8990 signs MOU to sell 2,699 condos to Quezon City

8990 Holdings [HOUSE 8.74, down 6.0%; 180% avgVol] [link] disclosed that it signed a memorandum of understanding (MOU) with the Quezon City local government (QCLGU) to provide 2,699 “housing units” to QCLGU employees and “informal settler families” from HOUSE’s four-tower Urban Deca Homes Commonwealth project. The 2,699 units represent the entire inventory of the project. According to sources, the units in the first tower will be turned over to QCLGU later this year, with full turnover of the remaining three towers to be completed by 2027. This is the first time HOUSE has signed an agreement like this with an LGU. No information was provided about the price of the units or how the payments from QCLGU to HOUSE would be structured. HOUSE shares sank 6% on the news.   

MB bottom-line:  I’d love to know more about how this deal came to be, because it doesn’t seem like HOUSE had contemplated selling these units to QCLGU at the outset when it developed the project and started construction. HOUSE had originally said that it expected to recognize ?6 billion in revenues from this particular development, so I’m curious to know how the economics of this deal compare with its pre-MOU revenue estimate. I can’t talk too much about how good or bad the deal is without knowing those terms, but if I were a HOUSE shareholder, I’d probably be excited about the prospect of HOUSE getting paid by such a deep-pocket single buyer, especially since HOUSE’s President, Anthony Vincent Sotto, had previously remarked that its target market consumers were feeling the effects of price inflation. I’d be less enthusiastic about what that could say about the wider market, though. I’m also curious to know if Mr. Sotto has any plans to repeat this type of project sale with other LGUs. I mean, of course he might have that desire, but I want to know if HOUSE has entered into those talks already or if this is just some kind of one-off confluence of factors that are unlikely to repeat.

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