Tower of debt: Villar’s Vista Land most vulnerable among Big Six property firms to the economic fallout from a POGO ban

Vista Land & Lifescapes (VLL) of ultra bilyonaryo Manny Villar might have limited exposure to Philippine Offshore Gaming Operations (POGO), but it is the most at risk to an economic fallout from the proposed ban on Chinese-backed tenants.

VLL has the biggest loan exposure among the country’s top property companies with a net debt to equity ratio of 128 percent.

The rest of the Big Six property firms have a debt-equity ratio of less than 90 percent:
* SM Prime Holdings (89 percent);;
* Ayala Land Inc. (77 percent);
* Filinvest Land Inc. (70 percent);
* Robinsons Land Corp (29 percent);
* Megaworld (24 percent).

In a previous interview, Vista Land president and CEO Manuel Paolo Villar said VLL’s leasable spaces were mostly retail malls, limiting the company’s POGO exposure to about two percent of its total leasing portfolio.

“A particular concern is a potential liquidity crunch among property developers, as a possible total exodus of POGO tenants should translate to lost revenues and constrict cashflows,” said Abacus Securities.

“This is to pile on the pressure coming from relaxed payment schedules for residential buyers in order to discourage cancellations, as well as increasing input costs. The ability to accommodate more leverage should thus be crucial, as we expect property developers to hike their debt levels in order to sustain business operations,” Abacus added.

Property consultant David Leechiu said the ban on POGOs, which occupy over one million square meters of office space, would lead to annual economic losses amounting to P200 billion nd 110,000 job losses.

Abacus doesn’t expect other business process outsourcing (BPO) firms to take up the huge hole left by POGOs especially with the shift to work-from-home set-up.

Based on the disappointing results of Bangko Sentral ng Pilipinas’ business expectations survey, Abacus said traditional offices might not be too keen to expand their business.

“All of these point to persistently elevated vacancy rates and softening lease rates in the coming quarters,” said Abacus.

Leechiu expects office vacancy rates to swell to more than 25 percent from 18 percent in the second quarter this year if the remaining POGOs are kicked out of the country.