KMC MAG: Recent bid for BGC lot will not result in new benchmark prices

Business Mirror10-04-2014

Property Consultant KMC MAG Group Inc. said the recent bid prices for tow properties for the state-owned pension fund Bonfiacio Global City (BGC) will not result in new benchmark prices in the area.

Antton Nordberg, KMC manager for consulting and research, said the bid of about P500,000 per square meter (sq m) for the two 1,600­ sq­m properties of the Government Service Insurance System (GSIS) should be treated as an outlier and not a benchmark of prices, at least for now.

Nordberg compared last year's bidding of 8,300 sq m of property owned by another state­owned pension fund, the Social Security System, which only fetched a price of P280,960 per sq m.

"The 'fair market value' of the land would settle to around P290,000persqm, which is the closest estimate to the current market value or for this specific lot," he said in a document sent by e­mail to the BusinessMirror on Friday.

"The fact that the major developers in the country-Megaworld [Corp.] and Ayala Land Inc.-did not participate in the bidding shows that their CFOs [chief financial officers] possibly recognized that these prices would artificially push the values up the rate ceiling, which is not beneficial in the long run as it puts the country at greater risk into a property bubble," he said.

Share prices of both Megaworld and Ayala Land surged at their highest, after the GSIS received a bid of P800 million for one of the 1,600­sq­m property, or 54 percent higher than the floor price of P520 million, or P325.000 per sq m, earlier set by the pension fund.

The other GSIS property of the same size fetched a bid of P732.8 million. Megaworld owns chunks of land in the former military camp in Taguig City, while Ayala Land is the developer of the entire BGC.

"Either way, justifying this price would involve a lot of speculation on market performance and rates going up.

"In spite of the promising property market, an investor still needs to exercise caution and justify if a 21­percent price increase is rational, or if it can be justified by the fundamentals," Nordberg said.

At the moment, the ongoing market value per sq m in BGC stood at about P140.000 per sq m for office and P130,000 for residential. At this rate, Nordberg said the prices of the end­product-or the building or fa- cility that will be built-will be no more than 21 percent. He said that for an investor to take on profits out of a P500,000­per­sq­m lot, he would have to sell the end­product at P170,000 per sq m.