment as payment.
Bond holders are given advance notice of newly launched properties being offered by Ayala Land and the option to acquire choice units. Should a buyer forego that option, cash plus interest on maturity will be paid instead.
In addition to the 5-percent fixed rate that bond holders will get every year, they have the option to use “bonus credit” by applying the face value and accrued interest of their investment as downpayment for ALI property. This “bonus credit” is equivalent to 10 percent of principal amount and not of the net selling price of selected ALI property subject to a maximum bonus credit depending on the property brand.
The bonus credit limit is 3 percent for Ayala Land Premier, 4 percent for Alveo, Avida and Amaia and 2 percent for Bella Vita.
The bulk of the proceeds from this offering will be used by ALI for residential development (34 percent) and landbanking (37 percent) while the remainder will go to corporate business, shopping center, hotel and resorts as well as expansion into the Visayas-Mindanao region.
With respect to the residential business, ALI intends to launch about 24,800 residential units for the whole of 2012, 20 percent more than the units brought to the property market last year.
BPI Capital Corp. will act as the issue manager. This offering will be the fifth series of these innovative “Homestarter” bond instruments and the largest since the first series was launched in 2006. The last time that ALI issued such bonds was last year worth about P2.02 billion.