Ayala Land Inc. (ALI) will sell preferred shares to keep foreign ownership in the Philippines' leading property developer within Constitutional limits.

In a special meeting on Tuesday, ALI stockholders approved the sale of up to 15 billion preferred shares at P0.10 par, with existing shareholders qualified to acquire one preferred share for every common stock they hold as of record August 6, 2008. A preferred shareholder takes precedence over a common shareholder when dividends are paid, but has no voting rights.

The noncumulative and nonvoting preferred shares would not be listed at the Philippine Stock Exchange and can only be converted to common shares after 10 years.

To make way for this share sale, the company's board earlier approved the increase in its authorized capital stock from P20 billion to P21.5 billion divided into 20 billion common shares with par value of P1 per share and 15 billion preferred shares with par value P0.10 per share.

According to Fernando Zobel de Ayala, ALI chairman, the issuance of the preferred shares is necessary since the company is close to breaching the 40 percent foreign ownership cap set by the Philippine Constitution. Reaching the limit would mean that investors are locked in and cannot freely trade their shareholdings.

"If they cannot trade in a fairly large and active way, investors would lose interest," he said.

Proceeds of the share sale amounting to P1.3 billion would go to general corporate purposes and capital expenditures.

ALI, through its wholly-owned subsidiary Avida, recently launched the P7 billion in-city Avida Towers Makati West condominium in San Antonio Village geared towards junior executives, professionals and start-up families.

For this year, the company will build 1,800 residential units in different parts of Metro Manila. Over the past four years, Avida launched 8 towers in 3 areas that include Santolan in Quezon City, Sucat, Parañaque and Santa Cruz, Manila.

About 26 percent of Avida sales were made to overseas Filipino workers (OFW), including house and lots in 13 locations in Luzon. The OFW market share is seen growing to 40 percent during the first half of this year.

Jaime Ayala, ALI president, said the impact of the subprime mortgage meltdown in the United States on the company's sales is "something we're monitoring closely."

"But so far we've been looking at our account receivables and payments and all of that but we have not seen issues with the payments. [However] it may affect some people who are making investments," he said.

The company president said the US market makes up a large portion of its sales. However, its diversified geographical market, which includes Europe and the Middle East, would make up for any slowdown in the take up of housing by Filipino-American clients, he said.