Ayala Land, Inc. (ALI) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning. Welcome to Ayala Land's 2020 Annual Stockholders Meeting. Let us start the proceedings with the Philippine National Anthem. [Presentation]

Good morning. We will now start with the meeting proper. We welcome our Chairman, Mr. Fernando Zobel de Ayala.

Good morning. The Annual Stockholders Meeting will now come to order. For the first time in our history, because of the current health crisis, we are holding this meeting in a virtual format. Let me welcome our fellow stockholders who have joined us in the live webcast of these proceedings and thank our shareholders who are participating in this meeting through voting in absentia system for their appointment of the Chair as proxy. Joining me in this meeting are Jaime Augusto Zobel de Ayala, Vice Chairman; Bernard Vincent Dy, our President and CEO; Jaime Laya, our Lead Independent Director and the Chair of the Audit Committee of our Board; Cesar Purisima, an Independent Director and the Chair of our Corporate Governance and Nomination Committee of our Board; Augusto Bengzon, our CFO and Chief Compliance Officer; Solomon Hermosura, our Corporate Secretary; June Vee Monteclaro-Navarro, our Assistant Corporate Secretary; Michael Anthony Garcia, Head of our Investor Communications and Compliance Division. The other members of our Board, officers of Ayala Land and representatives of SyCip Gorres Velayo & Co., our external auditor, are joining the meeting through the live webcast. Mr. Secretary, have the stockholders of the corporation been duly notified of this meeting?

Yes, Mr. Chairman, we have duly notified our stockholders of this meeting. On March 30, 2020, we sent to our stockholders of record as of March 6, 2020, the notice of the Annual Stockholders' Meeting and the definitive information statement in 3 ways: First, by e-mail to all stockholders who have provided us with their email addresses; second, by posting on our corporation's website; and third, by disclosure in the Philippine Stock Exchange. In addition, the notice was published on April 13, 2020, in the Philippine Daily Inquirer. Accordingly, Mr. Chairman, our stockholders, have been notified of this meeting in accordance with our bylaws and applicable rules, including our internal guidelines on participation in a stockholders' meeting by remote communication and voting in absentia under extraordinary circumstances, which are embedded in our definitive information statement that the Securities and Exchange Commission approved.

Thank you. Do we have a quorum at this meeting?

Yes, Mr. Chairman. For the quorum, there are present in this meeting stockholders owning at least 23,305,424,511 shares, representing 83.88% of the 27,785,256,860 total outstanding shares. Therefore, we have a quorum, and this meeting may proceed. Mr. Chairman, we will reflect in the minutes the breakdown by stockholders present in terms of their mode of attendance and the percentage of the outstanding shares that they own as well as the number of those joining us in the live webcast of the meeting.

Thank you. Though we are holding this meeting in a virtual format because of government regulations that prevent us from in-person meetings, we have strived to provide our shareholders the opportunity to participate in this meeting to the same extent possible as in an in-person meeting. Our Corporate Secretary, Mr. Hermosura, will now share the rules of conduct and voting procedures for this meeting.

Thank you, Mr. Chairman. The rules and procedures are set forth in the definitive information statement and in the explanation of agenda items, which forms part of the notice of the Annual Stockholders' Meeting. I would just like Mr. Chairman to highlight the following points to our stockholders who are joining us on our live webcast. Number one is stockholders who registered under the voting in absentia and shareholder system or who notified the company by e-mail to [email protected] by April 13, 2020, of their intention to participate in this meeting by remote communication may send their questions or comments to the same e-mail address. Mr. Mike Anthony Garcia, Head of our Investor Communications and Compliance Division, will read the questions or comments received before 9:30 a.m. during the Q&A period, which will take place after other matters under item 8 of the agenda. Management will reply to questions and comments not taken up during the meeting by e-mail. Number three, as indicated in the ballot for the voting of shareholders, there are 5 resolutions proposed for adoption by the stockholders in this meeting. Its proposed resolution will be shown on the screen as the same is being taken up. Number four, stockholders could cast their votes on these proposed resolutions and in the election of directors beginning April 2, 2020, through our voting in absentia and shareholder system. The polls will remain open until the end of this meeting for stockholders who have successfully registered to cast their votes electronically using our voting in absentia and shareholder system. And finally, number five is we have tabulated the votes cast as of April 13, 2020, after the end of the proxy validation process. These votes are from stockholders owning 23,292,221,733 voting shares, representing 99.94% of the total voting shares represented in this meeting and 83.83% of the total outstanding voting shares. I will be referring to the results of this preliminary tabulation when I report the voting results throughout this meeting. The results of the final tabulation of votes with full details of the affirmative and negative votes and abstentions will be reflected in the minutes of this meeting. Thank you, Mr. Chairman.

Thank you. The next order of business is the approval of the minutes of the Annual Stockholders Meeting held on April 24, 2019. An electronic copy is available on the website of the corporation. I will now ask our Secretary to present the proposed resolution and the voting results on this item.

Mr. Chairman, management is proposing the adoption of resolution #S-01-2020 for the approval of the minutes of the Annual Meeting on April 24, 2019. The resolution is on the screen. On the voting results, I am pleased to report, Mr. Chairman, that shareholders owning 23,292,221,733 shares or 99.94% of the total voting shares represented in this meeting have voted in favor of resolution #S-01-2020. Therefore, Mr. Chairman, the resolution has been approved.

Thank you, Mr. Secretary. The next item in the agenda is the annual report, which consists of the message from the Chairman, the President's report and audio-visual presentation. We will now be showing my prerecorded message. Fellow shareholders, good morning. Through the years, Ayala Land has remained both resilient and resolute in its singular goal of enhancing land and enriching the lives of more Filipinos. This was demonstrated in 2019 as we built and invested in more projects across the country. The Philippine economy grew 5.9% in 2019, slightly slower than in the previous years. However, fundamental growth drivers such as BPO revenues and overseas Filipino remittances remained strong. From its peak in 2018, inflation rates stabilized and remained within government targets. This allowed the Banko Sentral ng Pilipinas to cut both the benchmark rates and reserve requirements to spur growth in the country. We also saw a boost in the government's infrastructure spending. It grew by 8% to exceed the PHP 1 trillion mark for the first time. Ayala Land continued to benefit from this positive momentum. Our net income grew by 13% to PHP 33.2 billion in 2019. We continue to allocate significant resources to contribute to the development of new growth centers, helping to promote growth and progress to more people across the country. We continue to be optimistic about the domestic environment and spent PHP 108.7 billion in capital expenditure during the year. This is equivalent to 64% of our revenues, amounting to PHP 168.8 billion to create and develop new projects, particularly in the residential and leasing segments. Ayala Land continued to develop large-scale master plan mixed-use estates, helping spur growth and progress in many communities. To date, Ayala Land has a total of 29 estates located in different parts of the country. In these growth hubs, we provide living and recreational options for the communities that we serve, homes, office towers, malls and industrial parks. In 2019, Ayala Land established 3 new estates, 2 in Luzon and 1 in the heart of Metro Manila. This is in line with our commitment to develop new growth areas and revitalize established districts. The 120-hectare Alveo Broadfield in Biñan, Laguna will produce 80 hectares for commercial activity and 40 hectares for residential projects. The 290-hectare Crescendo in Tarlac City, on the other hand, will enhance the province's push to becoming new metropolis with affordable living and lifestyle options. Over 80% of Crescendo will be devoted to residential areas and open spaces. Meanwhile, the 11-hectare The Junction Place in Quezon City will expand the Ayala Land's footprint in Metro Manila. We have always aspired to provide Filipinos with high-quality living, working and recreational options. In 2019, we launched 48 new projects worth PHP 158.9 billion, the equivalent of close to 95% of our gross revenues. Furthermore, we will continue Ayala Land's efforts to protect the environment, which is an integral and core aspect of our business model. We reduced emissions from our commercial properties by 72%, keeping us on track with our carbon neutrality target by 2022. In addition, we doubled the number of our green building portfolio to 10 LEED-certified buildings as of end 2019. And finally, we opened 2 processing facilities in Arca South in Lio, Palawan to convert plastic waste in our properties into inputs for eco bricks and eco pavers to be used in our developments. In closing, I would like to thank the management and staff of Ayala land for their dedication and hard work. I am proud of their high engagement in the many communities that we serve, providing opportunities for employment, livelihood and productivity while ensuring their health and safety. I would like to especially thank our President and CEO, Bobby Dy, whose leadership has sustained Ayala Land's position as a dominant player in the Philippine property industry. Finally, I thank our Board of Directors for their guidance, and our many stakeholders for your continued trust and support to Ayala Land. The publication of this message comes at a time when the world is facing enormous economic health and social challenges brought about by the COVID-19 pandemic. Ayala Land is doing everything it can to support its employees and reaching out to help some of the most vulnerable communities in the country. Notwithstanding the challenges the world and our country are facing today, we remain optimistic of the long-term prospects as we continue to develop, innovate and build for our many stakeholders. At this point, I would like to call Mr. Bobby Dy to present his annual report. Thank you very much.

Thank you, Mr. Chairman. Well, good morning to my fellow shareholders. As much as I wanted to deliver this message in person, we are fully supporting the initiatives of the government to curb the spread of the COVID-19 virus while taking care of the communities we are present in. With this, please allow me to show my prerecorded message, followed by the company's audio visual presentation. Members of the Board, fellow shareholders, ladies and gentlemen, good morning. Our commitment to advance the country's development goals is best demonstrated in our investments across the various business lines. With these investments, we build sustainable communities and create products and services that enable more Filipinos to partake in the benefits of economic growth and social progress. In 2019, we continued to live up to this commitment as our investments translated into further expansion of our core businesses. We achieved revenues of PHP 168.8 billion, 2% higher than a year ago. Back-ended residential product launches and nearly completed projects sold out in previous years accounted for the significantly slower revenue growth. However, strong leasing revenues and commercial lot sales, coupled with tight cost management, fueled our net income to PHP 33.2 billion, 13% higher than a year ago. The strong leasing growth is the result of our strategy rolled out 6 years ago to invest heavily in commercial assets, and we saw many of these completions now bearing fruit. All these resulted in a return on equity of 16.7%, the highest in the Philippine property sector. Since the rollout of our 2020-40 Plan in 2014, I am pleased with how our organization has responded to the challenge and delivered significant growth over this period from a net income of PHP 11.7 billion in 2013, we have been able to increase our bottom line at a compounded annual growth rate of 19% by the end of 2019. The net income from property development increased at a compounded annual growth rate of 17%, lifted by consistent demand for residential products as reservation sales grew at an annual average of 8%. Meanwhile, net income from commercial leasing advanced at a compounded annual growth rate of 25%, as our malls' gross leasable area, or GLA, increased by 68% to 2.12 million square meters, offices' GLA doubled to 1.17 million square meters and the number of hotel and resorts' rooms increased by 85% to 3,705 rooms. This consistent strong growth has allowed us to disburse PHP 7.7 billion in dividends in 2019, 3% higher than previous year. Notwithstanding our achievements and strong cash flows, we ensure the stability of our balance sheet through prudent cash management and optimal capital deployment. With this, we ended 2019 with a net debt-to-equity ratio of 0.78:1, affirming our AAA credit rating. These results were made possible as the Philippine economy paved the way for steady progress. The country benefited from lower inflation and interest rates, a strong peso, robust household consumption and a growing middle class. These macroeconomic factors have provided for an environment that is supportive of growth, enabling us to sustain our momentum and fulfill our vision of enhancing land, enriching lives for more people. We best demonstrate this through our investments in estate development, residential projects, commercial leasing and other property-related businesses. In 2019, we spent a total of PHP 108.7 billion in capital expenditures. We introduced 3 new mixed-use estates, further venturing into more locations. The 120-hectare Alveo Broadfield in Biñan, Laguna, the 11-hectare The Junction Place in Quezon City and the 290-hectare Crescendo in Tarlac City. Broadfield is a mixed-use commercial development located close to Laguna Technopark and adjacent to De La Salle University Canlubang. It is poised to benefit from the completion of the Cavite-Laguna Expressway, or CALAX, and the planned Cavite-Tagaytay-Batangas Expressway. Meanwhile, The Junction Place is a pocket urban development located on Quirino Highway near Tandang Sora Avenue, which will host an Amaia neighborhood. We see this strengthening our footprint in Quezon City, following the success of Vertis North and Cloverleaf. Lastly, Crescendo is our first estate in Tarlac province and will feature a 30-hectare downtown area, a 32-hectare industrial part and a school by Don Bosco Technical Institute and an Avida community. We are investing a total of PHP 35 billion for the buildup of these estates over the next few years to spur commercial activity, promote job generation and foster community development. With these 3 planned mixed-use projects, Ayala Land will have 29 estates nationwide, cementing its place as the largest mixed-use developer in the Philippines. To ensure adequate inventory across all market segments we serve and to continue the buildup in our various communities, we launched PHP 158.9 billion worth of projects for sale during the year. 85% of the launches were halted for by residential products with a balanced composed of office units, commercial lots and industrial land for sale. I'm also pleased with our progress in addressing the broader housing market served by Avida, Amaia and BellaVita. In total, they delivered 11,476 units in 2019, a compounded annual growth rate of 28% over the last 5 years. In commercial leasing, we opened new malls and retail spaces, capitalizing on strong local consumption. These are Ayala North Exchange Retail in Makati City, Ayala Malls Central Bloc in Cebu, and our biggest small to date, Ayala Malls Manila Bay in Parañaque. Altogether, these account for 213,000 square meters of GLA. To meet the demand requirements from various office locators. We completed Ayala North Exchange BPO, Manila Bay BPO and Central Bloc Corporate Center 1 in Cebu, offering 70,000 square meters in total GLA. In addition, we opened 774 new rooms in our various hotels and resorts, such as Seda Residences Makati, Seda BGC expansion, Seda Lio in Palawan, Huni in Lio Palawan and Circuit Corporate Residences in Makati. In other leasing formats, Clock In, our co-working space provider catering to entrepreneurs, startups, freelancers and flexible space users, tripled its capacity to 1,404 seats by opening 5 new branches. In Vertis North, The 30th, Ayala North Exchange, Alabang Town Center and Lio. Meanwhile, The Flats, our co-living space offering opened a new branch in BGC. Together with its first branch in Amorsolo, Makati, The Flats now has 2,044 beds to serve young office professionals who require accessible and affordable housing within the central business districts. We also expanded our standard factory buildings and warehouses, now totaling 175,000 square meters of GLA. This is managed and operated by our listed subsidiary, Ayala Land Logistics Holdings Corporation, or ALLHC, accommodating demand for light manufacturing facilities and storage requirements from various industries. Our ability to execute on these investments would not have been possible without our construction arm, Makati Development Corporation, or MDC. I am proud to share that MDC celebrated its 45th anniversary in 2019. MDC manage 193 ongoing projects and completed 44 projects as it continued to improve its safety, quality and timely delivery performance. It has also significantly increased its design and build engagements and has started to gear up for prefabricated, prefinished volumetric construction. With its 9 local trading facilities accredited by the Technical Education and Skills Development Authority, or TESDA, MDC produced 5,139 graduates in 2019, bringing its total to 29,845 graduates since the inception of the program in 2015. Complementing MDC is Ayala Property Management Corporation, or APMC. APMC conducted 13,260 emergency response team drills and 192 night drills and rolled out a centralized fire-detection alarm monitoring system to ensure the safety of residents and tenants. Through these efforts, APMC achieved a 0 major fire incident record across its 256 managed properties. APMC received an overall satisfaction rating of 89.1% in 2019 from a survey of 5,786 respondents. Both MDC and APMC ensure that we are able to fulfill our customer commitments and maintain the quality of our completed projects over time. I'm also glad to report on the performance of our strategic investments, ALLHC, Ortigas Land and MCT Berhad. Through ALLHC, we were able to build further on our position as the largest industrial estate developer in the country. In 2019, it launched the 105-hectare Laguindingan Technopark in Misamis Oriental. This brought our total number of industrial estates to 5, adding to our portfolio of 29 mixed user states. Ortigas Land, on the other hand, launched new projects such as The Galleon in Ortigas Center and Empress in Capitol Commons and opened a new wing in its Estancia Mall. Meanwhile, MCT Berhad is preparing the launch of new projects in Petaling Jaya and Subang Jaya after the strong sellout of its projects in 2019. 2019 was a year of significant investments and business activity for our company. As we continue to build projects and communities, we remain steadfast in our commitment to integrate sustainability in our day-to-day operations. Three years ago, we embarked on our ambitious plan to offset the carbon footprint of all our commercial assets by the year 2022. I am pleased to report that as of the end of 2019, we already offset 72% of our carbon emissions through a deliberate shift of 16 properties to renewable energy and allocating 586 hectares of our land bank to become protected forest. We also rolled out new programs for waste management with the launch of our first echo hub in Arca South to drive segregation and improve waste reduction. In 2019, the facility was able to collect 32,000 kilograms of plastic and converted the sub-particles into construction materials to be used in our developments. Our second hub in Lio, Palawan was also introduced in the last quarter of the year. Indeed, we realized significant achievements and progress across multiple fronts in 2019. But as I present my report to you today, the world is going through the biggest crisis of our generation, a global pandemic brought about by COVID-19. An overwhelming majority of business activity stopped overnight and the entire Luzon region was placed under an enhanced community quarantine with major cities in Visayas and Mindanao also under quarantine. Filipino's movements were restricted to help control the spread of the virus, and our operations were brought to a standstill, with the exception of our BPO offices and hotels that continue to operate on a limited basis to accommodate current business needs. Today, we cannot ascertain the effect this crisis would have on our business. We do know, however, that this will have a major impact on the short term and our performance for the year 2020, with high likelihood of a spillover into 2021. We are now in the process of adjusting our plans to ensure that we adapt quickly to this new reality and remain resilient throughout this crisis. In the midst of the situation, what gives me comfort is knowing that our balance sheet remains robust, and I'm confident that this strength will enable us to weather the storm. As I look back over the last decade, it gives me tremendous pride, knowing that our company has undergone an unprecedented period of growth, expanding our product lines and services to benefit more Filipinos, enhancing their quality of life and help bring economic activity to various growth centers in our country. As we enter this new decade and a new chapter, we will start by creating a plan to adapt to the unprecedented disruption resulting from the COVID-19 crisis. As I close this report, let me take this opportunity to thank all my colleagues at Ayala Land. All our company's achievements would not have been possible without your hard work, dedication and commitment. For this, I am truly grateful. I'm also confident that the same team will allow us to overcome the challenges brought about by the pandemic and that we will bounce back stronger and more united as a company, that we are one despite the distance. To our Board of Directors, I would like to express my gratitude for your continued engagement, providing the guidance and wisdom that has allowed our company to achieve market leadership and thrive all these years. Finally, to you, our shareholders and stakeholders, your unwavering support and belief in Ayala Land is what inspires us to be of service to the Filipino people. Thank you for standing by us as we continue our journey to enhance land and enrich lives for more Filipinos. At this point, I would like to invite everyone to watch our corporate video. As we highlight our achievements in 2019, we also share the principles that have guided the way we do business. We take care of our community, nurture the environment and provide employment opportunities. Most importantly, we are one with Filipinos when it matters most. This is the Ayala Land brand of care. Once again, thank you, and good morning. [Presentation]

May I now ask the Secretary to present the proposed resolution on this item and the voting results?

Mr. Chairman, management is proposing the adoption of resolution #S-02-2020 for the noting of the corporation's annual report and the approval of the consolidated audited financial statements of the corporation and its subsidiaries as of December 31, 2019, as audited by its external auditor, SyCip Gorres Velayo & Co. The resolution is on the screen. On the voting results, I am pleased to report, Mr. Chairman, that stockholders owning 23,277,952,533 shares or 99.88% of the shares represented in this meeting have voted for the adoption of the resolution. Therefore, Mr. Chairman, resolution #S-02-2020 has been approved.

Thank you, Mr. Secretary. We now move to the next item in the agenda, the ratification and approval of all the acts of our Board of Directors and officers since our Annual Stockholders Meeting on April 24, 2019, until today. Mr. Hermosura will explain this matter and present the proposed resolution together with the voting results thereon.

Thank you, Mr. Chairman. Our Board and management seek the ratification of all the acts and resolutions of the Board, the Executive Committee and other Board committees, exercising powers delegated by the Board, which were adopted from April 24, 2019, until to date. These acts and resolutions are reflected in the minutes of the meetings, and they include: the election of officers and members of the various Board committees, project launches, updating of the list of authorized representatives and bank signatories, treasury matters, budget and funding plan, investments, declaration of cash dividends, renewal and establishment of credit facilities, share offering through a real estate investment trust company and matters covered by disclosures to the Securities and Exchange Commission and the Philippine Stock Exchange. Stockholders' ratification is also sought for all the acts of the corporation's officers performed in accordance with the resolutions of the Board, the Executive Committee and other Board committees as well as the bylaws from April 24, 2019, to date. These acts were performed to implement the resolutions of the Board or its committees or as part of the corporation's general conduct of business. The resolution is on the screen, Mr. Chairman. On the voting results, I am pleased to report, Mr. Chairman, that stockholders owning 23,197,125,357 shares or 99.54% of the shares represented in this meeting, have voted for the adoption of resolution #S-03-2020. Therefore, the resolution has been adopted.

Thank you, Mr. Secretary. The next order of business is the election of the 9 members of the Board of Directors for the ensuing year. Mr. Cesar V. Purisima, Chairman of the Corporate Governance and Nomination Committee, will explain this item.

Mr. Chairman, in accordance with our bylaws, manual of corporate governance and the rules of the Securities and Exchange Commission, the following stockholders were duly nominated to the Board of Directors of the corporation for the ensuing term: Fernando Zobel de Ayala, Jaime Augusto Zobel de Ayala, Bernard Vincent O. Dy, Antonino T. Aquino, Arturo G. Corpuz, Rizalina G. Mantaring, Rex Maria A. Mendoza, Sherisa P. Nuesa, Cesar V. Purisima. Mr. Mendoza, Ms. Mantaring, Ms. Nuesa and yours truly have been nominated as Independent Directors. The Corporate Governance and Nomination Committee of the Board has ascertained that the 9 nominees, including the foreign nominees for Independent Directors, are qualified to serve as Directors of the corporation. All the nominees have given their consent to their respective nominations. Thank you.

Thank you, Mr. Purisima. Mr. Secretary, may we have the results of the election?

Yes, Mr. Chairman, I'm pleased to report that each of the nominees for directors has garnered at least 22,655,483,160 votes. Given this, I certify, Mr. Chairman, that each of the nominees has received enough votes for election to the Board and that resolution #S-04-2020 for the election of the 9 nominees to the Board has been approved. The resolution is on the screen.

Before we proceed, let me take this opportunity to thank Jaime Laya and Delfin Lazaro for their support and invaluable service over many years. Mr. Laya has been the lead Independent Director of the company for 2 years and has served as Independent Director for 9 years. He brought an enormous amount of knowledge and experience to the Board from his many years in the public and private sectors. Similarly, I would like to thank Mr. Del Lazaro, who has served as a Nonexecutive Director of the company since 1996 or a total of 23 years. He has also brought his many years of experience to our Board and guided us through critical moments in the growth of Ayala Land. On behalf of the Board, I extend my deep gratitude to both of you for providing so much of your time and wisdom throughout all these years. I would also like to welcome Ms. Sherisa Nuesa and Mr. Rex Mendoza and to thank them for their willingness to serve as Independent Directors of Ayala Land. Next item in the agenda is the election of the corporation's external auditor. May I ask Mr. Jaime Laya, Chairman of the Audit Committee, to enlighten the stockholders on this item?

Thank you, Mr. Chairman. The Audit Committee evaluated the performance during the past year of the corporation's present auditor, the firm of SyCip Gorres Velayo & Co., and found it satisfactory. The Committee, therefore, as well as the Board of Directors have agreed to endorse once again the election of SyCip Gorres Velayo & Co. as the corporation's external auditor for the present fiscal year for an audit fee of PHP 4,600,000 exclusive of value-added tax and out-of-pocket expenses.

Thank you, Mr. Laya. I will now ask our secretary to present the proposed resolution on this item and the voting results.

Mr. Chairman, management is proposing the adoption of Resolution #S-05-2020 for the election of the corporation's external auditor and fixing of its remuneration. The resolution is on the screen. I am pleased to report, Mr. Chairman, that shareholders owning 23,192,233,212 shares or 99.51% of the total voting shares represented in this meeting have voted for the adoption of resolution #S-05-2020. Therefore, the resolution is now approved.

Thank you, Mr. Secretary. Mr. Secretary, are there other matters that require consideration by the stockholders?

There are none, Mr. Chairman.

We can now address the questions and comments from the stockholders. Our Investor Communications and Compliance Division Head, Mr. Garcia, will read aloud the questions and comments, together with the names of the stockholders who sent them. As mentioned by Mr. Hermosura earlier, management will reply by e-mail to questions and comments that have not been taken up during this meeting. Thank you.

Mr. Chairman, the first question is from [ Mr. Victor Ahoro ]. "How has COVID-19 affected your business operations? And what are your plans moving forward?"

Thank you, Mr. Garcia. May I request our President and CEO, Bobby Dy, to respond to the question?

Thank you, Mr. Chairman. Many of our revenue-generating businesses have been significantly affected by the enhanced community quarantine, or ECQ. However, we continue to manage and support our communities and customers. APMC, our property management group, is in full operations, continuing to serve our customers in our various residential communities and estates. We have approximately 7,000 people deployed in our various communities, and practically all of them are staying on-site since the ECQ started. More than 90% of our offices continue to operate, primarily for BPO locators. 9 out of 11 of our hotels are also under limited operations to serve the housing requirements of BPO employees. Our resorts in El Nido remain closed. Our malls are closed, except for essential services such as supermarkets, pharmacies and clinics. Our customer relations group continue to service our property buyers electronically for any queries they may have. With regard to our employees, those who are not on site, which is the predominant majority, they continue to work from home. This was made possible by the digitalization initiatives that we implemented over the last couple of years. With regard to our plans moving forward, post-ECQ, our number one priority is to ensure the safety of our employees and our customers. We are finalizing our protocol for employees' reentry to the workplace. We will operate our offices with the least possible head count in the beginning, and a majority will still work from home. We will ensure that strict safety protocols are in place before returning to full operations. This will include testing for employees who will report back to our offices. For other operating assets like malls and resorts, once allowed to operate, we will be reopening them gradually as social distancing will remain a top priority. Also, a stringent safety protocols will be put in place like temperature checks as well as frequent disinfection of high-touch areas. It is important to give our customers the peace of mind as they start to venture out.

Thank you, Bobby. Can we have addition -- some of the additional questions, please?

Yes, Mr. Chairman. We received 2 questions from [ Ms. Victoria Frejas ]. The first one is, "What is the impact of the prolonged knockdown on your financial performance for this year?" And the second question is, "How is your liquidity and balance sheet? And can it withstand a major slowdown?"

Thank you. For the first question, I'd like to ask Mr. Bobby Dy, our President and CEO, to answer it. And for the second question, may I request our Chief Finance Officer, Toti Bengzon, to respond, please?

Thank you, Mr. Chairman. As I've mentioned in my President's report, our financial performance for the year will be significantly affected. Just during the ECQ, we've seen significant loss in revenues from most of our business lines as the economy practically stood still. Having said that, we are now planning to restart our various businesses post-ECQ. As we expected, the buildup will be gradual and will take time, but we are hopeful that once this crisis is over, our products and services will continue to be well positioned to benefit from the renewed growth of the Philippine economy. Let me now turn it over to our CFO, Mr. Augusto Bengzon, to answer the question relating to liquidity and balance sheet.

Thank you, Mr. Dy. The question was, how is your liquidity and balance sheet, and can it withstand a major slowdown. Our priority right now is to ensure that the company has more than ample liquidity. In the past 4 weeks, we have asked all our business units to review their existing plans to immediately implement a zero-based budgeting program and to validate all costs and spending requirements. We have also mandated that they focus only on essential expenditures and what we deem as critical projects. With this exercise, we have rationalized a number of potential investments and land acquisitions. We have also decided not to launch any new projects this year. We believe that we have sufficient projects in our development pipeline to sell once the situation normalizes, given that we had launched PHP 159 billion worth of projects last year. As a result of our budgeting exercise, our capital expenditures will be reduced to PHP 70 billion from our original estimate of PHP 110 billion. We recognize that we may miss out on some opportunities, but we believe that this is the right decision to ensure that Ayala Land is in a healthy and strong financial position throughout this crisis for however long it may persist. We have also revised our projections for our cash flow from operations to take into account a possible slowdown in residential sales, the rent concessions that we have provided to our mall tenants as well as the significantly lower occupancy in our hotel and resorts. Based on this revised budget, the net cash flow from our operations will still be more than sufficient to cover our projected lower CapEx spend, our financing expenses and allow us to potentially reduce our outstanding debt, all without the need to raise new capital. We are currently refinancing relatively expensive short-term loans and have launched a debt capital markets transaction that will further lower our cost of debt while extending our maturity profile. We are targeting to issue a 2-year bond in early June. Our new cash flow budget is for the company to pay down a portion of its outstanding debt obligations this year, bringing it to 11 equivalent, if not lower than our 2019 year-end debt levels. And this should translate to a further improvement in our net gearing ratio. With PHP 18 billion in cash, unutilized credit lines of PHP 25 billion, action plans in place for prudent cost monitoring and capital allocation and conservative debt management, I believe our balance sheet will remain robust and enable us to weather the challenging environment that we currently face and bring the company forward once the overall economic environment improves. Thank you.

Thank you, Toti. Could we have the next question, please?

Mr. Chairman, the final question we received comes from [ Mr. Mark Hulingbayan ]. "How is the company helping its stakeholders during these difficult times?"

Thank you for this question. Indeed, the impact of this pandemic is felt not only across our business lines but more so by our countrymen. Allow me to respond to this question and discuss the initiatives we are undertaking to help the community. First, we allocated PHP 2.6 billion in rent condonation for mall merchants throughout the one 1.5 months' duration of the enhanced community quarantine. For our 78,000 inorganic employees, which is composed mainly of employees of our service providers, construction workers, security and maintenance personnel, we have provisioned PHP 600 million in financial assistance to help them during this crisis. We also created the ALI Pays it Forward campaign within the organization to raise funds through employee contributions to support the 3 designated public hospitals as exclusive facilities to fight the disease. That included the Philippine General Hospital, the Lung Center of the Philippines and Dr. Jose Rodriguez Memorial Hospital and Caritas Manila. I'm very pleased to note that to date, we have raised PHP 82.6 million with a 99.9% employee participation rate. In addition, our wholly owned construction company, MDC, has been actively involved in the conversion of the World Trade Center to become a temporary facility for the COVID-19 patients. MDC headed the fit-out construction of this 9,700-square-meter open space in a span of just 7 days. Normally used to host local and international trade exhibitions and conferences, the World Trade Center was converted into a 500-bed facility, complete with examination rooms, nurse stations, doctors' work areas and medical staff quarters. This was made possible through the collective effort of the Ayala Group, which was able to pool PHP 46.4 million for this project. Globe funded a large portion of the construction costs and provided unlimited WiFi, while Manila Water built 27 private cubicle shower areas for patients and converted 10 container vans for medical workers. Integrated Micro-electronics provided 2 sanitation boots at the entrance and another 2 at the exit. And AC Energy donated 500 bed frames and pillows and will cover 50% of the electricity cost. We did this together with the ICCP Group and Manila Exhibition Center, who will be providing free rent toilet security and janitorial services. Collectively, the Ayala Group's partners contributed PHP 29.5 million to this initiative. This project was supported by the Bases Conversion and Development Authority and the national government. We turned over the completed facility last April 14 to the Armed Forces of the Philippines Health Service Command, who will now serve as its medical operator. Do we have any additional questions?

We have no further questions from the stockholders, Mr. Chairman.

Okay. Thank you. There being no other questions or comments from the stockholders, I would like to take this opportunity to share with you a short video showing how Ayala Land, its employees and its partners have worked together and shown solidarity with the rest of the nation in trying to contain and stop this pandemic. The Board and the management are grateful to all those who participated and accomplished these projects in such an efficient and timely manner. We can now play the AVP, please. [Presentation]

With this, the meeting is hereby adjourned. We will be posting a link of the recorded webcast of this meeting on our website. Stockholders may raise any issues, clarifications and concerns on the meeting conducted within 2 weeks from the posting of the link by sending an e-mail to [email protected]. Thank you very much for joining us. I wish everyone continued good health as we move forward during this very challenging time. Please take care, and keep safe. Thank you.