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Saturday, June 28, 2025

We were offered an existing project but priced way too high but does not show good history of cash flow

Nation building via learning and being the best in business

Our group was offered an existing project in Southern Tagalog region and these were some of our salient findings/observation:

1.   The seller wants to price it at P15,000/sm of the developed area;
2.   There are four similar projects in the area;
3.  Ite is located in populated area 160,000 but mostly dormitory residents in an industrial zone in nearby PEZA town  That means 50% of that number of 80,000 would be active buyers or 20,000 households    30% of that would be active buyers or only 6,000.   Inventories in the locality would be about 25,000.   Inventories is 5x of possible demand, hence the very low sales
   
4.  The project has sold only 112 u nits since 2021;   thats roughtly 30 year.   This year only 7!!!  How come.  Price too high

It was reported that owner who is a US resident plans to go back to the state

Negotiation points:

1  Price  -  At 15,000/sm of developed area, the pricing would be roughtly P200m.    Only 20% of the project is built up

      PV, DCF pricing for next 20 years would place its selling price at only P30M!

2.  Why is the owner selling?   Low sales

3.  Why is the number of sales low?   Bad/non existing marketing?   

4.  What is unique about the product?

The business is going to be challenging for both the prospective buyer and seller.  It may not be sold at
all.

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