Cebu Landmasters, Inc. (CLI) Earnings Call Transcript & Summary

Okay. Hello. Good morning, everyone. This Franco Soberano, the Chief Operating Officer of Cebu Landmasters, and with me, of course, our Chief Financial Officer, Mr. Grant Cheng.

Good morning, everyone.

We're very happy to be with you again, our quarterly date with you, our dear investors and partners in the industry. As we were talking here this morning, having a good cup of coffee with my CFO here, we like how time flies. It's not me, middle of the year, I get it flies faster for us at CLI when we're so busy when really so productive as we cross towards the middle of the year. So very happy today to be reporting good news again and we take a lot of pride in that. So in the first quarter, we achieved outstanding earnings performance, 62% year-on-year higher using our normalized net income to parent, which increased to PHP 811 million from PHP 502 million in the previous period, after taking out the tax adjustment provided by credit trade law. I think one great highlight here is really our robust top line growth across all segments, 52% more year-on-year. This is PHP 3.6 billion in a quarter when we listed on the stock exchange, we had PHP 2 billion in a year. So this is very important for us, where we are already reaping the fruits of a lot of hard work, a lot of strategies. And basically, it mirrors -- now our commitment to get and it is through -- it is repaying us today. Thirdly, there is strong sales take up, driven by new launches, 36% growth year-on-year. So I'm referring here to a lot of our reservation sales. We achieved our record performance of PHP 16.5 billion in new reservation sales. This is really us being present in most of the key basement cities. One of the key success factors for us is we never stop construction. We never stop getting new projects during the pandemic. So in a way, Cebu Landmasters is ahead in getting that demand and providing the necessary supply. So we're now inching towards our PHP 100 billion mark. Last year, we crossed the PHP 50 billion mark in assets. We're now at PHP 70 billion. The asset growth is driven by the increase in receivables as units become ready for takeout. So in the first quarter, we launched 4 new projects, one of the most significant of which is our first project offering in our Davao Global Township. We launched the first residential offering called East Village, selling out 3 towers in just 4 days. That's never -- we thought we set a record last year, selling 3B in one week. Now we sold PHP 4 billion in 4 days, another record for Cebu Landmasters. So all this gives us enough confidence and we're one of the few to really provide guidance to you, our investors, our partners, our bankers. Based on the momentum, the amount of launches we still have and even the second quarter performance that we have so far, we are really poised to exceed year-end earnings guidance of plus 20%. We are on track. It's recovering very well and we see a lot of stability, a lot of certainty in what we can control here at Cebu Landmasters. So with that, I turn you over to our CFO, who will give update on our financial performance.

Thanks, Franco. So indeed, it's been a good start to the year for us and I'm happy to share our results and give a little bit more context to those results. And I look forward to all as always, I really look forward to these briefings to engage with your questions and allow us to share with you the details of our business in the spirit of transparency in this period of being a true store and of your shareholder value. So our total revenues grew by 53% quarter-on-quarter from PHP 2.349 billion in the first quarter of 2021 to PHP 3.585 billion in the first quarter of 2022. This was mainly driven by more construction progress or more percentage of public funds and units that are qualified for revenue recognition. So just to segue a little bit from what Franco said, when he said that we're on track to reach or even exceed our guidance target for this year, our industry and the way we account for our results lend itself to very strong visibility of how we're able to go into the report, how we're going to be able to report results until the end of the year, because these are projects that have sold, it's just a matter of executing on the delivery and collecting on the already signed contracts. Our OpEx -- our cost of sales went from PHP 1.2 billion to PHP 1.93 billion, resulting in a growth of our gross profit to 45%. Our operating expenses increased by 34%. And if you go now to our profit before tax, that leads to a 50% growth of profit before -- this is profit before tax from PHP 716 million to PHP 1.07 billion. The growth in the OpEx was -- the significant contribution to the growth in OpEx was due to commissions. And this is what I call the best kind of operating expense. It means that our products and our inventory is moving at a proportionately fast skip. So we are more than happy to pay and support and bring in our selling partners, our brokers that are moving our inventory and we're more than happy to pay this as an incentive for them in order for us to be able to achieve these numbers. So this results in a consolidated net income after tax of PHP 820 million. And for the parent or for CLI shareholders, that's PHP 811 million net income after tax. So compared to last year, quarter one last year, this is a 13% growth on the consolidated basis and a 14% growth on the parent basis. I will emphasize, though, that last year's number was included a one-time recognition or one-time tax benefit gain of PHP 212 million due to the implementation of the credit loan, which if again to job the memory was retroactively implemented even up to as-reported periods of 2020, which means there was a one-time upside onetime date. So in order to compare just the operations or the net income coming from our core operations or our business -- our core business, if we take out that effect of credit, it resulted in PHP 502 million of net income last year in the same period. So if you compare just the net income coming from our core operations and business, that would be PHP 811 million, that is a growth of 62% quarter-on-quarter. So really -- it is really significant result, especially if we just compare the net income contribution from our core business taking out onetime gains. Our margins remains healthy, although I'll be quick to add that yes, there were a little bit of challenges on the gross profit side due to the -- little bit of compression in our gross profit margins due to higher input costs. I think this is something that everyone is quite familiar with, fuel cost and raw material costs have affected this to some extent. But the good news is that a lot of our costs have already been fixed, input costs or construction material costs account for less than 30% of our overall cost, of course, there's land cost, design cost, operating costs. And so our net income margin and our EBITDA margin has remained relatively steady despite some of those pressures that we're seeing from external factors. Thank you. Okay. So let's take a look at where those revenues are coming from? So quarter one this year, you could see that there's a real growth in the revenues we're able to achieve compared to quarter one of last year. So it's a 53% growth and this came across the board. You could see that driven by our core business and hampered by our real estate sales, which grew by 42%. But you could see broad-based improvement as well across all our business segments. Our leasing is up 28%. Hotel revenues are up 284%, but of course, albeit coming from a very low base and management fees from our joint ventures and other development ventures are up by 34%. Our unrealized revenues has also grown to PHP 26 billion. So this is something that we continuously monitor and particularly for me, it gives me great comfort in communicating our projections because this is what I meant by our business is in a position where we have very strong visibility of how many -- how much revenues we still have to recognize. So these are all contracted sales. These are all signed contracts. So despite us growing revenues by 35% and 53% -- 35% for the whole year of last year and 53% quarter-on-quarter this year, we still grew our unrealized revenues. So it means that, yes, we drew a lot from the path. We were able to generate these many revenues and put it on our financial statement, yet, the water level or the unrecognized revenues still continue to grow. So on a net basis, our growth is sustained and we're looking forward to many, many quarters of this type of sustained growth. It is strongly driven by our economic housing model. So again, there's a lagging -- this is -- there's a lag period between actual sales or when we sign a contract and actual revenues when you build the property. So if you recall some quarters ago or about one year ago when we reported reservation sales in 2019 and 2020, it was really buoyed by our Casa Mira economic housing segment. So it is now translating into actual revenues and net income of putting on our financial statements. And if you could see the lower table now, a lot of our business is quite strong broad based. We expanded -- where did we expand outside of Cebu, I think 2015, that was the first time we...

Now it's more than Cebu.

Correct, right. So this is really something that allow the business to become very stable that we are now diversifying ourselves geographically and only 36% of our revenues are now coming from the Cebu JV, whereas 29% is coming from [indiscernible] and 34% is coming from [indiscernible].

We'll still keep our naming Cebu Landmasters, so besides Mindanao Landmasters it is quite long.

Correct and it speaks to our heritage, I know there are many companies that keep their home name there, but it does show that we are quite diversified and it shows our commitment to the entire region. And our growth is -- our expansion rate is from our headquarters in Cebu. So we're expanding our mall. We're going to have our first project in [indiscernible] this is the natural way to grow and I think we've grown quite well and quite sustainably finding sales, right? So if you look at reservation sales or just the number of contract we were able to sign up by this quarter. So last year, we had PHP 16.5 billion worth of sales, our reservation sales. And this year, in the first quarter, we managed to book PHP 4.5 billion worth of sales, again, anchored by that amazing condominium launch in Davao, where we sold over PHP 4 billion worth of Condo sales in less than a month.

In less than a week.

So there's just so much pent-up demand that is out there, demand that we are diligently trying to serve. There's a lot of underserved and backlog demand. So we're not just serving current demand. We're serving in fact, backlog demand. So this chart is dominated by that project in Davao, so it's the one here. But then it belies the fact that we know where to spot opportunities. We know where demand lies. And as we report our numbers in quarter 2, 3 and 4 for the rest of the year, this [indiscernible] balance, but it really shows that when we launch our projects. And in fact, when we acquired the land and way before launching the projects, we really -- it demonstrate our ability to deploy capital properly. And so we're looking at -- I think this year, we -- every year has been a record-breaking year in terms of the number of sales. So 2019 look at this, PHP 9.6 billion in sales, [ 19.0 ] billion and then the pandemic hits and our growth and our sales, maybe the growth trajectory slowed a little bit because people can't go out, we can't do product launches, permits were a little bit more challenging from the government approval perspective. But every year has been a record-breaking year in terms of the number of sales like, the number of launches and the sales values that we're able to capture. And I think this year won't be any effect. In fact, I'm really looking forward to the assumption of a type of growth rate that we've been -- we've managed to achieve sustainably in the past few years.

What I can add on this, Grant, I think that's one of those first charts, you'll see among the real estate companies here, this is really our achievement. It's been a lot of hard work. But every time we plan for a year, we've already planned for it 2 years before, 3 years before. So what really makes this happen is our preparation, what we call our ground game, we are very present on the ground. And this is really also our way of saying that the real estate industry is very much aligned. The demand is there. But companies like CLI who are very efficient are able to take advantage of such opportunity a little better or better. So as I said, keep looking at this chart and I keep parting the back of our sales team, but I want to maintain that chart that trajectory.

Right. And this chart, again this is the leading indicator. So this tells me what kind of revenues and net income I know we'll be able to achieve based on the actual market demand or this is just a matter of execution. So if the ball is in our court, where we have to deliver the projects on time and of course. And historically, we've really done that and we look forward to many, many quarters of this sustained outperformance. All right. Next slide, please. And this is our balance sheet now. And if you look, we're now -- our balance sheet has now grown to PHP 70 billion and that is a 5% growth since the last quarter of December 2021 for year-end. And so this 5% growth is just in one board anchored by the growth really what I would call core real estate assets or core assets in our business. And if you look at where the growth of our balance sheet is, it is in accounts receivables and contract assets, which again the realized monetary value of the sales contracts that we have signed 2 or 3 years ago. Real estate inventories, representing also the value of land that we are holding and we're acquiring land in order to ensure a robust pipeline of expansion. Investment properties have also gone up in value to PHP 525 million. And I would hasten to add that these investment properties are still booked at historical cost or acquisition cost or construction costs without any reappraisals yet, I would just want to emphasize that. So this is really a growth of our balance sheet in our core real estate business. This is despite the fact, by the way, that we paid our cumulative dividend of PHP 1.3 billion since [ 2020 ]. So this is the kind -- the balance sheet would have been much bigger, the equity would have been much bigger. But of course, CLI has continued to at least being in a position, fortunate enough that we can share the dividends to our shareholders. And just a quick look at our capital structure and capitalization structure and the debt structure because I know that a lot of you might be or are aware, especially the Savvy investors who are attending analyst briefings about our interest rate environment and [ bival ] and reference rates creeping up. So if you look at the trend in the past 5 years, we managed to secure cost of debt at lower and lower cost. We managed to get more debt at lower and lower costs. So I always thought I was -- we were in a top privilege extraordinary time because not only did we increase our leverage, we also lengthened our debt maturity profile. So again, we added more depth of the balance sheet and strategically used leverage in order to get expansion. At the same time, we lengthened the debt maturity profile of our interest-bearing debt, such that a lot of our debt, we've managed to move a lot of our debt towards the longer end of the curve. But at the same time, our cost of debt kept going down as our credit kept improving and as more financing institutions and land institutions, new CLI and had confidence and game was very primary. But then we're, of course, noticing that we are not new to gravity and that it's gone up by 7 basis points. And so your team has taken the strategic move or starting to fix the majority of our rates. So we have some work to do where we're fixing more and more of these rates. We're putting them more in the fixed range in order to mitigate and manage the interest rate rise. Now having said that, we don't anticipate interest rate to dramatically increase. So far, the BSP and the finance team has demonstrated an understanding of how to properly manage our fiscal and monetary policy, so that it doesn't introduce a lot of shockwaves into our financial economic system. In other words, they won't -- they will gradually increase it and they communicated this clearly giving companies like us ample time to adjust our strategies, which we are doing so. And so without disclosing anything yet, just know that the capital structure and the capital funding of the company is something that we're planning for and something that we look forward to sharing with you as soon as something is finalized in the next couple of months. Okay. So that concludes my financial performance on this. I'll pass it back to Franco and then later share with you some other exciting things about our financial projections.

Okay. Thank you, Grant. Thank you for the comprehensive update for our investors here. I'll now move to business updates. So our land bank, as you know, has really hovered above the 100 hectares mark and we're able to produce now close to PHP 80 billion, PHP 90 billion of projects in the last 10 years. We still have a very healthy land bank and continuing to acquire such land bank. As you can see now, we have over PHP 12.3 billion of land value. Around 60 hectares are currently under negotiation and you all know about our 100 acres in Ming-Mori Cebu. It's a 1/3, 2/3. 2/3 of our land bank are fully owned by Cebu Landmasters and 1/3 under our JV structures. So you can see us really producing all these new sales, while maintaining our strong land bank at over 1 million square meters. So we expect this to accelerate further this year Okay. So we are on track to spend close to PHP 13 billion in CapEx this year. In the first quarter, the company spent over PHP 2.6 billion in CapEx. So you can see us now moving very swiftly and I would say aggressively. You can see a letter be there when spending decreased during the 2020 for a good reason. And as things opened up in 2021, up to PHP 10 billion and now we are really on a path to spend those PHP 13 million in expenditures. These are mostly in residential development. And then second would be investment properties, our hotel, our office, our mall businesses and then around 20% in land acquisition. So you can see we're very proud of the expansion we have. We are -- what you don't see here is it's diverse and also its economic positioning. In residential, you all know we're in the high middle economic, even socialized segments. Offices include Grade A, Grade B offices attached to mixed-use. Hotels here are all branded hotels, except for new hotels that are CLI produced like Abaca, of course, the Abaca Group here. You have Magspeak, our mountain resort brand and a new whole concept called the pad located just across our building here in the Cebu IT park in Manila Road. And you see our [indiscernible] projects producing very fantastic return for us, almost 50% for sale, 50% recurring. It's almost self-liquidating as a model. 38 Park Avenue, Astra, Master Tower, Paragon, Baseline [ Patria ], our collaboration with LPU in Davao and Banilad High Street. Of course, we go to our high big ticket items like the Davao Global township, which will have its grand opening, meaning opening our wide roads, our parts, our jogging pads this July. So [Foreign Language] and then we have our Ming-Mori, of course very historic, very important project with a lot of impact to the municipalities and you have our Xavier university campus development as well. Speaking of Xavier University and Ateneo, you have our Eagle there, congrats to our friends at UP for the well-deserved win. So all in all, we are actually approaching our 100th project this year, an important milestone. For those of you who've really been with us, we'll have our fifth year as a publicly listed company this June next month.

Time slide as you said.

Yes, I remember we were at 30 projects in the IPO, now we're going to 100. I still have my heart in that meaning I do not lose much share during that span.

[indiscernible]

Thank you for those who are greeting us, happy fifth anniversary and our investors who have been with us. So you can see our residential portfolio is really hard bread and butter, as we speak more than 90-plus percent of our top line comes from residential. In total, we are now over 30,000 units spread across 67 projects, total project value of PHP 91.9 billion of sales value in Visayas and Mindanao. What is important to note is this 89% sold across the board. So you can see here that's how we track it. You have of the newly launched already 80% sold of everything under construction, 86% for everything completed, 96%. So this gives us confidence to continue what we do. What's important is we are -- even before we acquire the property, we are very disciplined in selecting, knowing the price points, knowing the economic realities and knowing what is the best we can give to our buyer in terms of price, position, design, amenities. I think it's in the preparation that leads to our success when it comes to residential. Okay. Next slide. So I'll just quickly brief through, but these are a lot of slides. We launched our Dumaguete Phase 2 there, just very, very recently, our very successful VGP, which was really, I would say, one of our or if not, our most successful selling demand, selling 1 billion a day. We could have sold more if we open more towers, we're opening our fourth tower I think in July or next month. So we also launched another office condo. So this is Astra with residential and office at the back. We really feel that as BPO market is still normalizing, we see an uptake in traditional offices. So we launched our office condo here in Astra Center. And we have Phase 2 of our Bogo project here. So in just 3 months, it's 80% sold across this inventory. Next slide. So you can see a lot of construction going on in CLO and this is where we like to say that we're very focused. It's easy to launch. It's really in the delivery that makes us a better developer. We are very hands-on. We with 30-plus construction projects we know where each project exactly is. We know challenges that needs to be tackled. For example, I was there last month, did my tour Dumaguete, my team just went there earlier this week, meaning from a centralized function or H2 in Cebu, we do have all our regional offices. However, the leadership team from Cebu has a mandate to regularly support and decide the sites, not just virtually, but also physically. So all in all of these projects in Cebu, again, the overall, you have whole Bogo, these are all 86% and these are contributing almost PHP 51 billion in sales value. So as we deliver this as a percent, our competition increases, of course, this will now contribute to the top line we report in our books. Okay, right. So as you know, all our completed projects, so this is where we are now generating lot of cash flow with delivery and turnover units. The banks are very supportive, especially with the timely completion of our projects, with the high customer satisfaction. And this is where we have these projects now turning over like our [ Mesabi ] and Bacolod, Casa Mira and Cebu land, the new baseline, Mr. [indiscernible] among many others. So, next slide. So as you all know, due to the rapid growth of our residential business, we have made several big investment in the leasing business, but the residential is just moving so fast. And yet, you will now see our leasing business now coming into the picture very strongly in the next 2 years. We have now over 30,000 in Gross leasable area competed. There's over 46,000 in under construction. You have 300,000 under the planning stages and you have around 370,000 square meters in GLA that we will deliver in total by 2027. Next slide. So I'm showing a picture here of our newly completed office, a grade A building 5-star green building rated by Verde. It's a combination of 80% -- I'm sorry, 60% for lease, 40% sold. The 40% has already been sold. The 60% for lease is now ongoing in its leasing activities. So we're very proud of this. It's near the gateway to the CBD Cebu. I hope you can now visit it. Now then we'll have our Astra Mall completing next year. It's going to be one of the most premium malls surrounded by our 2 residential towers, our Radisson Red, which is, of course, our hotel. And then you have our partner Cebu, the newest largest development in the downtown area of Cebu across Arcadia. So this will be very exciting. That will revitalized the area.

Yes, [ Sino logo] will be much more exciting, we'll consider.

Sino logo are really just having a good base for downtown. We have a lot of great sites. We have the San Antonio. We have Cathedral. We have our Jose Pedro, you have the connection to the new bridge nearby. So we're very excited about Patria at Cebu. Next slide. So you can hear our stability business. We're showing you the render of our Abaca resort. It's a very busy construction site. We're very excited for this because a lot of us -- a lot of people ask us, is this is for sale, but we always reply with our regrets that this is just a hotel, but it will soon be one of Cebu's most sought after luxury hotels where the Abaca group managing it for us. So in total, we're really looking at 1,700 piece by 2026. So these are the hotel portfolio, so these which is our only operational hotel so far, then we will have like Cebu City which is in the finishing stages. So like if the co-living concept of Astra group, so we'll be the first life in Cebu. It's been very successful in Singapore so far. After lyf, you'll have Radisson Red in 2023, Citadines Bacolod in 2023, we're very busy finishing this. Then you'll have our co-living concept [ Naban ], then you'll have Mercure in the downtown, our jewel, the Sofitel in Cebu single business park, Paragon in Davao and Tagbilaran. Now I would say when it comes to hospitality, we're very selective as well. These are projects attached to mixed-use projects or attached to CBDs or attached to the most prime resort properties. So you'll see how fast they contribute to the recurring business of Cebu Landmasters. So some significant milestones to report. We're very proud to share that in the latest independent market report done by Santos Knight Frank, Cebu Landmasters is undoubtedly the market leader in Visayas and Mindanao. We have 33% of the condominium supply based on all the newly launched condominium supply and 26% supply of the subdivision market in the entire Visayas and Mindanao. So thank you to all our investors, all our buyers, all our partners for making this happen to us. Now how did we achieve this? As we said, during pandemic, we were very busy in a way we believe in market and continued investing and this is now the beautiful result of such approach.

Yes, I'll add something there also. Of course, market share is not just determined by us, depending by how our peers and industry is moving. And I think this is a very good demonstration and a manifestation of our commitment investment we've done. Because if you go around the investment we've done, in the years 2020, 2021, by far the most universal feedback we've gotten is, if CLI who was committed to their projects continue to make sure that their land bank will be converted into actual projects, deliver housing unit. It was very challenging, of course, but this is the advantage of being a homegrown developer with that focus in our geographical region or the use of the political flavor are beating it because we knew how to work with not only local regulators, but local contractors, local suppliers, the local economy in order to move it forward. So while we were slowed down a little bit by the headwinds of COVID, if we're the only ones moving against everyone else who are making decisions outside of these locations and saying that we don't -- we're not trying to move forward in these locations. Then if the ones who are committed to moving that that's able to actually win market. And this is now manifested in this number. So it's also a reflection of our relative performance, relative movement and how we're able to serve the needs of the markets where we're in.

Okay. Thank you for that, Grant. So this is now showing you that special milestone in the first quarter. I believe we made a disclosure about this just to update the market, but I want to highlight this further that this is the first offering in our Davao Global township, our award-winning best township in Asia. So this created lot of excitement. You can see right after the selling, we immediately moved to construction. I mean that is faced in the system, right? That is us really moving efficiently, our buyers are so happy because they see now their reservation deposits, they see their installment payments being put to work, right? And that's how good realization be done, so we are now doing our cloud driving there. So these are the first 3 towers one, 2, 3. So we're launching the fourth one next month. So that actually has a long wait list as well. So for those in Davao get ready. And thank you again for your trust in the company. Next slide. Okay. So the exciting part where I'm very, very busy at it's really the turnover. You have our 38 part avenue there, 2/3 are now covered in glass, dining with the first 1/3 of the building. We [indiscernible] over close to 80 units there. Our beautiful Mesabi is certainly over 2 towers already. There is more than 200 units have been turned over. MesaTierra at Davao, it's very hard how to choose my favorite baby among these projects, but they're all pretty well done. I want to thank the teams in our regional offices for -- are using disciplines being committed to the quality we strive for. So MesaTierra Davao is almost more than 60% to 70% turnover as well. We've started to turn over Velmiro in Uptown Cagayan. The nice problem I have is I'm having schedule, right? So as buyers are still completing the equity payments, my units are done. So this is one of the nice issues that we have to deal with. But that's already finished. We've turned over already several units. This is the submission where our Olympic silver Medalist, Carlo Paalam was gifted a home from Cebu Landmasters and you have of course the mega trend.

These are first recommended.

Yes, he moved then already, their grandma is staying there.

Yes, yes, he couldn't wait such a heart warm.

Okay. Next slide. Okay. So as I would just recap the business updates and the significant milestones. I would say that we're now moving towards the end of quarter 2. The momentum is very strong. To be honest, mobility is at 100% here. Operationally, you see our human resources really beefing up the company very well. We are really looking at another very strong year for you. And I would say what external factors are there presenting itself obstacles to be very honest. The reason we do mostly residentials, it's really a local play. You have the local market now going back to work. You have OFWs now going back to work. You have banks very well still producing buyers with attractive interest rates now to take advantage of homeowners opportunity. So I would say that, it's there in the writing, right? You have CLI producing sales higher than last year, both in new reservations and recognized revenues. It means that the local demographic story is supportive of the local real estate market. And I will leave it there. So -- and I will elaborate further during the Q&A. So I now go to Grant, who will close this for us.

Okay. So we -- I'll just close this on how we're tracking against our projections, right? So in last year or we -- it was just a few weeks ago that we did our full year analyst briefing for our results in 2021, where we were happy to report that we actually achieved 40% year-on-year growth 2020 versus 2021. And so this year, our guidance is 20%, earnings growth our net income growth. And given how we're moving and given the trajectory of where we're going, we're optimistic that we can meet this target and with any grade and with any luck, if we shouldn't be able to actually outperform this target. But it's a long year, we know that we have to earn this. We have to work for this, we will continue to do so for everyone. Okay. So thank you very much. That concludes our formal -- I believe that concludes our formal presentation. Okay. And at this point, I would like to entertain your questions and anything that you might want to discuss and we'll entertain questions, Q&A, chat box. So please feel free to pose your questions there and we'll go through that systematically.

[indiscernible] Michel [ Hilado ].

Yes, please read it out.

Good morning. Are your sales cancellations book and book growing in quarter one, 2022? And do you have a growing number of repeat buyers such as investors, which explains the strong sales of the new double project?

Okay. I'll answer those questions and I might get a bit of help on the second part, repeat buyers. But just -- but I've seen the sales numbers and just this is based on my understanding, okay? In terms of cancellations, we kept it steady at about 3.74% cancellation per se, no. In US, it is slightly higher. Again, this is not unexpected due to some of the economic headwinds that we're seeing, but still something well within the margin or the margin of dollar that we projected. There's always a natural rate of cancellations from people for varying reasons, change their mind between the actual reservation sales and the delivery of the unit. But this is well within not only the standards, but well within our projections and well within our bandwidth of [indiscernible]. The second question is about, do we have a lot of repeat buyers? Actually, a lot of our buyers are first-time or primary buyers. These are -- again, if you connect that to the demand backlog that we are addressing, it just -- it's a natural conclusion and it's not surprise, I think that a lot of it are first-time individual buyers for themselves. We do get repeat buyers, mostly before higher-end investment properties. But for the most part, when we launch a project, especially residential, these are first-time buyers.

Yes, I would really want to mention about repeat buyers because I know a lot of them, they are lot who approach me, say they have asset, they have [indiscernible]. So something, yes. So I interact a lot. In fact, a third day part last week, I turned over -- a company, a buyer who is a repeat buyer doing turnover. That's how happy we are with repeat buyers. I think they see, example, we have a city condo then we are now getting into mid-market beach condo like Casa Mira, so they buy a beach condo, they buy a city condo. They even have a condo del, we have that variety and the servicing enables us to have these repeat buyers.

Franc, something for you, I'll read out this next question. When are we going to launch Casa Mira [ Danar], Casa Mira North, the Pristina North Township in our project.

Yes, so since you've been very loyal by attending the REIT, you'll get one of the first information about this. No, I believe it was commercial on slide on the -- I think it was not updated, it was not highlighted, the launches this year. Is that shared now? Okay. So you can see here that this is our launches for the year. I believe this is where investors and analysts really appreciate know how prepared we are. We plan for this year, 2 years ago, right? So you can see here that we have projects like [indiscernible] it's not here. So the now project, which is a model 15 that we have included this year. We're looking at the third quarter to launch our Casa Mira in the now. It's located along the highway. It's a very beautiful property. It will actually be part of a complex now with some retail and even CLI first work out along the highway. And now I go to Pristina North, I'm glad you heard about it. This anonymous attendee must be from Cebu. Pristina North is our third project under our joint venture with [indiscernible] Aboitiz called Cebu home grown. It was already announced that we acquired a 5-plus hectare property in the Pristina North compound. So what we acquired from AboitizLand is the commercial [indiscernible]. We're very, very excited to introduce our award-winning midrise concept to this beautiful complex for Pristina. We have a whole owner grant from there. So he asked me to make sure it's a very good development from us. So that might be towards the end of the year as we're still in the planning stages of the project. And then [ Magikai ] project Magikai is this?

Something could be.

Yes, This might be the consulting project. We're actually building a showroom by the third quarter there. It's also a very beautiful 2.5 acre property under our Cebu home joint venture. So this will also be at the fourth quarter of the year. So we have a lot of very exciting projects. I believe the timing towards the second half of the year, we'll see even renewed interest in so many real estate products. There is not some more stability post-election. As I said, a lot of the real estate we do here is very local in terms of its external factors. And we feel that after 2 years of Pandemic, we are -- at the end of year close to the end. So we are really looking at the rebound -- the real rebound this year.

Thank you for that, sir. There's another question here from [ B. Almandin ] asking about I mean more redevelopment, any updates. Has the construction works for the project started already and what is the updated time line for the project?

Okay. Thank you, [ Fei ]. So regarding our Ming-Mori, we're actually in the middle of our bidding phase or fewer towards the tail end of our bidding for a general contractor. We invited the top contractors in the country with -- and some of whom have some foreign collaborators. So we're relooking at the third quarter to break ground and really mobilize the contractors. As you all know, this is the only -- one of the few projects we did not proceed from the Philippine Reclamation Authority accompanied by ECC and all the national clearance. So it's a perfect timing for us in the third quarter as scheduled.

Thank you, sir. There's a follow-up question on the Pristina North project. Is this purely commercial? Or it's a mixed-use development with critical dealy?

Okay. I add, okay, my future buyer at Pristina. So the Pristina North will be mixed use. As you know, with 5 hectares and in an area with a lot of residential around the challenge in the [ Calambian ] area there is really no good commercial. So you have to travel far to get your coffee or to buy your groceries to -- for -- even for pre-school or gym. So the goal there is really creating a little community surrounded by midrise buildings, really nice retail store fronts. So it's going to be one of our showcase developments in Cebu. So you're right, mixed use development with critical village is something you got correctly.

Thank you, sir. Before we end, can I read one question there?

Sure, you can read a few more, we're not in hurry.

We see that CLI will start selling lots of the GP, will this be also the setup for other 2 real estate projects -- other 2 estate projects as well?

So I'm glad you pointed that out. So at the end of this slide, you can see DGT lot sales. So as you know, CLI has invested significantly here. Site development is about to complete -- be completed, we're already building our first residential forgone. The outdoor model is about to start and the Civic Center. So we are really preparing to sell commercial lots in the Davao Global township. And there's a potentially PHP 4.5 billion in sales from such and we're just referring to less than 1/4 of that property to be for sale while the JV CLI with our partners will still maintain and develop the rest. So that's happening, hopefully, in the third quarter as well. This is really something that would definitely boost the top line and hopefully accelerate our results for the year.

There's one -- there are more open questions from [ Chris Montelera ]. You have mentioned the possibility of reaching capital. What options are you considering? And have you started engaging down for additions?

We are -- [ Crystal ], we are considering a lot of options, but we've actually narrowed down those options because we've already finished with the consideration phase. We know exactly what we're going to do. We have a strategic direction there. And yes, we are engaged by already investment houses as fairly as few months ago. So as things are already moving, I wouldn't say that if things were in a certain stage, we're confident and they have moved in this direction. So yes, but nothing disclosable yet, nothing has been signed or finalized nor an application has been made. But you are -- please watch out for that. So we're looking at everything from corporate notes, commercial paper, retail bonds. And even on the equity side, there are some things that we are considering. Again, nothing disclosable at this point, but something that we will responsibly and eagerly share with the public once something is a bit more finalized and something -- there is a term sheet or there is something that we can disclose. Okay. Thank you for that. The second question, I believe is also, I think, take on this.

I can take first and else may be brief thinking about it. Considering that somewhat rising rate environment, how much of an impact can this be in terms of demand, like due to possibly higher financing costs. When I bought my first condo in 2009, I paid interest of 8.5% to 9%. And I thought I was, yes, 8.5% to 9%, right? So I mean, historically, if you look at it, right, we are still at 5% to 6% spread over a 10 to 20-year tenure. So I would say if rates were there, even if it inches up to 6% to 7%, it's still within a very reasonable scale. That is why we tell our buyers to take advantage of the environment now. You can lock it in for 3 years and that gives you even 5.9% or 6% at a 3-year fixed. So I would say we are still within a reasonable interest rate environment for the end user because of the long tenures of such loans again right?

And especially if you're getting an EB, for example, typically, the loan is 20 to 25 years. So a few basis points additional or less, is frankly not going to make a very big difference on your monthly amortization payment. For our end users, you have to understand that interest rate costs, while they play a faster, that's not the overarching factor and compared to renting a place versus owning a place where you're actually paying towards equity ownership, meaning you're paying equity ownership when you take it out with a bank, long-term rates have less of an effect -- interest rates have less of an effect in the decision-making whether to get a home or not. So the primary consideration really still is we want to own a home, [Foreign Language] and with the elections over, we were -- I was saying that in a political landscape, housing has always been a constant plan of any administration that you see out there. So this is a very politically neutral industry where every administration understands -- this goes all the way from that it's back that housing is a fundamental pillar of our economy of our society. They're going to be very supportive of this. And that's the demand we're addressing. And certainly even when interest rates rise or creep up, that demand will not go away. We're very, very confident in that.

And I think let's not forget that real estate really rewards those invest early. You all know that capital values in real estate, especially going projects, appreciate at least 30% to 40%, right, during -- from preselling to the time they're completed. So that is what counters interest rate volatility on the capital appreciation, whereas you lose money when it's -- you're not putting your money to work, is what my advice is usually to first-time homeowners. And I always -- as Grant said, rent is a worse kind of investment, right? That does go back to you. So we always try to do this and that's why we have affordable products that give a lot of value like our Casa Mira, where for PHP 1.4 million, PHP 1.5 million, you can own a home. And you just set aside 5,000 a month, right? And when you get your loan for 20 years, that's 7,000 to 8,000 a month.

And the value of that home will continue to -- so that 1.5 that you bought it for that's now worth PHP 3 billion to PHP 4 million once it's full amenities are there. The road networks again adds it, there is...

I think this is applicable to all developers, but I think this is where -- how does CLI give you advantage? We finish our construction projects mostly ahead of our peers. 2, we try to really price it with a lot of upside for our buyers. I think this is where on a developer to developer basis, buyers will now check with in spite of these rising interest rates, which deal is the best for me and it now goes to that. And when you check all the criteria, I hope they will see CLI being very generous in its offering.

There is still actually -- there's one more question here, sir, about Pristina North and customer looking at investment, but...

And also the now.

Yes, let me check first actual numbers, but can I read one question please there? Okay. Recent GB shouldn't have issued the increase of sealing economic housing ceiling to 2.5. What would be the impact of this to CLI?

I can answer yes, that means that the Bureau of investments can -- will now allow an approval or will give us incentives to housing projects with individual housing is 2.5 million or yes. So if we apply for the incentive, it means that more of our housing unit projects will enjoy the bureau of investment incentives such as an income tax holiday for 4 years, among other things. So from that point of view, it provides a little bit of a financial boost to the industry. But nonetheless, this -- it also -- there are considerations to be made about how we allocate those costs as well. But overall, the net effect is quite positive. So in fact, it should move with the inflation rate, right, what they define as economic housing. But yes, it has mostly to do with tax incentives that we're applying for and that we're using judiciously. Okay?

So I think I can answer this about from [ Christa Montera ] like we are here, most companies are getting into logistics and data factors. I know you have a very strong residential business, but are you considering entering these new segments eventually? And will you consider JVs to pursue these businesses? So I would answer by saying that we are getting into industrial through our Ming-Mori project, right? But when you look at logistics or even data centers, a lot have approached us. We're very open as we said we are a diversified developer. However, it now goes back into which investment gives you the return, right? Residential being very stable for us, gives us we say 30% to 40% IRR or return a year, whereas when you look at logistics, I think you're looking at single digits to at least low deals. So that's what we balance out. Of course, it's a great diversification, although we are diversifying into recurring business through our hotels, offices, retail businesses. So for now, we're saying that logistics is attractive, but if we just do it small, that the return will be dwarfed by returning service rental. But if we can scale up really, if there's like a 50-hectare logistics hub we can do, why not? So we are -- that's why we're expanding into townships. We have what we're doing in Ormoc and Mandaue there near the second bridge, we're doing our project in Milena. So these are possible hubs where logistics hubs that we are doing. So thank you -- we've done -- our US business is co-living. So co-living in very prime areas near CBDs -- so we're doing the pad, what we call the patent. So for 3,000 to 4,000 per bed, you can live in the heart of the city, sleep like a baby. So that's the news. So we are really a developer is very agile, as we say, logistics, it's more of a return consideration, okay?

Maybe we're ready to answer the question from [indiscernible]. So how much is the investment for the now Pristine North and something...

I have to say as a company, I think the figures are forefront because, again, as Franco said, we're in planning stages. We have a very strong deal of what we want. So these are going to be project.

I would come up with a rough my part is around PHP 8 billion of new investment first. I know that now is around 2% seen as significant, around 4% and you say the cost sitting around 2%. So if they -- for initial phases of these projects, it's PHP 8 billion of investment for Cebu, these are Cebu projects.

Another question from Michael Hilado. How do you balance construction outflows with BP or loan take out?

Okay. I'll take this one. The answer, Michael, honestly, you cannot balance it. You see, as a developer and this is something that you have to understand the financial model, financial structure of the developer. We are cash out. So the way to actually -- if you talk about balances in a balance funding and where do we get the liquidity, that's where proper capital planning and funding structure are re-counting, you have to project your project costs well, you have to monitor them religiously and diligently. And then you have to also take care of your collections. But even then, you'll have a gap, that funding gap, which has to be addressed but again, proper capital projection, proper capital planning. So the quick answer there really is that before you launch a project or at least when you plan to launch these projects, you already have to have your funding land up. You have to have your capital already prepared for such project. The last thing you want is to run out of liquidity in the middle of a project that everybody loses, right? So there is no balance in the DP. You cannot ask your buyers to fully pay for their unit or to proportionately pay for the unit as it goes up, it just does not work -- the industry does not work that way. You can tweak the proportions, but for the most part, it has -- you have to plan your capital, this is capital expenditure planning and truly a core function of your finance team where capital planning is very key to executing the projects.

Thank you, sir. One last question from Mr. [ Fru Chua ], does CLI be looking at REIT soon?

Well, we've answered this question I think for secure briefings now. Yes, we are looking at REITs, but soon as a relative term, when you say soon, it's not immediately soon, not in the next couple of quarters. We're not applying for anything. It will be in the next 3 to 4 years, I would say, in our intermediate plans, not super longer, but intermediate plans because a REIT from sponsor needs a stable recurring income base with operating assets that has an established record. That's the kind of quality assets we would like to put in REIT before we go out with own REIT. So when we do go out and we will go out with a REIT let's say 3, 4, 5 years from now, it will be infused from as sponsor, with stable quality recurring income assets. So as -- if you are able to look at what we connect that and look at what we're constructing right now. So we're talking about the hospitality projects, the office projects, the retail and commercial projects that we have and we are already thinking about how to structure those assets, help infuse them or perhaps transfer them into a weak vehicle in preparation for a REIT, but we're at that stage. Our first priority is delivering these units for these assets organically. We construct them well. We execute them well. We'll launch, we operate them. And then once a certain have achieved a certain operational stability, then that is the time when it is right to put them in a REIT and get proper valuation and capitalization for them.

So something to -- completely agree with Grant there. And yes, as we end somebody pointed out here in the chat group that, yes, you'll be getting your 2021 dividend tomorrow, invested wisely, you know one of the wise options is to invest more in CLI that's giving. But yes, we're very -- always happy to be returning to our shareholders. Thank you for continuing to keep track of us. There's a lot of good news here from Cebu Landmasters and hope you can strive that good news. So thank you, everyone. Have a great day.

Thanks, everyone, and thanks for your time.

Bye.

Thank you.