October 19, 2015 – – CRISP has assigned an ‘AA+’ rating on SLI based on the following rating factors:
- Solid 40-year track record. Lucia Land, Inc. (SLI) is a key player in the Philippine property development sector. SLI is a majority-held company of the Sta. Lucia Realty Group (SLG) that was incorporated in 1972.
Together, SLI and SLG have a combined 40-year track record that created a footprint in 10 major regions and cities in the county as they developed over 10,000 hectares of land and more than 220 residential subdivisions. Through the years, SLI has also added 14 golf courses in its portfolio with world-class championship courses.
- Well established brand recognition as a property developer. The combined decades-long presence of SLI and SLG in the highly competitive real estate market has created an immediate brand recognition today as a reputable property developer. This brand recognition enables SLI’s marketing of its projects to Filipino homebuyers. SLI maintains a sales force of more than 120,000 sales agents from 6 marketing companies with an exclusive relationship with 4 of these companies.
- Low debt burden. SLI has operated mostly from internally-generated funds and has only tapped banks for its direct borrowings for just over P3 billion as against its assets of P17.8 billion and total equity of P11.7 billion. SLI’s low debt provides the company a broader flexibility in financing its future expansion programs by tapping the capital market with fresh debt and further equity infusion.
Outlook: Stable. CRISP assigns a stable outlook on Sta. Lucia as it is expected to maintain its sales and revenue trajectory in a competitive but stable property development market.
Although CRISP expects that the election year in 2016 may produce a lot of political noise that could prompt a few buyers to temporarily defer their home purchases, CRISP also anticipates a smooth political transition of the Philippine national leadership that will immediately dissipate the uncertainties among the homebuyers.
CRISP notes SLI’s currently low level of cash relative to its working capital requirements. CRISP has also noted SLI’s longstanding relationship with its suppliers that have accorded the company a generous suppliers’ credit arrangement that has worked as a stable source of credit for SLI for many years. Notwithstanding these arrangements, SLI also informed CRISP of a firm commitment for readily available credit by a bank, should it be necessary.
CRISP’s observation regarding SLI’s need to build up its management team and structure has been addressed by the company’s plan to further develop its team with more senior and seasoned management personnel in the immediate term.
Overall, CRISP is confident that given the solid and reputable performance by SLI in the property development sector would enable the company to pay its debt with relatively small risk and maximum loss recovery up to the full amount.
SLI strategy and competition
SLI’s joint-venture strategy has enabled the company to build its landbank with relatively low capital requirements and establish its presence in the country’s top housing spots. SLI has forged successful relationships with landowning partners for their housing projects in the following areas:
Eagle Ridge Cavite (800 ha), Alta Vista Cebu (400 ha), Lakewood City Cabanatuan (400 ha), Colinas Verdes Bulacan (300 ha), Beverly Place Pampanga (300 ha), Palo Alto Rizal (200 ha), Pinewoods Baguio (200 ha), Greenmeadows Iloilo (172 ha), Royale Tagaytay (165 ha) and South Pacific Davao (145 ha).
Under the joint venture agreement, partners either got a specific share of the developed land or proceeds from the lot sales.