KMC MAG Group: Riding the Real Estate Boom

Money Sense by Excel V. Dyquiangco, 09-01-2014

The Philippines is now a top hot spot for real estate. According to the Urban Land Institute's regional report on emerging trends in real estate in 2014, Manila ranks number four in the list of most preferred cities for real estate investors in Asia Pacific. And growth is noticeable in many other parts of the country.

KMC MAG Group, the largest Philippines-based real estate services firm and an international associate of Savills, a London Stock Exchange listed real estate services provider, knows this for a fact. Not only does it know the pulse of the real estate industry through its research, consultancy, and brokerage services, the company itself has grown rapidly along with it.

Chairman of the Board Gregory "Greg" Kittelson, Managing Director Michael "Mike" McCullough, and Chief Legal Officer Amanda Rufino-Carpo founded KMC MAG Group (KMC stands for their last names) and lead the dynamic and energetic team who work together to attain consistent and enormous company growth.

"We started the company with just the three of us and now with roughly around 130 employees after just a few years, the rate of its development is stealthily and healthily increasing," says Mike.

KMC MAG Group offers cost-efficient and creative real estate solutions to a wide array of clients, ranging from local to international multinational companies. It also functions as a one-stop shop for companies planning to expand to the Philippines. "This has been very big for us since our phone just keeps ringing off the hook with people who are looking for multi-billion peso transactions to do here in the Philippines," says Mike.

The founders modestly share they are lucky to be still in operations after five years. The reality is they have achieved a lot in such a short time.

"We've been recognized internationally by the Asia Property Awards and some other award-giving bodies. We've won Best Real Estate Agency in the Philippines, Best Real Estate Website, and that is to say these are years filled with dedication and hard work. So as our business services have been expanding, we've also been awarded and recognized in different categories," Mike shares.

"Also, it is about building a very good team of people," Greg adds. "It has been very rewarding watching them grow professionally, and watching them grow the company with us."

The Start

But it wasn't all this rosy from the beginning. When Greg and Amanda met at a cocktail party in 2006, they started a consultancy firm, Kittelson & Carpo Consulting which helps foreign investors set up in the Philippines. Mike, on the other hand, just came from Palo Alto in California and was tasked to set up the Philippine office of the IT-BPO company he was working for. "He was one of our first corporate clients," Amanda recalls.

In 2006 none of them had a proper office so they had their first meeting at a Starbucks coffee shop in Legaspi Street in Makati. "When we first met Mike, Amanda and I were just renting one old wooden desk together, technically out of another company which was an office that I was managing," Greg says. "We were using used laptops on top of our used desks, as that was all what we could afford at that time. We started our little firm with just enough money to incorporate the company and put up a website. The firm grew organically through client acquisition with no help or influence from family and friends."

A year later, Amanda, Greg and Mike formed KMC MAG Group. Of course they needed a proper office but they couldn't afford it, so they took a sub-lease.

"The first office that we took as our own was in Rufino Tower in Makati City," says Mike. "It was 220 square meters which was about a 150 square meters bigger than what we needed."

"We took the new office so quickly, we had no time to hire proper support staff, so Mike and I did the painting, vacuuming and took out the trash for first few days until we hired proper help instead of asking our employees.", says Greg

But right there, they knew that they were going to grow as they were all young and ambitious so they looked for clients who were willing to do business with them. A month later, they found some individuals and companies. From there they were able to hire employees and the organization increased in size and revenue. One of their key employees, Rosario Carbonell, was also instrumental in the success of the firm.

A year ago, they realized that they were making waves in the industry when people, even their competitors, came knocking at their doors and wanting to buy them out or buy into the company. "We were definitely in the right industry, in the right city, in the right country at the right time," says Greg.

"Our company has been extremely lucky when anything could have gone left or right," says Mike. "It has always worked for us, and we could have lost the biggest deal to a competitor or something but we always won and whether its luck, success, or preparedness, it has always been in our favor - hopefully that's because of the positive aura that everyone exudes here. Within the company, everyone is happy."

At present, KMC operates a total of 10,000 square-meters of serviced offices facilities throughout Makati, Ortigas and and Fort Bonifacio Global City. "We have 2,000 work stations under our management now," says Mike proudly.

KMC Solutions and the BPO Industry

From the real estate industry, the company has also branched out into the IT-BPO industry through KMC Solutions. "We feel that we are an accelerator for IT-BPO clients," says Greg. "We don't have to go and look for outsourcing contracts. Foreign companies who already existed or wanted to set up an operation in the Philippines were coming us daily. We would handle their biggest headaches; the facilities, IT, HR, and payroll."

"So we essentially incubate them - every service they need to initially be successful and to grow in the Philippines," says Mike. "We continue to provide what they need until they are off on their own."

A company coming into the Philippines, for instance, would typically need to find office space, employees, and make so many decisions. "We make the decisions for them and we, in a way, finance that in the sense that we are the ones who invest in this type of property," says Amanda. "We set up the office so that they are just plug-and-play. This makes it easier for them to do business." "They just need to focus on their business and their employees and we handle everything else," says Greg.

Given the services that the company offers, how is KMC MAG Group different from their competitors? "We started out in an interesting niche and that was the SME segment - foreign companies, specifically - which is being underserved," says Mike. "In fact when we did our competitor analysis, if you are an SME and you call up our competitors, they would never even return your calls or your emails. They wouldn't even meet up with you. They just ignore you and that's quite unfortunate. And I think they have realized their mistake because they have allowed a company like us to come into their market that they control since they have all the money and the branding. We were able to take the market share away from them. This is simply by doing the right thing and just answering phone calls and reaching out to them via emails, and offering them real and amazing service."

"We stepped in to help them and now we are a full real estate services company and a full serviced office, an incubator assisting these companies," says Greg.

Major Trends in the Real Estate Market

Recent news and surfaces have also begun talking about a property bubble these days. But for Greg, Amanda, and Mike, '"bubble" is not the right term to use for this market simply because it may only be talking about what happened to the United States which initially sparked the global financial crisis. They believe that the situation in the Philippines is quite different from that.

"What we have is an oversupply of residential coming up in the next year or two and I think the developers are starting to recognize that," says Greg. "The market is softening; the demand is being satisfied by the current supply and for the next couple of years, we may see some overall price decreases which should result in cheaper sale prices and rental rates."

"But if you ask me, I don't think there's a bubble because the main players are very cushioned," says Amanda. "They have a lot of cash and they are not leveraged. It's not the same situation such as in the United States. If there is a property bubble here, they have the ability to ride that bubble. It's always in a cycle and a wave. They are robust. They can absorb that hit."

She continues that probably one of the biggest problems is that incomes need to rise to match the rising cost of property. "But Filipinos are very resilient and that they'll find a way to buy a house or finance a property some way somehow and the developers know that. It's every Filipino's dream to own a home and the challenge is in making people grow their incomes and for more equality."

Sadly, as Mike says, people need to live vertically and they need to be able to walk to the office. "As the city gets bigger and bigger, more economic opportunities for salaries will always be in the corporate cities," he says. "If the residential market slows right now, prices will increase and I believe that it will bounce back for years to come."

On the other hand, when it comes to the commercial market and office space, this is a hot property as well. It's not just the BPOs anymore -It's also with the SMEs, the banks, the local insurance companies, and the local telecommunication companies that are all expanding.

"People who work will need to eat and shop so you've got this multiplier effect and I think that businesses will keep on coming in here," says Amanda. "They're here for the labor in the Philippines and that's the biggest asset. The biggest challenge to that is having quality labor which means that the education and the skills that people have need to be developed."

They also see this trend coming in for places outside Metro Manila, particularly Cebu City, Bulacan, Pampanga, Bacolod, Iloilo, Davao, or anywhere with schools and universities. In short, the next wave cities would eventually experience a boom in their own markets.

"I think that Davao has a lot to gain especially with new players moving in there, and that has set the trend," says Mike. "Once the big guys come in, then we know it's ready."

For freelancers and tech start-up companies, the last thing that they will spend on is the office. "But there is a space for freelancers - collaborative space - that is more useful than just working from home," says Amanda.

Eventually, they believe that there will be a product similar to theirs that is more cost-effective in the next few years. Plus having an office space help freelancers reach out not just to potential clients but to potential collaborators. "You also get to work with other creatives and you network," says Mike. "At least you keep yourself from getting bored at home." "You can even generate income from one another," says Greg.

Shared office spaces, meanwhile, can get a little bigger when the tech wave happens in the country. "There's still a bigger market for what we do with the private rooms, though, and this is what the majority of the market is asking now but it would be nice to see shared collaborative spaces in the near future," says Greg.

As for companies directly leasing out rooms or desks in an online marketplace, there is still the issue of trust and security - and they don't see that happening. "A lot of companies are doing well right now so for a stranger to rent their table for just a few hundred pesos is not worth it yet," Mike says.

"But I do think that [AirBnB] is one thing that can potentially bring residential prices down a little bit because now you have an effective platform to rent out for both short and long periods of time," says Greg.

Indeed these websites, mobile apps, and technologies have disrupted many traditional service industries and it's going to disrupt a little bit the micro-real estate industries for short or long periods of time.

Personal Finance and Investing

So with their jobs as leaders in the real estate industry, they do admit that life has become demanding. "It's a work-life-balance and that has been the challenge," says Amanda. "When you become more successful, you realize that the most important thing is your time. You should know where your time goes."

She says that her American partners are still hands-on and very hardworking. "I don't think from then to now there is any less passion for what we are doing," she says. "I think it's more because more is at stake. If you are watching a trilogy, for example, it gets more intense."

When they are not working, they usually have other activities in store. Mike takes his family on vacation and he tries to disconnect from the office a little bit. Greg travels alone or with friends, apart from going to social activities and networking events. Amanda, on the other hand, trains for triathlons, every single day.

"We love to travel and this is an opportunity for the senior management to step up to see if they can handle the challenge," says Amanda.

When it comes to managing their money, aside from spending it on their recreational activities, they also spend it on their families. Plus they also invest. The three of them believe in the diversification of stocks, as they have mutual funds spread anywhere.

"We always retain a certain amount of cash inside the company for expansion and if we have to put in some loans, then we always have money for that," says Greg. "I believe the best investment is still your own business, especially in a booming economy like the Philippines."

For those who want to invest in real estate, location is very important. Choose commercial, too, if one can afford it because it has high potential and it deals with different clients. "Commercial has better returns and better clients," adds Greg.