The Market Monitor Minding the Nation's Business
8990 Holdings, Inc., the country’s No.1 mass-housing developer, continues to excite the capital market with a deal-breaker of a deal regarding the P1-billion sale of its CTS or contract to sell receivables, to Ayala’s BPI Family Bank . The transaction has three interesting subtexts involving the mass-housing industry, the capital market, and access to long-term financing.
With one fell swoop, 8990 Holdings has opened a new avenue to long-term financing for its housing projects that are characterized by the hitherto unheard-of low down payment of 2 percent, started a new funding scheme not just for housing developers, and stirred the bond market with the P I-billion deal transacted last October 30.
Once again, 8990 Holdings has shown that it continues to come up with significant innovations that let it stay ahead of the curve. It has been rewriting the business of mass housing, and it is no wonder that in just 12 years, it has zoomed up to the top of the totem pole. This is what happens when the company continues to level up its business.
The company has introduced to the market the low down payment of 2 percent, and then just recently, its agreement with Manila Electric Co. for prepaid electricity availability in its projects.
But the deal with BPI Family Bank shows it could unlock its receivables to further pursue projects that now encompass even future mall developments. The housing industry, which requires loads of cash to sustain business due to the finance mismatch between project delivery and full payment, has just seen what it takes to be a market disruptor, which is what 8990 Holdings is.
We are pretty sure other industry bigwigs are looking at the business ideas of 8990 Holdings and other industries could replicate the approach to long-term financing that the company has embarked on.
As 8990 Holdings President and CEO Januario Jesus Atencio III asserted in a disclosure to the Philippine Stop Exchange: “The agreement with BPI Family is a significant milestone for 8990, as it signals the growing acceptability of 8990s CTS receivables with the banking sector, paving the way for the creation of alternative housing finance in the private sector not only for 8990 but also for the entire mass housing sector.”
Under the arrangement, BPI Family will immediately process the conversion of the CTS into a mortgage loan under the bank’s Kayang-kaya Pabahay Program. The recourse ends once the CTS is converted into a mortgage loan even before the two-year recourse period lapses.
The company’s receivables portfolio stood at P14 billion as of end-2014, a significant rise from its end-2013 total of P8.6 billion. This just goes to show that the take-up for its housing units continues to grow exponentially that require it to have alternative modes of long-term financing to continue to raise the bar of its yearly growth.
And that is what it has just done with the BPI Family Bank transaction. Now, other banks are expected to join the bandwagon, especially since banks have so much cash floating around looking for safe projects to lend to.
No wonder, JJ can afford to enjoy a cruise whilst sketching another innovative deal in the mass-housing business.