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

Okay. Good afternoon, everyone, and welcome to Ayala Land's Full Year 2024 Analyst Briefing. I am Blase Aquilizan from Investor Relations. Let me start by recognizing our panel led by our President and CEO, Ms. Meean Dy; CFO and Treasurer, Mr. Toti Bengzon; Mr. Mike Jugo, Head of the Premium Residential Business; and Ms. Mariana Zobel De Ayala, Group Head for Leasing and Hospitality. We would also like to recognize other members of our management committee in the audience, Mr. Darwin Salipsip, Group Head of Construction Management; Ms. Raquel Cruz, Head of the Core Residential Business; and Ms. Isa Sagun, Chief Human Resources Officer. I'm pleased to announce that we also have a strong turnout from our virtual audience with over 80 on the call. And please note that a copy of the presentation is available for download at ayalaland.com.ph. For questions we may not be able to address on the floor, we will e-mail you directly. And without further ado, I turn over the floor to Mr. Bengzon.

Good afternoon. And before I start, let me just say that we have good news and not so good news. So which one would you want to hear first? Okay. So the not-so-good news was the country's growth rate was 5.6%, lower than the 6% we were expecting. And now for the good news, next slide. So we said we'd grow the company's bottom line by 2x GDP. We exceeded that. Net income came in at PHP 28.2 billion, that's 15% higher than the previous year. So the company achieved solid growth across our business lines despite the challenges that we faced in the operating environment, and this was anchored on the strength of our diversified portfolio. Our consolidated revenues reached its highest mark to date at PHP 180.7 billion. This is 21% higher year-on-year and 7% higher than our previous high watermark of PHP 168.8 billion in 2019. Net income, PHP 28.2 billion, 15% higher than a year ago. CapEx of close to PHP 85 billion, mostly going to the build-out of our property development projects, estates and leasing and hospitality assets. We ended the year with a very strong balance sheet, net gearing ratio of 0.73:1, which is actually lower than the 0.75:1 of the previous year. By revenue segment or by business segment, revenues from our Property Development business grew by 22% to PHP 112.9 billion, driven by higher residential and commercial and industrial lot bookings. Residential revenues grew by 23% to PHP 94.9 billion, while combined office and lots for sale revenues grew by 19% to PHP 18.1 billion, while stand-alone commercial and industrial lot revenues jumped by 34% year-on-year. Our leasing and Hospitality revenues reached PHP 45.6 billion. This is 9% higher, owing to the contribution of our new assets, namely One Ayala Mall and Office Towers, Ayala Triangle Tower Two and Seda Manila Bay. Both shopping center and office leasing revenues grew by 9% to PHP 23 billion and PHP 12.9 billion, respectively, while hotel and resort revenues reached PHP 9.7 billion, up 11% year-on-year. Our service businesses composed of construction, property management and other ancillary services registered a 57% growth to PHP 18 billion on account of additional contracts from external projects and stable property management fees. Net construction revenues nearly doubled to PHP 13 billion versus the same period last year, while property management and other ancillary services was steady at PHP 5 billion. Moving on to the detailed breakdown of our income statement. Real estate revenues reached PHP 176.5 billion. This is 21% higher from last year, driven by higher residential and commercial lot bookings, additional contracts from external construction projects and healthy leasing operations. Interest and other income increased by 25% to PHP 4.2 billion on account of growth across the 3 subcomponents, namely equity and net earnings of associates and JVs ended up 29% at PHP 2 billion as our joint ventures with the Eton Group, FBDC companies and Ortigas Land recorded higher earnings. Interest and investment income climbed by 22% to PHP 884 million, reflecting the higher yields generated from our short-term investments and cash deposits. Other income amounted to PHP 1.3 billion. This is 22% higher year-on-year on higher management fees, primarily from FBDC. Meanwhile, turning to expenses. Total expenses grew by 23% to PHP 138 billion. With construction activities in full swing, our real estate expenses totaled PHP 111.8 billion, up 26%, while general and administrative costs were managed with a modest increase of 3% to PHP 9.2 billion. Our GAE ratio has improved now at 5% versus the 6% we registered last year or in 2023. EBIT margin stood at 33%, 1 percentage point lower than last -- than 2023, but well within our target range of maintaining EBIT within the 30% to 35% range. Our interest expense, financing and other charges came in at PHP 17 billion. This is 14% more than last year due to a higher average borrowing rate and daily loan balance. Likewise, income before tax grew by 17% to PHP 42.8 billion. This increase translated to an income tax provision of PHP 8.5 billion, 14% higher year-on-year with an average effective -- this translated to an average effective tax rate of 20%. Income before noncontrolling interest stood at PHP 34 billion, 18% higher than last year, while noncontrolling interest from our JVs and associates increased by 34% to PHP 6 billion. Deducting this from our consolidated net income, net income after tax attributable to ALI Equity Holders grew by 15% to PHP 28.2 billion. Turning to our revenue breakdown by business segment. Property development revenues rose by 22% to PHP 112.9 billion. And putting some color to this, residential revenues accelerated by 23% to PHP 94.9 billion on higher bookings across premium and core brands. Office for sale revenues, however, declined 18% year-on-year to PHP 3.5 billion on lower incremental percentage of completion recognition, which offset the new bookings that we recorded during that period. Meanwhile, revenues from commercial and industrial lots jumped by 34% to PHP 14.6 billion, driven by lot sales outside of Metro Manila. These were mainly from Nuvali in Laguna, Laguindingan Technopark in Misamis Oriental and Azuela Cove in Davao. Revenues from our leasing and hospitality business reached PHP 45.6 billion. This is a 9% improvement year-on-year on higher rental rates and the contributions of newly completed assets. Despite our ongoing reinvention initiatives, our shopping center revenues advanced by 9% to PHP 23 billion due to the higher average rental rates as well as the full year contribution from Ayala Malls One Ayala and the improved operations of Ayala Malls Manila Bay. Office leasing revenues also grew by 9% to PHP 12.9 billion from increased rental rates and the contribution of our One Ayala BPO Towers and Ayala Triangle Tower Two. Moreover, hotels and resorts revenues reached PHP 9.7 billion, up 11% year-on-year, owing to higher average room rates and the contribution of new rooms at Seda Manila Bay and Seda Nuvali Tower 2. Our service businesses composed mainly of construction, property management and other ancillary services grew by 57% to PHP 18 billion. This was primarily driven by MDC nearly doubling its net construction revenues to PHP 13 billion on account of its external contracts, mainly from the 50-megawatt ePLDT data center project in Santa Rosa, Laguna. Summing up the top line, real estate revenues amounted to PHP 176.5 billion. This is a 21% growth from last year. Coupled with interest and other income of PHP 4.2 billion, total revenues grew by 21% to PHP 180.7 billion. Moving on to our margins. We have managed our operating margins, which all fall within our investment targets. On the property development side, GP margins for horizontal residential projects stood at 43% and 37% for vertical residential projects. Our target for horizontal GP margins would be in the mid-40s and our vertical GP margins in the mid-30s. So both well within our targets. Office for sale margins were at 48%, higher than 43% last year on the previous year due to higher selling prices, while margins of commercial and industrial lots remained stable at 65%. For leasing and hospitality EBITDA margins, steady at -- for shopping centers, 1 percentage point lower due to our ongoing reinvention initiatives. Offices stood at 90%, while hotels and resorts were at 27%, down by 2 percentage points, primarily on account of our reinvention works. Finally, the EBITDA margins for service businesses was at 6%, owing to the impact of certain quality-based -- quality-focused initiatives. Let's start with -- on the operating metrics. Let's start with the residential sales, part of the property development business. Notwithstanding headwinds in the Metro Manila condominium space, we achieved residential sales of PHP 127.1 billion. This is up 12% year-on-year, anchored on resilient demand from the premium residential segment, horizontal projects and developments in our suburban estates. Sales from our premium brands, Ayala Land Premier and Alveo jumped by 25% year-on-year to PHP 80.8 billion, accounting for 64% of total sales. By product type, we saw an increased demand for horizontal lots and housing lot offerings, which ended 16% higher than a year ago or higher than 2023 levels. Moreover, demand for developments outside of Metro Manila remained robust with take-up accelerating 14% from 2023 levels and now accounting for 46% of total sales reservations. Sales during the year were led by the following projects: Ayala Land Premier's Park Villas in the Makati CBD, Alveo's Park East Place in BGC, The Ametrine at Portico, Caleia in Vermosa Cavite and Sereneo in Nuvali. Turning to our portfolio buyer profile, 72% of our sales came from local Filipinos, which notably grew by 20% year-on-year to PHP 91.6 billion, further underscoring the strength of the domestic market. However, sales from overseas Filipinos and other nationalities declined by 8% and 2% year-on-year, respectively, to PHP 21.6 billion and PHP 13.9 billion, respectively. In the fourth quarter alone, combined sales from these 2 segments declined by 23% compared to the third quarter, and we attribute this decline to 2 factors. First, on the supply side, we lacked inventory in the core segment, which is the preferred product of these buyers. And we launched quite a bit of the inventory late in the fourth quarter, namely in December. Second, there were demand uncertainties brought about by the U.S. elections, which created cautiousness in the overall market sentiment. Next slide, please. Starting this reporting period, we wanted to provide more color on lot sales from our mixed-use and industrial estates to give you a holistic view of sales take-up from our property development portfolio. In 2024, sales of commercial and industrial lots amounted to PHP 14.7 billion, surging 52% from last -- from the previous year and contributing 10% to total take-up. Combined with residential sales reservations, total property development sales grew by 15% to PHP 141.8 billion. Just some of the notable launches we had last year. So we did revise our launch target for the year to PHP 80.5 billion with 70% coming from the premium segment and 30% from core. Launches in our core segment were deliberate and tactical, focusing on specific locations with low existing inventory and underserved demand. Of these core launches, only 2 projects were located in Metro Manila, representing 46% of the total launch value of the segment. By product type, 65% of our total launches were horizontal developments and by location, 66% were in our suburban developments. Notable launches during the year include Ayala Land Premier's Enara in Nuvali with PHP 15.5 billion launch value, which were -- and they were able to generate PHP 2 billion in sales in 1 weekend. Avida's Makati Southpoint Tower 2, our first Avida vertical offering in Metro Manila since 2022 with a value of PHP 6.3 billion. Avida Serin Terraces, a townhouse offering in Tagaytay worth PHP 3.1 billion and Anvaya Searidge Residences buildings A and B with a total value of PHP 3.1 billion. Building A is 79% sold. With that successful take-up, we launched -- we immediately launched the sequel tower Building B. These launches will provide us ample inventory to sell in the succeeding quarters. Okay. Turning to our leasing and hospitality businesses. Higher occupancy and higher and stable occupancy drove our healthy leasing operations. Our total malls GLA at 2.1 million square meters had a lease-out rate of 90% at par with 2023 levels. We have a total pipeline of 707,000 square meters of GLA, which includes projects currently under construction and under planning. For offices, total GLA of 1.4 million square meters with a lease-out rate of 91%, slightly lower than the previous year as we opened 2 new office buildings with a total GLA of 47,000 square meters. In terms of tenant mix for our office portfolio, 79% is leased out to BPOs, 12% to corporates and 0 exposure to POGOs. Our vacancy rate stands at 9%, significantly better than the industry's vacancy rate of 20%. Our total office pipeline stands at 362,000 square meters. Hotels and resorts, we have a total of 4,267 rooms. Occupancy continues to be healthy. The average occupancy for all hotels stood at 67% and 43% for resorts, a 2 percentage point increase from the previous year. Total number of hotels and resorts room in the pipeline stands at 4,058 rooms. We opened 72,000 square meters of commercial leasing space in 2024 to further bolster our recurring income base. For offices, we opened Park Triangle's Corporate Center BGC and the South Tower of One Ayala, which is a headquarter type building. These were opened in the third quarter and are now 67% and 66% leased out, respectively. So that totaled 47,000 square meters of additional office space. We also opened an additional 25,000 square meters of GLA at our Ayala Malls Vermosa in Cavite. CapEx spend came in as per our revised guidance of PHP 85 billion, PHP 84.6 billion, of which 46% were spent on residential projects, 27% on estate development, 15% on leasing and hospitality assets and the balance of 12% on land acquisition commitments. We have a well-managed debt position with 93% contracted into long-term tenors. Average maturity is now 4.9 years, and we were able to maintain our average borrowing cost at 5.3%. We also wanted to highlight some notable achievements, last year, we did the first sustainability-linked financing program, raised PHP 28.2 billion, PHP 14 billion in sustainability-linked bonds and PHP 14.2 billion in sustainability-linked loans with the IMF. Thank you to the IMF -- IFC, sorry. Okay. The balance sheet remains fortress-like. We had a net gearing ratio of 0.73:1, even as borrowings increased by 9% to PHP 282.2 billion. Our stockholders' equity increased by 12% to PHP 358.5 billion. Current ratio improved to 1.75 and our interest coverage ratio is 5.1x higher than the S&P's prescribed range for investment-grade property companies of 3 to 6x. So just to summarize our performance for 2024, revenues reached our highest mark to date at PHP 180.7 billion, 21% higher year-on-year. Net income, 15% higher at PHP 28.2 billion, CapEx of PHP 85 billion, and we ended 2024 with a very healthy gearing ratio. So that's all, and thank you very much. I will now turn you over to our CEO for our key messages.

Thank you very much, Toti, and good afternoon to everyone. Just a few points that I'd like to share before we pass this on to Mariana and to Mike for their presentations. So we ended the year on solid footing despite the challenges of 2024. The CFO already went through the details of our financial performance. So I will not go over it again. Much has been said about the inventory overhang in the industry and the abundance of RFO units. Our early and proactive risk management has resulted to much lower and higher quality inventory. We ended the year with an inventory level of 22 months after we launched PHP 29 billion worth of product in December. Prior to the spurt of launches and as of end November, our inventory levels were at 19 months. We will continue to be disciplined in managing our inventory. Our condo inventory is predominantly located in our estates, Makati, BGC, Arca South and Parklinks. We are less exposed to areas such as Manila, QC and Paranaque, where there is a lot of inventory according to industry analysts. Our RFOs now comprise 10% of our stock. Moreover, RFOs located in Metro Manila comprise only 5% of our total inventory. This is much lower than the 35% reported for the industry. Our land bank utilization target is on track. We used an average of 846 hectares over the past 2 years. Our planned horizontal residential projects, commercial and industrial lots will be launched in available and usable lots, and we foresee that we will continue to be net users of land. However, we are prepared to make strategic acquisitions, especially within our flagship estates, but we are prioritizing properties that are usable in the short term. We started the year with a keen focus on quality. Mariana and Mike will discuss in detail how we are setting new standards of quality in our leasing and residential projects. In 2025, we look forward to the following: the continued residential launches in new areas and in new formats. We started the year 2025 with our first-ever residential horizontal project in Davao, Virendo at Toril. We will continue with our launch momentum with winner launches, another bespoke project in Makati and our first project in Katipunan, Quezon City. Our 2025 residential launch value will be at PHP 80 billion, roughly the same as in 2024, and we intend to retain the 70-30 split between premium and core. The priming of our estates. We broke ground for the Taguig City Intermodal Transport Exchange in Arca South together with the Department of Transportation last February. This is a key milestone in unlocking value in Arca South as a gateway from the South to Metro Manila. The revised design guidelines and development restrictions in Makati will be up for approval by the Makati Central Estate Association in the second quarter with the end goal of spurring redevelopment in the CBD. We reorganized to focus on leisure and tourism. We formed a dedicated leisure estates team to work on the plans, activations and development of our Lio Estate in El Nido and our Arillo Estate in Nasugbu, Batangas. We have several more leisure estates in the pipeline, which we will announce in due course. In order to strengthen the transport links to El Nido, we sold AirSWIFT to Cebu Pacific. We believe that this will open up the market for our El Nido estates, our resorts and our locators. In turn, we plan on expanding Lio Airport to double its passenger capacity. The continued reinvention and expansion of our leasing estates. We are about halfway done with the reinvention of our 4 flagship malls and the 4 hotels under renovation will reopen this year. And later this year, we will start refreshing another 4 malls and renovating 6 more hotels. Lagen Resort in El Nido will reopen in the third quarter with a new positioning suited for the luxury leisure traveler. In addition to the full renovation of all rooms, it will now have a beachfront, new amenities and additional dining destinations. We are opening our first TechnoHub offices in Nuvali and Atria, Iloilo. These are our 4-story buildings located within a suburban estate. Given the high level of interest of the market, we look forward to our new TechnoHub format now in Evo City and in 2 more estates to be announced this year. This year, we will add a total of 128,000 square meters of leasing GLA. We are making big bets in hospitality and industrial real estate. Our plan to add another 4,000 rooms in 5 years is on track. This will include the expansion of our hospitality portfolio by adding new brands to serve different market segments. And we target to develop over 15 green logistics parks in the next 5 years, all in land we already own. Four of these sites will launch this year. And on these logistic parks, we will build a nationwide network of dry warehouses and cold storage facilities, providing the logistics industry's real estate requirements. This way, we can use our assets and capabilities to help improve our country's supply chain and food security. For 2025, we are looking at the following: a PHP 95 billion capital expenditure for the year with 37% for residential, 25% for estate development and 23% to be spent for our leasing and hospitality assets, a step-up from the 15% allocation in 2025. Property development launches of PHP 100 billion, PHP 80 billion in residential and PHP 20 billion for our commercial and industrial lots and the opening and acquisition of over 170,000 square meters of leasing assets from our malls, offices and logistics businesses. Finally, we aim to achieve 2x GDP growth in our bottom line. We look forward to the year and believe we are well positioned for what lies ahead. Thank you very much.

Good afternoon. Over the years, we have been asked about the size of the premium market and our ability to sustain growth. And despite challenges in the local environment, the global financial crisis, the pandemic and geopolitical issues, wealth continues to grow and property continues to be a safe haven to invest in. We do acknowledge that the market is more challenging. Clients become more in sophisticated and discerning. They have high expectations, lower tolerances and many choices. They purchase and invest based on confidence in the product and its unique qualities, its relevance to their lifestyles and trust in the brand. This market will continue to spend on properties they deeply connect with. The following slides provide examples of our projects, their unique features and why people are buying them. These are reasons to believe in our continued success. Park Central Towers will be turned over this year, featuring 540 luxury residential apartments with over a hectare worth of indoor and outdoor amenity. These 2 towers shall sit above a 10,000 square meter retail plaza, featuring carefully curated F&B outlets and retailers located in a coveted address just across Ayala Triangle Gardens. Since its launch in 2016, Park Central has grown at a 10% compounded annual growth rate from its launch price of close to PHP 290,000 per square meter to around PHP 700,000 per square meter based on the pricing we're selling today. This shows the strength of our Makati projects. Our first ALP signature product will also be a pioneer project to be managed by Ayala Land Hospitality to reflect our commitment to elevating the ALP living experience. The diversity of our portfolio also allows us to serve new sources of demand. As mentioned by our CEO, we recently launched Virendo, a highly anticipated horizontal project in Davao with an extremely low density of only 5 lots per hectare. This project delivered PHP 2.7 billion in sales during its launch week. We're extremely grateful for the trust of our joint venture partners, the Floirendo family because they have put in our -- because of the trust they have put in our capabilities and brand entrusting to us their breathtaking property rising almost 250 meters above sea level with spectacular views of Apo-–Talomo Mountain range in the Davao Gulf. Meanwhile, demand in Nuvali continues with the recent launch of Enara, which helped generate PHP 2 billion in sales in 1 weekend event. Finally, we continue to elevate all of our product offerings to deliver enhanced standards of living. Our amenity strategy reflects changing consumer lifestyles, seeking convenience, healthy living and green spaces. Park Central Towers, for instance, has an unparalleled sky terrace amenities that are 500 to 700 square meters in size within an 11-meter triple height space. Each of these sky terraces will also feature a lounge or an express gym and spa. Each of these towers shall have 2 of these 500 to 700 square meter amenities in the sky. Our horizontal development Sereneo boasts the largest pool complex within Nuvali, while Caleia in Vermosa offers more than 4 hectares of contiguous park system to support a very active lifestyle. We continue to build premium communities in our master planned estates. We do recognize that our brand is our key asset, and we are reinvesting in our brand to maintain our advantage in the premium market. We aim to achieve brand resonance as we build places that people love. Thank you.

So shifting over to the leasing and hospitality side. I guess, first, I'll start by saying that kind of across all of our leasing businesses, our strategy remains the same: one, bring our existing assets to full potential; two, ensure that new builds are sufficiently differentiated to drive a premium; and three, make bold moves to build new sources of revenue. So double-clicking on Ayala Malls, we really believe that the segment is going to continue its top line growth momentum as we continue to optimize our existing assets and redefine retail through new malls. The reinvention progress of our flagship malls has hit between 40% and 60% to date. The reopening of Ayala Center Cebu and TriNoma is likely to be in the second half of this year, while Greenbelt and Glorietta will follow in 2026. Other than the physical reinvention works, we are also changing the merchant mix to suit the target market more appropriately to be able to improve footfall and sales. We target to refresh 30,000 square meters per year through 2028 and expect merchant optimization to lift sales per square across all malls. On top of reinventing our flagship malls, we've also allocated just under PHP 5 billion to reinvent our core malls. For these, the reinvention will commence in 2025 and reopening will be phased from 2026 to 2028. We expect again that both the combination of the physical reinvention and the merchant replacement will improve footfall and tenant sales while, of course, creating an enjoyable retail experience for customers and tenants. In terms of our existing assets, operational improvements from our recalibrated leasing formula have already started to manifest through new [Technical Difficulty] such as Manila Bay and One Ayala. We get asked every analyst briefing, so I'll share the information upfront. We're happy to report that the lease out of Manila Bay is now at 81%, and that of One Ayala is at 90%. These 2 malls particularly posted more than 10 percentage point improvements in lease-out, exponential foot traffic [Technical Difficulty] growth and 70% revenue growth as they introduce new food store concepts, experiences and big box format department store anchors. This year, we will target to open 78,000 square meters of GLA, bringing our total portfolio to 2.2 million square meters. Each mall will have a distinct personality suited to the community it caters to. We will also be introducing location-relevant malls, which are strategically positioned to attract people and spend from outside its catchment area. Arca South, Greenbelt 2, Gatewalk and Nuvali will each have their own unique personality and positioning, which we believe will be worth traveling to. A successful example would be Manila Bay, which has become an entertainment mall that's been pulling individuals around from even outside the Bay Area. Overall, we are focused on bringing our existing assets to their full potential through building and merchant reinvention while ensuring that we define the personality and target market of each of our pipeline malls to adapt to new retail demands. Thank you.

Thank you very much. And with that, we open the floor to Q&A. We'll start with our live audience. Questions from the floor? If there are none, maybe we can start with a question from one of our online participants. The first question is from Ms. Yvonne To from Morgan Stanley.

Can you hear me?

Loud and clear, Yvonne.

My first question is on you [indiscernible]...

Thank you for the question, Yvonne. I think number one, looking at the sales in the market we're operating in, 12% is a very solid growth. And maybe one of the reasons why December sales were not where we expected it to be was a lot of the sales launches were back ended to the last 2 weeks of essentially December. So we should see some of these sales come in the first quarter of 2025.

So if I can just add to Mike's supply side response, wherein launches were pushed back to December and prior to the December launches, I think in -- we launched about PHP 30 billion in December. So it was a little late to make sales during that period. Now on the demand side, we also saw a wait-and-see approach from our OFs and other nationalities, which as you know, declined. And the third quarter, we believe that the U.S. elections also created uncertainty in the market. So that's why we think sales on the fourth quarter were a little bit slow.

[indiscernible].

If I may take that answer. I think because if you look at the composition of our OF sales, much of the sales actually coming from the U.S. That's our #1 OF market. And with the elections in the U.S. at the fourth quarter of last year, I think the changes in maybe the market sentiments that have happened as far as how interest rates will move have also affected the demand, particularly from that segment of the market. In 2025, as mentioned, we intend to grow the business at 2x GDP, which is -- which we are forecasting to be at about 12% and feel that our presales will grow at the same rate.

And just to follow up on that, we remain optimistic about international sales, and that's why we are increasing the sellers that we have dedicated to the international segment. So just last year, we grew our sellers by 2% from 7,600 to 7,800 sellers as well as opening 2 new international offices. We opened one in L.A., which we think is a good source of international buyers as well as the U.K. So we are going to grow our international sales initiatives.

[indiscernible].

I'm sorry I didn't catch the latter part of your question. The first one was how mortgage rates trended, and the second one was?

The second one is you're expect to see a pick up [indiscernible] based on [indiscernible]...

I think we've said that we are going to lean on the premium segment for the -- for as long as interest rates remain fairly high. And we have been very -- we have strategically been very strategic about our launches to the core segment because we do believe that the core segment needs to see interest rates coming down before they come back in a big way. The reason being the core segment requires bank loans. And rates, which is -- which goes to the second question, rates have remained fairly stable. We see the 5-year mortgage rate, it's 6.75%. So it's been pretty steady at that level. What -- where rates have gone up would be on the short end. You might recall years back, the banks had these teaser rates. They would offer 1-year rates at about 4.5%, 4.99%, and that's gone now. The 1-year rate is at about 6%, which is a good thing because we were a little bit concerned about those teaser rates. So now mortgage you'd have to come in and borrow at about 6.5%, 6.75%, which I think is reasonable at this stage, but probably we need to see it come down by maybe another 25, 50 to 75 basis points to really encourage the core market to come back.

If I may add, I think it's -- in a challenging market, it's really important to understand relative performance. As our CEO mentioned, industry analysts when they talk about the core segment, it's been down primarily 60%. And if you look at our own core market that's located in these estates, it's down 6%. So I think that also speaks volumes about how we're performing in this type of environment. Thank you.

Next question is a housekeeping question. On your unsold inventory level, you mentioned 19 months, is this right because [indiscernible] 22 months.

It was 19 months at the end of November. As we announced, there was almost PHP 30 billion worth of launches, the last few weeks of 2024. So after that -- those -- that spurt of launches, it went up to 22 months. But prior to that, we were in the 19 months level.

[indiscernible].

It's come down, but I want to give you context why it's come down. It's now at about PHP 122 billion coming from year-end 2023 of PHP 142 billion. And the reason is we actually booked a lot of revenues last year in as much as a lot of our sales came from our ready for occupancy units. So as you know, ready for occupancy units, you can book -- once you pay about 10% -- once you get to the 10% payment threshold, you're able to book 100% of those revenues. So PHP 122 million, but we do see this continuing to pick up in the coming years as we launch new product.

Thank you, Yvonne. And may I now open the floor again for questions from the live audience. Jelline Gaza from JPMorgan. And then we'll have Mr. Carl Sy afterwards.

I have a question on the value of the unsold inventory just to make sure that we're on the same page. Would you be able to disclose as of end 2024 [indiscernible]?

It's a little above PHP 200 billion.

Would you be able to also disclose the mix between horizontal, vertical, Metro Manila and outside as well as core versus premium?

Let me consult my notes. I wrote this down, knowing you would ask it. Okay. All right, in terms of -- okay. So of the total by location -- okay, let's start with premium versus core. It's about 2/3 premium, 1/3 core. And also in terms of product, same 2/3, 1/3 vertical and horizontal. In terms of location, 55% would be in Metro Manila, 37% in Luzon ex Metro Manila and 7% VisMin.

And then I'd like to ask next about the malls business. Fourth quarter revenues growth was quite substantial, mid-teens, if my calculations are correct. How would you attribute that significant growth? How much would be from what you discussed, like the One Ayala and the Manila Bay? And have we started seeing better overall rental rates for those malls that are ongoing transformation?

So the largest kind of center of growth was really from the increase in rates, and that was largely due to One Ayala and Manila Bay. But we also saw increases in some of our newer mall contribution as well and then some of our ancillary business, specialty leasing, entertainment.

So, so to speak, you are yet to see the fruits of the reinventions that you're doing for the bigger flagship malls?

Yes. I think we've mentioned in the past that we phased what we call our merchant replacement program to be able to manage the impact to the overall portfolio. So we've allocated about 30,000 square meters a year. So while we'll reopen the physical renovations, it will be a few years until we see the full potential enjoyed. But the initial indications are promising.

And then like I'm sure you know now what the question will be. Could you please share the update on the preselling level for the 2 projects, Park Villas and Park Easy Place?

Okay. I knew also you were going to ask that. So maybe to answer that question, we have to say the uniqueness of Park Villa as an ultra-luxury project does not serve as a bellwether to measure the health of our market, the market that we're serving. We measure the health of our business primarily on the bulk of our activity in the upscale and luxury market, which is reflected in our positive results now. But again, having said this, the take-up continues to be at 40%, but it's well within -- it's actually slightly ahead of projections based on approvals we saw. Thank you. For Park East Place, it's at 65%, up 2% now from the last analyst briefing.

So Jelline, on Park Villas, we sold one more unit from the time we spoke last November.

Mr. Carl Sy.

I'd like to ask about your outlook for the residential segment. And in particular, if it has changed since the last briefing? And if you could give some detail on whether there's a difference between vertical, horizontal, premium, core? That would be great.

I think we've always said that it's been a challenging market. I think we are better positioned than most other players in the market, maybe because we addressed the issues maybe a little early on compared to the others. But we know we do not work in a vacuum. So we are aware of the inventory in the market. We're tracking it very closely, and we are very deliberate with our launches. Like we did last year, we will continue to lean on our premium brands. We will capitalize on our estates. We are launching more horizontal projects this year than last year, where we feel the market has remained robust and where we also feel we are very clearly differentiated. So I guess to answer your question, we are very cautious going forward, but still, we have quite aggressive plans in terms of our launches and our projects. But we're very deliberate. We will not launch just for the sake of launching. We will keep a close eye on our inventory levels and the use of our capital. We have a lot of projects on push button that if market turns out to be better, then we are ready to capitalize on those opportunities. But if it's weaker, we will pull back because I think at this time, it's very important for us to have, I guess, a very strong control of how we use our capital.

Got it. And just a simple question on the mall business this time. Whether you use same mall revenue growth or same-store sales growth, what was it in the full year in the fourth quarter?

So year-on-year sales growth was 10% and actually, foot traffic also grew 10%.

Those are all of my questions.

Thank you, Carl. We have a few questions on the chat box. Let's start with one question on residential coming from Mr. Rob Skepper from Ashmore. His question is, please, can you talk about the decline in presales performance in 4Q 2024, which was already discussed earlier. But his other question is, if the issue with presales was December launches, how has the performance been in 1Q 2025?

I'll start off with saying that it's been -- it looks promising given the numbers we saw for 2 of our projects, Enara plus Virendo, PHP 4.7 billion worth in a weekend. So it looks promising. Mike, what's your sense?

Yes, no, exactly. We remain positive about the performance for the first 2 months. And the launching in December was really critical to ensure that we have much needed inventory for Q1. Thank you.

Thank you for that. Another question on residential coming from [ Ms. Joanne Loren at Sprare ]. Given the oversupply of residential properties in the NCR and the growth of emerging cities across Luzon, Visayas and Mindanao, is there a sufficient pool of potential buyers in these developing areas? Additionally, do local buyers have the financial capacity to sustain demand for residential properties in these markets, given that Ayala properties are sold at the premium?

Well, I just wanted to go back to where we said our inventory was, which is mostly in Luzon. And as some of you may know, these are regions just north or just south of Metro Manila, which means we really still capture -- a big portion of our buyers are still from Metro Manila, where we believe bulk of the economic activity of the country remains now. So we're quite bullish about our -- I guess, our buyers for our ex Metro Manila projects.

Thank you for that, Ms. Meean. We have one question coming from the online audience. May I call [ Mr. El Hamil of ATR Asset Management ]. [ El ], can you turn on your mic? We can hear you, [ El ], loud and clear.

Okay, yes. I just have a quick question about -- I'm sorry if I missed it. What portion of your inventory is RFO? And can you give a breakdown, please geographically, segment-wise and type of product?

I was expecting that question from Jelline. So yes, I have the breakdown. So the industry report says that there are 74,000 units, RFO units at Metro Manila, equivalent to the -- what they said was 98 months inventory. Of the 74,000 units, 26,000 of those units are RFO, okay? So in terms of our RFO we only have -- this is our RFO, total. In terms of units, if the industry has 26,000, we have 1,303 units. So that's 5% of the RFO in the market. And we also take comfort in the fact that our RFO are in prime areas. So these are in the main cities. In terms of units, for example, Makati, only 120, BGC only 104. So I think in terms of RFO, we're in a good spot. We're not particularly worried about our RFO situation, which is about 10% of our total inventory.

I would also like to ask about any updates on the developments in Arca South. And maybe just another question also for a particular mall, Southpark Mall, what is the vacancy rate there in that mall and [indiscernible] is quite taken and what is your plan on there [indiscernible]?

So we're getting the info on the occupancy of Southpark Mall. But the good development there is that STI broke ground and they are intending to build a facility or a school that they're targeting to have about 10,000 students. So that would be a very good addition for our Southpark development -- occupancy.

We'll get the number, [ El ].

Arca South, so we broke ground for the TCITX, which is an intermodal terminal. This is where all the provincial buses from the South will come in and passengers would then transfer to either a city bus or the north-south commuter rail or the future subway in Metro Manila. So this will actually be a bus and a rail and a subway interconnected terminal. We are also advancing in the implementation of SEMI or the Skyway Stage 3, am I correct? SEMME, in S-E-M-M-E, which will connect the Skyway with C5. Meanwhile, we will be completing our mall. So we've put that on hold since the pandemic. And if you go there now, you will see that we are completing the projects and our first phase of the mall will open by end of this year, second phase by next year.

Southpark.

Southpark 80% occupancy. 8-0, yes.

Yes. Probably my last question. Can you give us some color on the commercial and lot sales you guys had in the past year. Geographically, projects that [indiscernible] and if you can also give us the profile of the buyers, if you can.

I'll let our Head of Estate answer that question, Chris Maglanoc.

So the estates where we had the most interest in were Nuvali. We also had Arca South and Broadfield. So those were the 3 in Luzon. And then for Visayas and Mindanao, there's a lot of interest in Azuela and our project in South Coast City. So those 5 estates accounted for a sizable portion of our commercial lot sales. And in terms of the buyer, some of them were repeat buyers, but we were also able to engage with new buyers. Now some of these are really big ticket items. We're talking of -- in the vicinity of PHP 1 billion each. So there's a very limited pool for this type of buyer. So we were banking on our extensive network of existing buyers.

So the buyers for commercial lots are really local entrepreneurs, some of whom have plans to put up their own businesses or their own offices in -- or hotels even in our developments. Some of them are investors, so they're holding on for future land value appreciation. But perhaps one thing to note about our commercial and industrial lots is we're also differentiating offering more varied products. So we have shop houses, which are lower ticket lots, about PHP 50 million to PHP 100 million. And we also have, as part of our leisure estates, commercial lots effectively, but for more of a tourism or a leisure use, like where our buyers can put up Airbnb-type facilities or hotels. So that's a segment of the market, again, which we foresee significant growth. In 2024, our commercial and industrial lot sales grew by 47% -- am I correct? 47%. About 50% -- 52%. So we're actually seeing quite a big jump in sales in that segment.

Thank you, [ El ]. The next question will come from Mr. Gilbert Lopez of Macquarie.

I want to ask [indiscernible].

Yes, we're quite bullish about the commercial lot sales. These are all inside our estates. So I suppose with the performance of our estates, buyers also want to have an opportunity to take part in the upside by holding land, not just residential units, where they can, like in BGC, put up their own buildings or their own -- even their own apartments, their own hotels. So the main, I suppose, in terms of value, they remain in our estates such as in Makati, such as Arca South, in Taguig. I think we'll have an offering in Circuit, where else, Chris? In Cebu, we'll have some opportunities as well. And our shop houses in Tarlac, in Bulacan, in Lipa, in Cavite. So there are different formats. We'll continue to have commercial lots in Lio as well. So that's another estate where we find our buyers would like to be part of. That's one side. The other side are our industrial estates. So as you know, manufacturing and warehousing continues to grow in the Philippines and our industrial parks in Pampanga, in Naic, Cavite and in Batangas in Laguindingan are also very popular with our buyers.

So fortunately, we have the land to be able to unlock these horizontal developments. So both residential, horizontal and commercial and industrial lots. And that's why we did show -- for the first time, show you a slide on property development sales because we think commercial and industrial lots will continue to play an important role in our -- in the growth of our business.

We just have a few questions on the chat box coming from Mr. Sean Zhuang from APG Asset Management. On residential, how do you see the price gap between primary and secondary market? And what discount are we seeing in the market for Metro Manila versus provincial? What is our pricing strategy? And another question from him. Please elaborate on the increase in pipeline for malls and hotels.

On the pricing strategy, it's hard to answer it in general for Metro Manila because as mentioned, there are areas where demand is higher. Definitely in Makati and BGC and Taguig in Arca South, prices have held and we are able to escalate prices. There are differences clearly between prices in the primary units versus the secondary market prices. But I think most of the buyers will just understand this from a cash point of view, present value point of view because if you do buy in the secondary, you'll either need to go to the bank and get a loan or pay in cash. Now property prices in the South Nuvali area, the area here continue to be strong. We've been able to escalate pricing anywhere between 5% to 7%. And we believe we are still positive about the potential for these areas. Thank you.

Maybe on the malls and hotels pipeline. So I think we shared earlier that we have about 700,000 square meters for the malls that's under different stages of either construction or planning. So this year, we're going to be opening quite a bit of GLA in the South across Vermosa, Evo City and also in Nuvali. We're also opening some GLA in Park Triangle, which is in BGC as well as our CEO mentioned [Technical Difficulty] Arca South Mall. For next year, we are going to be opening GLA in Parklinks. We have an expansion in TriNoma as well as more GLA across Evo City and Nuvali and then the second phase of Arca as well as the much anticipated mall in Mandaue as well. So really, you'll see that across both of our malls and our hotels, we're doubling down on our estates, and we're really excited about the potential. For our hotels specifically, we have also much anticipated the opening of Mandarin, so about 280 rooms here in Makati as well as another Makati hotel closer to the Glorietta One Ayala area. We also have rooms planned across Makati in Lio Beach as well and also in Cebu. Does that answer your question?

Yes. Thank you, Mariana. We have 2 more questions on the financials and CapEx. This is coming from Mr. James Kenneth with Eco. The question is, how does Ayala Land plan to finance its target CapEx of PHP 95 billion? Specifically, what portion will be funded through debt capital, issuance of bilateral loans and other financial sources? And do we already have a target for these fundraising activities? And related to that, also asked by [ Ditas Lopez ], does Ayala Land plans to raise as much as PHP 75 billion via debt capital market this year based on the company's disclosure. Will you be tapping the international market? Or will the entire amount be raised locally? How much will be in bonds?

So the -- I'll answer the last question first. The fundraising will all be domestic peso. The PHP 75 billion, PHP 25 billion of that is earmarked for refinancing. So we have maturities of PHP 25 billion. The balance of the PHP 50 billion is -- right now, it's probably -- how do I say it, it's probably on the high side. We think we'll be borrowing much less than that. Most likely we'll go to the market for PHP 30 billion, of which half -- similar to how we do it before, half will go to bank financing and the other half, we will tap the capital markets. So I think PHP 25 billion for refinancing, that's going to happen and then maybe another PHP 30 billion for -- to fund the new CapEx.

Thank you for that. And I think we are actually 15 minutes past our schedule. If there are any further questions, please send us an e-mail at [email protected]. Thank you very much for the participation, and Merienda is served at the back. Thank you, everyone.

Thank you, Mariana. Thank you.