Mid-income housing developer's unique business model propels expansion to Visayas and Mindanao
Fast-growing real estate developer ACM Homes, which has sold close to 10,000 low- and mid-income homes mostly to Filipino families, announced plans at a recent press conference to expand its operations beyond Cavite and Batangas where it has established a solid presence.
The 18-year old company which constructs homes in the 300,000 to 3.5 million segment has developed 15 projects covering approximately 100 hectares in the two provinces where it has become a leading real estate player in its segment, according to ACM co-founder and president Tonette P. de Guzman. From 2005 to 2009, its revenues grew by 35% per annum.
ACM's robust performance in the past few years has been strengthened by its keen understanding of its markets including seafarers, who earn an average monthly wage of US$1,000. Their wages are significantly higher than those of their land-based counterparts. Focused initially on socialized housing in the 90s, ACM's product lines evolved as the purchasing power and tastes of its initial market of OFWs, professionals and employees grew. Now, ACM offers homes up to the 3.5 million level.
Unlike its bigger competitors, ACM has pinpointed higher-income seafarers as one of its key markets. In 2007, the company forged a strategic marketing alliance with one of the country's largest crew management companies, Philippine Transmarine Carriers (PTC). "This enabled the company to exclusively tap nearly 35,000 officers and crew to fulfill their aspirations of having their own homes," disclosed de Guzman.
For its part, PTC partnered with ACM on the strength of the latter's expertise in the OFW market and belief in transforming housing projects into living communities. It tapped ACM to fulfill its corporate social responsibility (CSR) program that revolves around housing. This CSR program aims to ensure that the seafarers' hard-earned wages are earmarked for quality homes that will appreciate in value and represent a sound investment over time. Studies have shown that purchasing a home motivates many OFWs to perform better and to remain engaged at work. "The ACM and PTC strategic marketing alliance is a unique business model that is at the same time mutually beneficial to both companies,"according to de Guzman.
In collaboration with ACM, PTC succeeded in offering its seafarers homes tailor-fit to their income levels through convenient financing schemes. She clarified that ACM's sales are not confined to seafarers but also include land-based OFWs, local employees, professionals and entrepreneurs. Of those, a growing number have traded their initial ACM homes for bigger, better models.
Carol Osteria, ACM co-founder and chief financial officer, relates that the firm's keen understanding of the mid-income market has provided the firm with a sustainable edge. Based on 2009 audited results, ACM's capital base has nearly reached 1.2 billion.
She cited studies by the Housing and Urban Development Coordinating Council that only 1 million homes are produced in a year to fill the housing backlog of 4 million. "Moreover, strong end-buyer financing support from government and private banks makes this a particularly good time for this segment of the market."
From 1992 up to the end of the decade, ACM grew on the strength of the quality of its developments and "strong backroom support that takes care of the buyers' financing needs," relates Osteria. To this day, close to 35% of the company's 120-person workforce is dedicated to assisting buyers meet the requirements of government agencies and banks for financing.
The company was founded by de Guzman, Osteria and another partner, Mia Gentugaya who used the beginning initials of their first names as the company name. The first two were expatriates working in Hongkong while Gentugaya is a senior partner in one of the country's top law firms. Osteria was a senior executive at Chemical Bank where she did investment banking. De Guzman was a regional director for Credit at The Elder's Finance Group. Then in their 40s, they saw the vast opportunity in the low- and mid-income housing segments in the Philippines then dominated by landholding families or entrepreneurs in the construction business.
They quit their jobs and chose to run their own business "using the financial discipline learned in a multinational corporate set-up to propel the business," according to Osteria. They expanded out of Imus, Cavite to other high-growth areas in South Luzon where they set up their first projects supported by capital infusions from foreign funds, friends and colleagues in the Hongkong expatriate community. The company intends to expand from Southern Luzon and to the Visayas and Mindanao by tapping the capital markets. Osteria disclosed that the company has a Cavite landbank "good for the next five years" but is looking to form joint ventures in other parts of the country.