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

Good afternoon, everyone. I'm from Investor Relations team, and welcome to Ayala Land's analyst briefing for the first 9 months of 2024. Let me start by recognizing our panel composed of our President and CEO, Ms. Meean Dy; CFO and Treasurer, Mr. Augusto Bengzon; Ms. Mariana Zobel De Ayala, Group Head of Leasing and Hospitality; and Mr. Mike Jugo, Head of the Premium Residential Business Group. Allow me to also recognize the presence of other members of our management committee Mr. Robert Lao, Head of Strategic Growth at New Ventures and Substantial Land Acquisition; Mr. Dan Abando, President and CEO of Makati Development Corporation; Ms. Raquel Cruz, Head of the Core Residential Business Group; and Ms. Isa Sagun, our Chief Human Resources Officer. Let me also welcome other members of our management team. I'm pleased to announce that we have a strong turnout for the call. We have over 90 people dialed-in. And please note, a copy of the presentation is available on the website at ir.ayalaland.com.ph. For questions that we may not be able to answer, we'll just e-mail you accordingly. And without further ado, let me turn over the mic to Mr. Bengzon.

Thank you, please, and thank you to all of you who are joining us in person. I'm sure the 90 who are not here in person are glued to the screen and keeping track of the election results in the U.S. But I think we already know who's the seventh President of the U.S. This afternoon, I'll go over the 3Q results, both financial and operating results of the company after which, I will hand over the floor to our CEO for some key messages. So let me start with the headline. The company sustained its solid earnings growth momentum for the first 9 months of 2024, anchored on resilient property demand and consumer activity. Our consolidated revenues increased by 27% to PHP 125 billion. Net income registered at PHP 21.2 billion, up 15% year-on-year. Our CapEx totaled PHP 51.9 billion, mostly for the build-out of our estates development projects and leasing and hospitality assets. We ended the 9-month period with a very healthy net gearing ratio of 0.7:1. And this was an improvement from the 0.73:1 from the quarter. Turning to segment revenues. Property development increased by 34% to PHP 76.6 billion driven by higher residential and commercial lot bookings. Our residential revenues jumped by 35% to PHP 64.2 billion, while combined office and lots for sale revenues grew by 28% to PHP 12.4 billion, primarily on demand from commercial -- for commercial and industrial lots. Revenues from our leasing and hospitality business totaled PHP 33.2 billion. This is 8% higher owing to the contribution of our new assets, namely, One Ayala Mall and Office towers, Ayala Triangle Tower Two and Seda Manila Bay. Our shopping center revenues grew by 7% to PHP 16.7 billion, while office leasing grew by 7% to PHP 9.4 billion. Moreover, hotel and resorts revenues reached PHP 7.1 billion, up 13% year-on-year. Our service businesses composed construction, property management and other ancillary services, registered a 54% growth to PHP 12.8 billion on account of additional contracts from external projects, airline ticket sales and stable property management fees. Our net construction revenues doubled -- nearly doubled to PHP 8.5 billion compared to the same period last year, while our property management and ancillary services registered a 9% improvement to PHP 4.3 billion. Let me go into some detail on our income statement. Our real estate revenues totaled PHP 122.6 billion. This is 27% higher from last year due to higher residential and commercial lot bookings, additional contracts from external construction projects and healthy leasing operations. Interest and other income reached PHP 2.6 billion, on par with last year as higher interest income from short-term investments and cash deposits were offset by a decline in other income. Our equity net earnings of associates and JVs increased by 2% to PHP 1.4 billion as our joint venture with the Eton Group, FBDC companies and Ortigas Land recorded higher earnings. Our interest and investment income jumped by 85% to PHP 558 million reflecting the higher yields generated from our short-term investments and cash deposits. Other income amounted to PHP 620 million. This is 34% lower year-on-year due to the consolidation of revenues from our joint venture with the Kuok Group. This is AKL Properties, the developer of our Aera estate and ALP's Ciela project in Carmona, Cavite. These revenues were now consolidated under real estate revenues. Meanwhile, total expenses grew by 29% to PHP 94 billion. With business activity ramping up, our real estate expenses totaled PHP 75.8 billion, up 34%, while our general and administrative costs increased by 8% to PHP 6.7 billion. Our GAE ratio, however, has settled at 5.4% lower than the 6.3% in the first 9 months of last year. Our EBIT margin stood at 33.9%. This is lower than 36.4% from the same period last year, but sequentially higher than our first half level of 31.8% and well within our target range of 30% to 35%. Interest expense, financing and other charges totaled PHP 11.5 billion, 14% more than last year due to a higher average borrowing rate and a higher average daily loan balance. Deducting expenses from revenues, income before tax grew by 20% to PHP 31.2 billion. We had an income tax provision of PHP 6 billion, 16% higher year-on-year, translating to an effective tax rate of 19.1%. Income before noncontrolling interest totaled PHP 25.3 billion. This is 21% more than last year. Netting out our noncontrolling interest from our JVs, which grew by 61% to PHP 4.1 billion, net income attributable to ALI equity holders grew by 15% to PHP 21.2 billion. Let me break down our revenue profile. Our strong residential bookings, commercial lot sales, additional external construction projects and healthy leasing operations drove top line growth. So property development revenues rose by 34% to PHP 76.6 billion. And to break this down, our residential revenues jumped by 35% to PHP 64.2 billion on the back of higher bookings across all segments. On the other hand, our office for sale declined by 29% year-on-year to PHP 2 billion due to lower incremental POC, which offset new bookings during this period. We also have not been launching any more office for sale projects. Meanwhile, our revenues from commercial and industrial lots surged by 51% to PHP 10.4 billion, driven by lot sales from Laguindingan Technopark, Nuvali and our Broadfield estates. Our leasing and hospitality revenues reached PHP 33.2 billion. This is 8% higher year-on-year. Shopping center revenues advanced by 7% to PHP 16.7 billion; coming from the contribution of Ayala Malls, One Ayala as well as higher average rental rates. Our office leasing revenues grew by 7% to PHP 9.4 billion, increased rents as well as the contribution of our One Ayala East and West Towers and Ayala Triangle Tower Two, both of which have reached full occupancy. Moreover, hotels and resorts revenues reached PHP 7.1 billion, up 13% year-on-year, owing to the contribution of Seda Manila Bay, higher room rates at Seda Vertis North as well as higher occupancy of Seda Nuvali Tower 2. Our service businesses composed mainly of construction, property management and ancillary services grew by 54% to PHP 12.8 billion. MDC nearly doubled its net construction revenues to PHP 8.5 billion on account of additional contracts coming from the 50-megawatt ePLDT data center project in Santa Rosa, Laguna. APMC's property management revenues combined with other ancillary services generated PHP 4.3 billion, this is a 9% improvement primarily from airline ticket sales and property management fees. Summing up our top line. Real estate revenues amounted to PHP 122.6 billion, this is 27% higher from the previous period. And with interest and other income of PHP 2.6 billion, total revenues grew by 27% to PHP 125.2 billion. So let me turn now to some of our business units, or SBUs, starting with the residential business. So our residential reservation sales reached PHP 100.5 billion for the first 9 months of 2024. This is up 17% year-on-year. 63% of our reservation sales came from the premium segment brands, ALP and Alveo, while 37% came from the core segment led by Avida. 64% of our reservation sales went to our vertical developments, while 36% went to our horizontal projects. Our year-to-date sales performance translates to a monthly average of PHP 11.2 billion. This is 18% higher than the average -- than the annual monthly average of PHP 9.5 billion last year. Just to cite some of our -- the performance of some of our exemplary projects. The sales performance during this period was led by Premier's Park Villas in Makati, The Courtyards in Vermosa, Alveo's Park East Place in BGC, Caleia in Vermosa and The Ametrine in Portico, Pasig City. In terms of the buyer profile, 72% of our sales went to local Filipinos, 27% higher than last year to PHP 72 billion. Sales to overseas Filipinos, which comprised 16% of the total, was down 10% from last year given the relatively limited launches we had at the core segment, which is the -- as you know, the preferred product type by the OFs. While sales to other nationalities grew by 9% to PHP 11.9 billion, accounting for 12% of residential sales. In terms of other nationalities, 55% of our sales went to American passport holders. This is 5% higher year-on-year. For the first 9 months, we launched 15 projects worth PHP 45.6 billion. So notable launches in the third quarter were Ayala Land Premier's Orchard Vistas at Anvaya Cove in Bataan; Ayala Greenfield Estates' Brookside Park; Avida's mid-rise Avida's mid-rise condominium offering, Sentria Storeys Vermosa in Cavite; and the second tower of Amaia Skies Sta. Mesa in the city of Manila. 79% of our launches are in the premium with an almost even split between vertical and horizontal projects. For the fourth quarter of the year, expect us to ramp up launches in line with the demand that we're seeing on the ground, but well within -- but we'll make sure that we are well within our target inventory levels. Turning over to the leasing -- our leasing businesses. For our malls, total malls GLA stands at 2.1 million square meters. Just a note here, this is actually 60% higher than the 1.34 million square meters we had 10 years ago. Our portfolio lease-out rate is 90%, slightly lower than last year due to the opening of One Ayala in the fourth quarter of 2023, which is being -- in the process of being leased out and experiencing a healthy lease-out today. The average occupancy or the average lease-out rate for our malls stands at 90%, while the revenue -- or the pipeline, which is our under construction malls stands at 181,000 square meters. For offices, total GLA now stands at 1.4 million square meters. This is more than double the 610,000 square meters we had 10 years ago. The average lease-out rate for all our offices is 89%, the same level as the same period last year. But please note that we opened 2 new office buildings with a total GLA of 47,000 square meters. The total office pipeline under construction stands at 250,000 square meters. And with regard to tenant mix, 76% of our office portfolio is leased to BPOs, 12% to corporates and only 1% to POGO back offices. So our vacancy rate of 11% is lower than the industry average, which currently stands at 18%. For our hotels and resorts, we have a total of 4,522 rooms. This is more than double the 2,000 rooms we had in 2014. Occupancy and room rates continued to be healthy. The average occupancy for all hotels was 65% while it was 44% for all resorts, just slightly down 2%, respective, for both of these segments. Our total number of hotel and resort rooms in the pipeline or under construction currently stands at a little under 1,000 rooms, 920 rooms. So these are the leasing assets we opened in the third quarter of this year, 60,000 square meters of commercial leasing space, of which 47,000 represents our openings in the office sector coming from Park Triangle Corporate center in BGC and the South Tower of One Ayala with 12,000 square meters of GLA. Park Triangle Corporate Center, a total of 30,000, 35,000 square meters. One Ayala is going to be posting corporate headquarter type of tenants. We also opened an additional 13,000 square meters of GLA at Ayala Malls Vermosa in Cavite. We've got 12,000 square meters to go for Vermosa. That should be opening by next year. In terms of CapEx, CapEx currently stands at close to PHP 52 billion. We spent 49% on residential projects, 27% on estate development, 13% for leasing and hospitality assets and 11% on remaining land acquisition commitments. So we did declare a budget of about PHP 100 billion. We believe that we'll be coming in at around 86 -- 85, 86 -- I'm sorry, PHP 85 billion within the year. So there's going to be some pushback on some of our -- some of the launches and therefore the costs will be deferred into next year. Our debt portfolio remains well managed with 88% contracted into tenors and 70% locked in, in fixed rates. Our average borrowing cost has moved up by about 30 basis points. We should be ending the year at about 5.4%. We've been able to extend the average maturity now standing at 4.3 years on account of the sustainability-linked loan with the IFC last October 11. That was PHP 14.5 billion at 5.99% that had an 8-year tenor. And expect us to go back to the capital markets -- debt capital markets in this last quarter. So our balance sheet is quite healthy. Net gearing ratio of 0.70:1. Cash of close to PHP 22 billion. Our total borrowings amounted to just under PHP 270 billion or just an increase of 4% from the end of last year. And our stockholders' equity ended at PHP 352.9 billion. That's 10% higher from the end of 2023. Current ratio at 1.77% as well as a debt-to-equity ratio of 0.76, better than the end of last year. And our interest coverage ratio as well as our net debt-to-equity ratios showed further improvement to 5.3x and -- sorry, interest coverage ratio at 5.3x. Okay. So just to summarize. Consolidated revenues increased by 27% to PHP 125.2 billion. Net income came in at PHP 21.2 billion, up 15% year-on-year. CapEx of close to PHP 52 billion. And we ended the 9-month period with a healthy net gearing ratio of 0.70:1. So that ends my presentation, and I'd like to turn over the floor to our President and CEO.

Thank you, Toti, and good afternoon to everyone. Just a few points to share with everyone this afternoon. The ALI business lines continued with a strong performance, sustaining the 15% NIAT growth. Take-up in the residential business was solid at 17% growth, improving our overall inventory to 18 months, which is significantly lower than the industry average and lower versus our end 2023 level of 22 months. Our RFO or ready-for-occupancy comprised 12% of our residential inventory. And in Metro Manila, our RFO is at 7%. As you can see, our inventory levels are at healthy levels compared to inventory based on industry reports by Colliers, also better than our situation last year, this time last year. We will continue to move our inventory with quality sales by incentivizing our sales team, tactically matching our pay terms to what each project requires and tapping new markets. We have recently established 2 international offices, one in London and another in LA. These have proven effective, demonstrated by the decrease of the cancellation impact to revenue at 8%. And if we are talking specifically just of residential, cancellation would be at 7% of revenues. We expect to end the year with a total of PHP 80 billion in launches, modestly higher versus last year and in line with our capital management program. Of our planned launches for the remaining months of the year, more than 90% of these are just awaiting license-to-sell. Given the unique position of our inventory, almost half of the projects for launch in the coming months are in our core segment, bringing fresh product to the market. More than 70% of our launches will be horizontal projects and only 1 will be in Metro Manila. The rest are predominantly in Laguna and Cavite. Full year CapEx is tracking PHP 85 billion. This is lower than previous forecast as we reduced our launches and staggered the start of mall and hotel reinvention to minimize disruptions in our operations. The reinvention of our malls is proceeding in Glorietta Greenbelt, TriNoma and Ayala Center Cebu. We expect to end the year at an average of over 40% completion rate and to complete the reinvention by 2026 as originally planned. We welcome new merchants to our malls, including Landmark, which opened at Ayala Malls Manila Bay last October and Anko of Australia slated to open their first Philippines store at Glorietta 2 today, November 7. We are bullish on the mid- to long-term prospects of our estates as we look to benefit from the road and rail infrastructure programs of the government and the private sector. We broke ground the Ayala Greenfield SLEx interchange last October 14 with San Miguel Corporation and DOTr, giving our 700-hectare estate its own interchange and providing direct access to our second regional mall in Laguna, which we will launch no later than 2026. We have also divested AirSWIFT to Cebu Pacific. They expect to increase the number of round-trip flights by 30%. And in turn, we will focus on Lio Airport, which we will expand to accommodate double its current passenger capacity and Lio estate where we will develop new hospitality formats and expand Seda Lio as well as our commercial district in the next 5 years. So just to summarize, strong performance at 15% NIAT growth, residential take-up still up at 17%, inventory levels down to 18 months, RFO at 12% and cancellation now down at 8% of revenues. Launches for the year is expected at PHP 80 billion with 90% of the remaining projects for launch just awaiting LTS. Our full year CapEx will be at PHP 85 billion. And infrastructure projects continue to enhance the value of our estates and our land bank. Thank you.

Thank you, Ms. Meean and Sir Toti for the presentation. We will now proceed with the Q&A. For the over 140 that are now dialed in, you may use the chat box function or you may choose to raise your hand and we will unmute your line. We will start with questions on the floor. Are there any? Carl Sy from Regis.

I'll ask a little bit about the residential business first. So it was mentioned that unsold inventory is down to 18 months. I'd like to ask if between premium and core, is there a large discrepancy between the number of months?

Not really, Carl. It's premium, which is the segment that's been growing quite strongly is at 19 months. And core, which accounts for about 1/3 of the total is 16 months. So the average overall is 18 months.

Got it. And I'll ask also a little bit about your views on residential demand. So it looks like for the 9 months, core actually slowed down compared to the first -- so I believe in the first half, the core sales was still up maybe 6% or 8%, it's now flat for the 9 months. So it looks like from the unsold inventory numbers, this wasn't really a supply issue. You had product to sell. So to me, it looks like there's some weakness in demand. And first, is that your view? Should -- am I looking too much into a single quarter? And how do you see this segment and premium segment going forward.

Well, Carl, I think, strategically, we made a decision. I think 16 months is probably already on the low end. And if you will recall, we were asked in the past when will we be more aggressive in the core segment. What are those leading indicators that we're going to look at? And we said interest rates coming down. So that only started coming down last month. So I think going forward, I mean, we're going to be -- and I think the CEO has alluded to this, we will be more aggressive in the core segment.

Actually, for the remainder of the year, correct me if I'm wrong, 50% are going to come from the core segment. So last year, I think we were less than 20% core of the total launches for the year. This year, we are actually forecasting about 30% of full year launches will be core. So this is how we think about it. So we really focus on the core in the last few years, particularly after the pandemic, we faced quite a number of cancellations. And we -- let's just say we really cleaned shop and made sure that we are really moving product. And the team has been very focused on that. We haven't been launching and yet we managed to increase our gross take-up. But I think we're already reaching a point where we need to -- we're comfortable where we are in inventory. We're comfortable with the projects that we have. We believe they are very strong projects. We realized that in certain parts of the market there is an oversupply. Fortunately, we are not geographically in those areas. So we believe that the products that we will be launching in the core will actually be very strong. And we'll start. We'll restart our launches in the core in the fourth quarter of this year.

My next question or set of questions would be on the mall business. From what I can tell in the third quarter, revenue growth was slower than in the first half. So I want to check if perhaps there was a little bit of a quirk from the redevelopment. Is it fair to say that effectively some portion of the portfolio is not generating revenue.

So -- well, generally, I think we do see a bit of a slump in the third quarter. But if we look at same-store sales for our flagship malls, which are generally the bulk of the reinvention, we saw a 9% growth. So for the existing inventory, it's still growing healthily. And we've allocated -- I think we shared at the last analyst briefing that we've allocated about 5% of our GLA a year for our merchant replacement program.

Okay. So just to see if I understand, is it -- does that mean up to 5% of the space is not generating revenue?

Is in a period of transition.

Okay. Yes. So that explains a lot.

Thank you, Carl. If we have other questions from the floor Ms. Jelline Gaza from JPMorgan.

My first question is on the residential CapEx. I recognize that in the third quarter, it was down around 20-plus percent quarter-on-quarter. Can you explain what has driven this? Is it a factor of cash flow matching or seasonality in terms of wet weather? And how should we think about it going forward into the fourth quarter, especially with the magnitude of new launches in the pipeline.

We're forecasting our CapEx to be at PHP 85 billion for the remainder of the year. We're quite confident that we will achieve that. I realize that it is lower than the guidance that we gave a quarter ago, and the difference is really coming from some delays in our start. We basically decided to stagger the start of some of our leasing reinvention and that delayed some of the CapEx for the year. There were also some delays in the payments of land as landowners continued to deliver on some CPs or condition precedents in our land acquisitions. But residential CapEx for the year is pretty much aligned with our original forecast.

Ms. Meean, I think in relation to that initial question, I was wondering that in the past, we usually see a bump in residential revenues towards the fourth quarter. Is that a trend that we can expect this time around? Or is it more normalized this time?

Well, a couple of things. We're laughing because we had this exact discussion ourselves. So the third quarter, usually there is dip in the GTU and the gross take-up because of ghost month. So August, we tend to lose a couple of weeks in August as far as sales are concerned. As you can see, we have -- typically, we have a lot of launches in the fourth quarter and this year will not be any different. So we're expecting increase in our GTU or gross take-up in the fourth quarter as we have the launches.

How about residential revenues like percentage of completion?

Yes, it's a little bit more skewed towards the last 2 quarters of the year, Jelline, when we recognize. Because if you remember, historically, our launches are also back ended. So it's back ended into the prior year, then you get to start -- get to the 10% threshold in the succeeding year and then that's when you start recognizing revenue. So it generally, you see a bump up in the, I'd say, the second half of the year.

Thank you for that explanation. And I think lastly before handing over the mic, question on the presales for Park Villas and Park East Place. It's a common question from clients, so might as well get it out of the way.

I think I'll hand this over to Mr. Jugo. We have good news there.

So for Park East Place, I think last quarter, we mentioned we're at 58%, we're now at 63%. For Park Villas, where we said last quarter we're almost at 40%, now we're at 40%. I think we also want to note for Park Villas, this take-up that we had considers that we've actually increased prices from launch by as much as 15%.

1-5 percent.

Yes. Thank you.

Thank you, Jelline. I also invite the 148 callers. If there are any questions, you may use the raise hand function or you may type your question in the chat box. So far, there are none. Are there other questions on the floor? We have one question coming in. From Ms. Xuan Tan from Goldman Sachs.

[indiscernible] Are you seeing in what's driving this.

Yes. So for the fourth quarter, we'll be launching most -- half of it will be coming from core and there's going to be 1 project in an area where we believe demand will be strong. For premium demand, we'll be steady. We're really hoping for a very strong Christmas season.

I think the movements in the interest rates have also helped, and we're looking forward to reflecting in lower mortgage rates, which would further boost our core residential.

And as a follow-up question, we have question from Mr. Paolo Garcia of ATR Asset Management. What is the company's strategy for launches moving forward to 2025. Should we expect similar to this year's in terms of in terms of premium and core, in terms of horizontal/vertical mix?

Well, we foresee growth in launches. So we'll end this year at about PHP 81 billion. So we'll -- PHP 80 billion. So we're forecasting maybe double-digit growth again in our launches. And as you can see, we're beginning to do more launches in the core segment. So in the past few years, we've really been launching premium segments -- premium products. But as we are hitting our desired level in the core segment, we'll actually be -- we're actually forecasting to launch more core products by next year. As to the horizontal and vertical split, we'll probably stay where we are with about 50% to 60% on the verticals.

Thank you, Ms. Meean.

And if I can just add, this is call out to all the bankers. I know monetary transmission is a little bit delayed. So the Central Bank has started to cut rates. We hope the banks will follow suit by cutting mortgage rates as well. So hopefully, by the first quarter, bring it down, guys.

Thank you, sir Toti. Our next question, we do have Mr. Sangam Iyer from Consilium Asset Management.

[indiscernible]

Let me take a stab at that. First, just on the macro. This segment, most of them do require homes. And I think what we were looking forward to was to see interest rates declining. We think that with interest rates declining and hopefully that getting transmitted to lower mortgage rates, then this will encourage the core buyers who have been pretty much on the sidelines in the past couple of years to start coming out and buying the homes that they deserve. So I think that has been the leading indicator for us that we've been watching out for, the rates finally to start coming down. So we saw that. We just need to see it. Again, with the mortgage bankers, please transmit the lower policy rate into your mortgage rates.

But also, if you look at our -- I guess, the data that we're sharing with you, our inventory levels are now down to 18 months with core at 16, actually, which is where it was, I understand, in 2019. Our cancellation rates are now at 8%, 7% if you only look at residential. And our RFOs are actually at very healthy 12% levels. So if we look at our internal data and the health of the products that we have, we feel that it's time for us to refresh effectively our offering in this segment.

Thank you, Ms. Meean, Mr. Toti. Do you have a follow-up questions, Sangam?

[indiscernible]

Well, actually, if you look at our unbooked revenues, it has begun to increase again. I understand we're at about PHP 147 billion, which is roughly 3 years' worth of property development revenues. So even as we launch new projects, we think that we have enough unbooked revenues to recognize. Also, a lot of our launches are horizontal and horizontal projects take about 3 years to complete. So the complete -- the recognition -- the revenue recognition cycle is going to be fast because we've been launching more horizontals than verticals relatively compared to, I guess, during -- compared to before the pandemic.

Just to clarify -- to close that out. So we do have unbooked revenues close to PHP 147 billion. And as we accelerate launches next year, then the unbooked revenues will continue to rise. So essentially what -- we've gotten to the stage where we are now seeing unbooked revenues rising. And as we accelerate launches next year, then there will be further increase in unbooked revenues.

Okay. A follow-up on the model. Are we done [indiscernible] How do we see the mall revenues going forward? I mean, can you give a flavor of the overall [indiscernible]

Yes. The short answer to your first question is no. The reinvention projects are slated to continue through 2026. And so as mentioned, we've kind of timed the merchant replacement program, which really has the most direct impact to mall revenues to kind of cap it at about 5% of the total GLA per year. But we've actually seen that some -- we were worried that the construction was going to affect the sales of some of the merchants in the mall that are not being affected by the merchant replacement program, and actually they have not. So we've been pleasantly surprised by that.

[indiscernible] are we seeing improvement coming overall cost -- are they still seeing that there's big gap [indiscernible] conversion.

So our footfall is up 10% year-on-year. And as mentioned, the same-store sales for our flagship malls are up 9% year-on-year. So still quite healthy. But again, when you have 5% of the GLA in transition plus the fact that, as mentioned, we were at 90% -- 90% lease-out. We see probably 2% to 3% uplift through the end of the year.

Thank you, Sangam. And related to interest rates, we have a question from Mr. Wilson Ng. How do you see your 5.3% cost of debt trending through the year and next year now that interest rates are falling?

I can just see as far as the end of the year, we're almost there. 5.4% on is my prediction, Wilson. 10 basis points more.

Thank you, Wilson, for your question. And we now have Ms. [ Yvonne To ].

Can you hear me?

Yes, we can hear you. The question that I have is can I just confirm that the unbooked revenue was PHP 147 billion?

We confirm.

[indiscernible] I understand that it's 12% RFO. What is the split between those in Metro Manila and outside Metro Manila.

Let us look for that.

Okay, sure. And also the split between premium and core. I think you mentioned it's 1/3 core.

We will get back to you on the split between -- for RFO 7% is in Metro Manila, 7% RFO in Metro Manila.

Okay. But for the whole unsold inventory. So 7% is Metro Manila...

We'll get back to you on how that is split. But the data we can give you today is as follows: of our inventory in Metro Manila, 7% are RFO.

Okay. So following on this question, could you share a bit of color on how are they faring in terms of those in Metro Manila and outside Metro Manila in terms of your effort to lower unsold inventory.

And the question is if there's any difference between the selling effort for RFOs between Metro Manila and outside Metro Manila RFOs.

Let Mike and Raquel maybe opine on this.

Yes. Because of the location, the residential typology outside of Metro Manila are typically lots. So we don't really see any kind of difference in terms of selling strategy.

And [indiscernible] strategy, but the [indiscernible] demand within Metro Manila and those outside Metro Manila.

For the Metro Manila inventory where most of the core inventory is, we've seen a lot of improvements there and I think that's what's driving the lowering of the inventory. One is because there's been confidence in the market. Second is there's been a lot of activity going back to offices. So there's a lot of increase also both of the end use and the leasing market. Our RFO inventory are mostly in the VisMin area. And we've been just moving those property and the units. And in terms of how we view the market, I think both of them, both the Metro Manila and the VisMin areas are actually picking up for the residential condominium market.

Okay. That's very clear. Just my final few questions. So your presales are great compared to your industry peers that's not doing as well as you are. And many have shared that because they raised reservation fees, they have held back on launches. They've also been diverting efforts to lower unsold inventory. So my first question is, what are you doing differently to grow your presales? Why do you sell better than your peers? That the first question.

I suppose not one single answer. Maybe there are two things. One is premium -- we focus on the premium segment when there was softness in the core segment coming out of the pandemic, and I think that has served us well. Second, the issues in the core that we saw very early on coming out of the pandemic, we immediately addressed. And maybe we were, in fact, ahead of the curve in terms of recognizing the issue in that segment, and as a result, we were maybe also a little ahead in terms of addressing that problem. Maybe the third also is if you look at -- again, I refer to the Colliers report that came out. We are not in the geographic locations where some of the weakness in the core -- or in the market in general is, and I suppose that means we're not experiencing the same weakness or even cancellations that may be experienced in those geographies. So I think those would be the three. Are there others?

Yes. I think especially for the launches for this year, a key strategy of the company is to focus on quality. And what you've really done is reviewed very carefully the brand offerings. And I think the recent products that we've offered, the market has really received these quite well.

Just to respond to your question on RFO. We did present earlier, the CEO did mention 12% of our residential inventory is RFO. Now if we just look at our RFO in Metro Manila and use the Metro Manila total inventory as the denominator, our RFO percentage would be 7%.

Thank you, [ Yvonne ]. We have one question from [ Sean Yap ]. What is the mix of mortgage versus cash finance buyers?

In the premium, about 30%, 20% to 30% get the mortgage. In the core, about 90% to 95% would get the mortgage.

Thank you, Ms. Meean. Do we have any other questions on the floor? Jelline?

This question is for Sir Mike. Park Villas has been at 40% presold levels for, I think, 3 quarters already. Are you considering the project on track on what you wanted to achieve in terms of sell-out for this project?

Yes. Yes, so far. We launched -- we technically have not launched a project, but we started doing private selling late December. So considering this is like the tenth month, I think we're quite pleased with where we are in terms of take-up.

And you're confident that even after the 15% price increase, there will still be takers.

Yes, yes. Thank you.

Okay. Understood. And then on the horizontal, I understand that it's the major driver of presales growth for the third quarter, more than 30% year-on-year growth for third quarter alone. And for fourth quarter, 70% of the launch pipeline will be horizontal. Yes. What's happening there specifically that drives your optimism? And in terms of geographical locations, perhaps or brands or states that have reached maturity that's driving that growth? Any color would be appreciated.

Our horizontals are most in the -- sorry, the Cavite-Laguna area, so south of Metro Manila where historically the take-up has been very good. They're also mostly in our estates, which, again, we typically get very good reception. As I mentioned earlier, the infrastructure in the South is really driving the demand for these products. And I suppose we're quite happy whenever we launch about the surge, the take-up in the first 6 months of projects launched. So we continue to be very optimistic about projects in -- the projects that we will be launching in the fourth quarter.

Could you give us an idea on the price increases in terms of peso per square meter in those 2 provinces?

Typically, we do around 5% to 7% per year.

We have a few questions coming in from Mr. [indiscernible] of JPMorgan Asset Management.

So question about the premium segment [indiscernible]

We will continue to grow it. I think overall, we're looking at low double-digit growth, but premium will probably be high single-digit growth.

Thank you, [indiscernible]. I think we have room for just one more question from the floor or online. If there are no more questions, let me close our 9-month analyst briefing. Thank you very much for attending.