But with the way the Philippine National Railways (PNR) rehabilitated the Southrail Line – from Tutuban to the Bicol Region – what we have is a railroad system that is neither modern, fast nor reliable.

If our railroad system is to live up to its full potential, its modernization should be left in the hands of the private sector. And if there’s one company that has the motivation, vision, ability and financial muscle to do it, it is Ayala Corporation.

Let’s look at the timeline:

1987: During former President Fidel V. Ramos’ visit to Los Angeles, US financial and industrial giants Bechtel Enterprises and GE Capital signed a memorandum of understanding (MOU) with Ayala Corporation signifying their entry into a US$600 million railroad project.

… Dubbed the MCX or Manila-Calabarzon Express, it was to provide commuter and freight service between Metro Manila and the southern provinces of Luzon… Additional phases in the plan include extending the line to the southern port of Batangas City thus linking it to the deep-water port of Manila. An additional lateral section can connect Lucena City in the east to Sangley Point, Cavite in the west thus opening up the entire southern Luzon area to a modern transport facility…

The plan didn’t push through. But the vision and motivation of Ayala Corp. for wanting to modernize PNR’s Southrail Line at that time will be clear if you consider the succeeding events.

1988: Ayala Corporation spun off its real estate division into a separate company, giving birth to Ayala Land, Inc (ALI).

1989: Laguna Technopark, a 387-hectare industrial park was opened by ALI together with two other multinationals, in response to the government’s call for private sector participation in countryside development. Technopark straddles Sta. Rosa and Binan, Laguna and is now home to almost 100 of the biggest manufacturing/assembly corporations in the Philippines.

1990: Known for high-end commercial, office and residential projects primarily in Makati, ALI decided to test the middle-income housing market by establishing Laguna Properties Holdings, Inc. (now known as Avida Land)

LPHI acquired a 400-hectare property from the Yulo family in Sta. Rosa, Laguna and developed it into Santa Rosa Villages, San Jose Village and later, the Santa Rosa Estates. These were followed by various projects in Batangas and Lucena City in Quezon.

1995: A consortium of five local companies was formed to acquire controlling interest in what would later be called Metro Rail Transit Corporation Ltd. to develop and maintain EDSA MRT 3. These were Fil-Estate (a real estate company), Ayala Land, Inc., Anglo Philippine Holdings Corp (that owns National Bookstore among others), Ramcar (the car battery company that also owns Kentucky Fried Chicken, Mr. Donut and Tokyo Tokyo) and Greenfield Development Corporation (of the Camposes who own Unilab).

Anglo Philippine Holdings has minority stake in Shang Properties, Inc, the upscale developer of The St. Francis Shangri-La Place, The Shang Grand Tower, Shangri-La Plaza Mall, The Enterprise Center (in Makati) and currently, One Shangri-La Place – all are within spitting distance from MRT 3.

Greenfield is one of the biggest landowner in the country. Together with ALI, it has controlling interest in Bonifacio Global City. It has vast properties in Laguna. It is currently focused on its 11-hectare mixed-use development along Shaw Boulevard called the Greenfield District, just across Shangri-La Plaza, again just a stone’s throw away from MRT 3.

1999: EDSA MRT 3 started operation

2001: North Triangle Depot Commercial Corporation was incorporated by three of the original consortium-members of MRT 3 – Fil-Estate, ALI and Anglo Philippine Holdings Corp – to develop the 20-hectate TriNoma Mall. Did you know that this mall sits directly on top of MRT’s huge depot?

2005: ALI and Greenfield Development Corporation formed a joint venture to develop Ayala Greenfield Estates – a 350 hectare upscale residential development in Calamba, Laguna with an 18-hole, par 72 championship golf course designed by Robert Trent.

2007: Ayala Land launched Nuvali, a 1,800 hectare mixed-use development that straddles the cities of Sta. Rosa, Calamba and the municipality of Cabuyao in Laguna. It is envisioned to become the Makati Central Business District of the South. It is one of the country’s most ambitious real estate projects that will be completed in 30 years. The various residential developments in Nuvali are handled by its three units – Ayala Land Premier, Alveo and Avida.

April 2010: ALI established its fourth residential unit, Amaia Scapes, this time for the class C market. It offers house and lot packages from P605,000 to P1.25 million. Currently, Amaia has developments in Cabanatuan, Pampanga, Cavite, Laguna, Lipa, Batangas and Negros Occidental.

December 2010: The Inquirer announced that Ayala Corp was looking into the possibility of participating in the development of the PNR’s (Southrail Line) service to Southern Luzon up to Legazpi City in Bicol.

… the PNR line can directly link the Makati central business district to suburban communities being developed by ALI in areas in Laguna… It’s logical for them to participate in the development of that corridor. They have a lot of developments near the PNR line.

So far, nothing new has come up regarding this plan.

August 31, 2011: ALI puts up its fifth residential unit, the South Maya Ventures Corp. to cater to the largest but most neglected segment of the housing market – the underprivileged and homeless. Called “socialized housing,” each unit will cost P400,000 and below. Its first project was scheduled for launching within the last quarter of this year in Gen. Trias, Cavite. To remain feasible, expect succeeding projects to be located farther down south where lands are cheap.

The timeline indicates the following:

1. Bechtel’s and GE’s MOU with Ayala Corp. in 1987 to construct the MCX railroad project was meant to lay the groundwork for the latter’s future projects in Laguna. The freight service was certainly partly intended to transport cargoes to and from the various locators in Laguna Technopark. The commuter service was meant to “pull” its early middle-income real estate projects closer to Metro Manila.

With hundreds of real estate projects that have sprouted in Laguna and other provinces in the south since, plus the seventeen economic zones in Laguna alone, a modern railroad system is imperative and feasible now more than ever.

2. MRT 3 illustrates that those who have the greatest motivation to invest in transportation infrastructure are big commercial, office and residential real estate developers whose properties lie near this transportation line. An improved transportation increases demand for and, therefore, value of their properties.

It also indicates that ALI has the ability and experience in building and managing a modern transportation infrastructure.

3. With the pattern of its real estate developments, ALI clearly sees the high growth potential of the South Luzon Corridor. It is the only big developer that has invested a very large part of its resources south of Metro Manila. ALI probably knows something that other developers don’t.

The private sector is motivated to participate in the construction of transportation infrastructure not only because of the revenue they will gain from it but more importantly, because of the boost it gives in the demand for and value of their real estate developments.

And with the way Ayala Land has lined up many of its projects near PNR lines, it shall reap the biggest benefit from a modern railroad system in the south.

Thank you so much

Good news! On July 14, 2009 the government announced that:

Phase 1 of the rehabilitated Philippine National Railways was inaugurated. A commuter train, with the President and the VP on board, chugged along the stretch from Tutuban in Manila to Buendia in Makati City.

Salient points of the report:

[Note: There used to be a link to this report from the website of the Philippine Information Agency but the page no longer exists.]

• The trains started commercial run the following day from Tutuban to Buendia, passing through Espana, Sampaloc, Sta. Mesa, Paco, Sta. Ana and San Andres.
• For 15 pesos, a commuter can now expect a traffic-free journey from Tutuban and reach Bicutan in 30 minutes.
• By September this year, the route will extend to Alabang and eventually to the Bicol region.
• The Department of Transportation and Communication is now finalizing a uniform ticketing system for the PNR, Metro Rail Transit (MRT) Line 3 and Light Rail Transit (LRT) 1 and 2.
• The second phase, or the North Rail, has been approved by the board of the National Economic and Development Authority and will be started within 60 days.

These plus the extension of super highways and the Skyway along the South Luzon Expressway and more will impact heavily on Philippine real estate.

What to expect:

• Real estate properties along certain points of the railway system will become attractive
• There will be a domino effect in price increase of real estate
• Migration from and decongestion of Metro Manila
• Business relocation especially of Business Process Outsourcing companies

These facts are intertwined; they may overlap one another.

Real estate properties along certain points of the railway system will become attractive

A 2006 Dutch study [this is a PDF file] noted that:

“… households are willing to pay more for housing near (not beside) railway stations due to lower transportation cost and reduced travel time. As workplaces become more accessible, so do leisure areas…”

Population convergence near or around some (not all) of these stations will lead to increased commerce that will push demand for and, therefore, price of real estate. Expect commercial establishments, conveniences and job opportunities to increase in some of these areas.

There will be a domino effect in price increase of real estate

Another study noted that:

“… the price of real estate is highest in city centers and decreases with every unit of distance from the city center. Thus, when some areas are pulled closer to the city center through an improvement in transportation, land values in these areas increase…”

As transportation improves, Filipinos will start moving to locations outside Metro Manila. As they do, commercialization and urbanization in these areas will start, driving up prices of land therein.

In time, these new urban areas will become the sub-city centers for people farther along the line; they will become the new sources of jobs, leisure, and conveniences for these people. The process will be replicated as you move farther and farther.

Migration from and decongestion of Metro Manila

Latest figure from the National Statistics Office puts the population of Metro Manila or NCR at 11,553,427; that’s 12.5% of the projected 92.23 million for 2009 in the entire country.

Forbes.com ranks Manila, our capital, as the city with the highest population density in the world. With a population of almost 1.6 million, it has a density of 41,014 persons per square kilometer. Cairo, Egypt is second with 36,618 per square kilometer. Hindi na mahulugan ng karayom ang Maynila : (

I think migration from Metro Manila will come in stages:

• First will be low-income earners who are forced to settle or rent in Metro Manila because of work. Many will relocate or go back home to the suburbs or even to nearby provinces.
• Second will be middle-class parents who want to live in the suburbs but can’t because of work and their kids who are studying in Metro Manila.
• Third will be some high income earners who will call their weekend mansions in the suburbs their main home.

In Japan, because of its super-efficient transport system, many employees living in, say, the “equivalent” of Batangas City commute everyday to work in Caloocan City. I’m not saying that exactly the same thing will happen here (they have bullet trains and even Maglevs, we don’t). But it will happen to a certain extent.

Business relocation especially of Business Process Outsourcing companies

According to a 2009 newsletter of the Real Estate Brokers Association of the Philippines (REBAP), many BPO’s are starting to move out of Metro Manila due to high office rental rates.

Down south, there are currently 30 call centers in Muntinlupa and 13 in Laguna. Up north in Pampanga, there are 22. Expect more of them to relocate or to put up additional offices outside Metro Manila.

Last year, Jaime I. Ayala, President and CEO of Ayala Land, Inc. announced that several BPO’s have already reserved office spaces in their flagship project, Nuvali,  in Sta. Rosa, Laguna; construction of the offices haven’t even started yet then. (I will write about this very soon.)

These are just a few of the changes that I think will happen. What do you think?

Let’s hope that whoever occupies the highest office next year will have the zeal to continue, even to hasten this program.

By the way, there’s a forum that’s discussing this development. See lots of pictures and interesting comments from those who have experienced the new PNR.

Thank you so much.