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

Good afternoon, once again. This is Philippe Palma Gil from BPI Capital and I will be your moderator for today's session. On behalf of the issuer and the joint lead underwriters and joint book runners, I welcome you to Cebu Landmasters, Inc. or CLI's trading participants briefing for its maiden preference shares offering. CLI was established in 2003 with a vision to provide quality homes for every day Filipinos. Guided by sincere family values and genuine real estate passion and unrelenting faith, CLI grew and prospered as a leading residential developer in Visayas and Mindanao region. In 2017, CLI became the first homegrown Cebu-based real estate developer to be publicly listed on the Philippine Stock Exchange. Building on the success, CLI further expanded its financial ventures with the successful launch of its maiden bond offering in 2002. So during today's briefing, our focus will be directed towards exploring CLI's recent developments and achievements along with the overview of terms and conditions surrounding CLI's preferred share issuance and key reminders for the TPs and key dates for the TPs. For today's briefing, allow me to walk you through today's agenda. We will start off with the opening remarks to be given by Mr. Grant Cheng, Executive Vice President and CFO of Cebu Landmasters. Mr. Cheng will then discuss the company overview and strength and strategies, then we'll have the discussion of the summary of offer terms and key reminders and key dates for the trading participants, which will be led by myself. After this, we'll have a Q&A session. We encourage everyone to send in the questions ahead of that via the Q&A feature, and this will be addressed during the Q&A portion of our program. So without further ado, I turn the floor over to Mr. Grant Cheng for the opening remarks.

Thank you very much, Philippe, and I appreciate the introduction. So welcome and good afternoon, everyone. So I'll be representing CLI. On behalf, I welcome you to this and I'm eager to go through the presentation to talk a little bit about how our business is doing, what the preferred shares are for, why I believe this could be a compelling investment instrument for your and your clients consideration. And then I really look forward to our Q&A session later where I hope that we can have an engaging conversation where we can specifically address some of your questions so that you're armed and equipped with information to make an informed decision or -- so that you can in turn pass it on to your clients in case they have any questions. So just to begin, we think we're taking time to get to know more about our company. The fresh capital that Cebu Landmasters is raising today, it continues our strategic engagement with the capital market. So as Philippe mentioned, we had an IPO back in 2017 and a maiden bond offering. And now this is our first issuance of our preferred shares. So this marks the first time we're going out in the market with preferred shares. In fact, we recently amended our authorized capital stock precisely for this very reason. And having a diverse range of options to raise capital provide CLI with the flexibility to match our capital needs and to the conditions of the market. So as a capital-intensive industry with a longer cash conversion, product conversion cycle than most businesses out there, we need capital instruments that match that financial cash cycle as well. And we, in CLI, I can tell you, I don't speak just for myself, but all the executives, all the management and our shareholder -- the shareholders who control the company [Audio Gap], we understand and appreciate the weight and the responsibility that comes with raising capital, whether it's -- whether we do it privately or in this case, publicly. And whether it's debt or equity, we know exactly what that capital is [Audio Gap]. So we always see our capital investors as partners in our mission of providing housing and shelter to the Filipino people and all the while we do this while protecting the investments of our investors and our fund providers. And since we -- just to let you know how we've been stewards of capital, when we first tapped the capital markets in our IPO, I think our track record and a testament is deployment of capital in order to reach our business objectives. Cebu Landmasters is now the #1 residential developer in Visayas and Mindanao. We currently have over 100 different projects in the biggest economic centers of the Visayas and Mindanao in different stages of completion. In terms of housing, which is our core business, we've completed over 11,000 houses and another 25,000 is in our pipeline in different stages of construction, some newly launched, some are about to be delivered. And of all of these, 35,000 out of these 36,000 homes have either been sold or delivered or they are in, what you call, they are pre-selling basis [Foreign Language]. So as they pay their amortizations to us, we know that our pipeline of collections in the next few years stands at over PHP 78 billion, with over 26,000 orders out there from buyers still waiting to be fulfilled. In other words, these are the housing lots and the condominiums that have already been reserved, but we still have to deliver on. Aside from our housing projects, we're operating 3 hospitality assets and 7 more are in the pipeline. We started developing mixed-use developments and townships where each of the different components, whether it's a residential, office or commercial and especially hospitality, they complement each other, they provide synergy and mutual value in their own respective business models. And all of this was possible because investors like you have put their faith in us. As we continue this growth and expansion, we hope you and your clients can be part of that and entrust us with capital we then put to work under a framework of good corporate governance and prudent risk margin. So now I'll talk you through a little bit about the details of our company and the thesis for this investment. And I hope that it will be useful for you and for your clients as you consider this. So as I mentioned in my opening remarks, we are now the #1 developer in Visayas and Mindanao. We have 23% market share already in the residential segment. So we're actually the biggest in all the markets where we're operating in. We are already in all the major areas of Visayas and Mindanao. And we're actually expanding to other vibrant areas as well. Our assets have grown almost 20x since the IPO. We have 117 different projects. And if you look at our growth rate, both on the top line and bottom line, our compounded annual growth rate is at the 37% and 26% for revenues and net income. Next slide. So this is our current portfolio of projects. As I mentioned earlier, our core business is in residential housing and condominiums. So when I say housing, subdivisions and house lots. So we actually sell housing lot and subdivision projects. And we -- our main markets are the economic and affordable segment as well as the mid-market segment. Combined, these 2 segments provide almost 70% of our total sales by value. But then we can also strategically build high-end open market or premium types of investments. Aside from residential, we have offices, hotels and mixed-use developments as well as estates and townships that I will elaborate later on, and that these are really the projects where the capital we are raising are going to be deployed in. next slide. So here, I talk a little bit about our hotels and resorts. So one of the things that CLI is doing is that we're rounding out our recurring income parts. We do want a good foundational asset base of recurring income. So here, on your screen, on the left, that is The Pad, it's a co-living space here in Cebu. So this is targeted towards students, BPO workers. So this is a concept that you might be familiar with in Metro Manila already, and this is something we're piloting, and that we're bringing here to great success. On the right, that's a new hotel that opened here in Cebu called Lyf. So Lyf, L-Y-F, is a brand under The Ascott Group, Singapore, the same brand or the same hospitality group that brought us Citadines that we also own and operate here in Cebu. Next slide. And if you look at our -- I mentioned earlier that we're the #1 developer in Visayas and Mindanao. And this is not a self-assertion. Every year, we do commission an independent third-party market research firm, in this case [Technical Difficulty], to do that market study. So what I want to highlight here is that, yes, we're #1, but we are a #1 with 23% share, which goes to show that there is room for us to grow on 2 very important fronts. One, we could continue winning market share in the regions where we're competing. And keep in mind, this is a market that is continually growing. In other words, we simply -- our growth vectors come in the form of increasing our share of a growing pie. That's really the 2 areas where we intend to grow. Okay, next slide. Okay. So I'll talk a little bit about our strengths and strategies, some unique aspects of CLI and then my friends from BPI will talk about the terms of the offer, and we'll go to Q&A later. So some of the strategies that we're doing. We are expanding to key cities, including Luzon. I could tell you that other cities that we're looking at are in Cebu -- Visayas and Mindanao are Cabanatuan, General Santos. We're looking at -- and then in Luzon, we're looking at Naga. And there's no shortage of properties that are being offered to us for development all over Luzon. In northern Luzon in Pampanga; southern Luzon, in Cavite; in the General Trias area; even inside Metro Manila. So we continue to have engaging conversations with a lot of leads. But just to let you know that this is just a natural trajectory of growth plans. The second is we continue building our recurring income segments. We're not shy in saying that one of the main objectives of building up our recurring income segment is eventually we'll go out with our own REIT. And we want the foundational assets with a track record that will go into that REIT. We will continue to establish and leverage strategic partnerships and joint venture partnerships with landholders. Our pipeline projects, I mentioned that we still have an order book of 26,000 buyers and uncollected sale of over PHP 78 billion as of today. So that is the kind of collection pipeline that we have. And I mentioned pipeline, it's not a projection. These are sales -- reservation sales that we already have signed under a contract to sell. It's just a matter of delivery. Then there's a vertical -- I think we want to vertically integrate, capture more of the value chain from land acquisition all the way to property management. One statistic or one thing that, I don't know if other developers necessarily point this out, but in all our finished projects, we are still the property manager for even the projects we turned over more than 15 years ago. I think that says something about our commitment to the community and our home buyers that we're really there for the long run. And we will continue to grow our economic housing brand, the famous Casa Mira. And it's really famous here in Visayas and Mindanao. The brokers, our seller network, the buyers, the real estate market, I think Casa Mira has established its place in the consciousness of a lot of the real estate market here. Okay, next. Okay. And some investment considerations for you. If you look at our ability to deliver growth, our track record is there. We've been -- we are the developer that is known to forge truly strategic joint venture partnerships. If you look at our annual reports and the way we do business with our joint venture partners, I think it's rare that you might see a real estate developer that allows their JVs to be on a 50-50 basis. But that is exactly what -- and we are having -- we have a diversified portfolio and a continually diversifying portfolio in different socioeconomic markets. We count on our financial strength, meaning on a solid base of balance sheet. Now we know there's a rate at which we know that we can expand sustainably. And our management team is quite experienced. These are both in-house grown as well as senior and experienced managers that we're also getting from established companies and multinational companies. Then there's the operational excellence. Later, I'll talk a little bit about how we structured our sales, our engineering and our home loans department a little differently from the industry. And all of this are down to socially responsible development or our adherence to ESG standards. Next slide. Okay. So if I talk about track record a little bit, you could see that we started out with one project in Cebu. In less than 20 years, and we just celebrated our anniversary, we've expanded to all the key areas. And I just want to expound on this a little, in that expansion in real estate is really a ground game. So that's pun intended. When you say ground game, because you have to have people on the ground and you have to know what the market is like on the ground. So you not only have to know what kind of product will sell, you have to know what price point, you have to understand the local economies and the local industry, which supplier has the warehouse and the trucks that can deliver the materials to our project site, which contractor has the manpower and the financial capacity to serve a contract [Technical Difficulty]. Have we cultivated healthy relationships with the local government units from barangay captain all the way to the mayor? One of the things about real estate is that we have hundreds of permits to take care of from DENR, BIR to RD. So [Foreign Language] expertise. And your cultivation of such relationship is quite important. So scaling up and growing radiates from our home base in Cebu, and it's only natural that we do this as we grow. So our track record does speak for itself. Okay. Next slide. And just a quick breakdown of our portfolio. So [Foreign Language] brands that we're offering. So if I start out with our residential brand right here, so there's the economic brand called Casa Mira. So this is our flagship brand. Both the economic or affordable segment of our products, whether it's housing lot, horizontal or condominiums, vertical, we call them Casa Mira. And then we have the Garden series and high-end residential spaces as well. The high-end ones tend to be -- they are actually vertical projects within the primest city areas of Cebu, Iloilo, Davao. We've launching offices, and we're committed to building out our hospitality and tourism portfolio. So if you look at all the names that you see here, these are international hotel operators or beloved brands like Abaca. So while we are building it, we rely for now on the expertise and know-how of other world renowned hotel operators to bring our hotel businesses to operational profitability. Then mixed-use projects. So a lot of these projects are residential, offices models are actually already part of mixed-use projects. And when I talk about synergy, it means that, imagine if you are a retailer then you love that there's a captured market for the product that -- or service that you're offering. And of course, if you're a buyer, if you're a resident there, you love the fact that there's convenience literally at your doorstep. And then the big expansion that we have right now is we're looking at estates. And estates are mixed-use townships, typically more than 10 hectares in size where there is a master plan for their launch, and it allows us -- gives us a strong pipeline for growth in the next few years. Okay. Next. So we're expanding our project portfolio. As I mentioned, we're looking very strongly at expanding into Luzon this year, plus launching more projects in the areas and the provinces -- or in the regions where we have first launched. So in areas like Davao, in Cagayan de Oro, in Bacolod and Iloilo, we've had a lot of success entering those markets. And we've had a lot of success with 2 or 3 projects. So we plan to replicate that success and just make sure that we can sustain that momentum. We have over 100 -- sorry, 10,000 hectares of land bank that should allow us to forge ahead and sustain our growth for the next few years. Okay. Next slide. Okay. I won't belabor these points already, but suffice it to say that we're proud of the management team as well as the Board we have put together. This is a Board and management team that I will say knows how to take care of minority shareholder rights, is very conscientious about corporate governance, especially if you look at the background of our Corporate Director, Independent Directors, how they hold our feet to the fire, coming from much larger companies and having many, many years in much larger companies [Audio Gap] provide us guidance as we grow and as we go on this journey of growth at CLI. Next slide. And again, these are a lot of numbers based on our ESG monitoring. So please, I invite everyone to go to our website, download our annual report. Our annual report contains a full write-up section on how we are monitoring and implementing our ESG initiatives. What I will say very quickly is that there are many industries out there that are already showcasing this, especially since this is an SEC requirement. But I've always said that, we, in CLI, have practiced good ESG principles even before ESG and sustainability became fashionable. And that's because -- I don't know how many people not in the industry know this, but every development needs an ECC or an Environmental Clearance Certificate from the DENR. So that's the E part. So obviously, if you're going to build something, there's always already environmental compliance there. The S part is you have to be good neighbors. And if you've ever seen any one of our projects, and if you're going to build, for that matter, any project, you have to have good relationships with your neighbors, the people that you are building around because your development and the buyers moving in will be part of that community. And the G and the governance part, again, in real estate, one of the key principles to success are your permits and your paperwork and your licenses. So if your permits and licenses flow, and they proceed accordingly to the timetable, then your projects will as well. Okay. Next slide. Okay. So these are just a glimpse of our strategic joint venture partnerships. So you could see that in many, many of our joint venture partnerships, we are 50%, of course, are the original land owner and our partners being the other 50% of this. In some cases, in fact, we're a minority now of that joint venture. But what it does is it gives -- we become the developer of choice for many land owners, landed people that have the primest pieces of land, especially here in Visayas and Mindanao. Next slide, please. All of this translates to what I feel are very remarkable financial results. If you look at our growth rate on our revenues and our net income, I did -- I mentioned this earlier, but I think you won't find many companies who can even come close to this kind of growth rate. So notice that even during the pandemic, this is our -- we consider this our down year, that we were profitable, but not at the growth rate that we saw at the peak. But that growth rate, okay, that growth rate picked up immediately in 2021, 2022 as soon as we were able to pursue ordinary operations and ordinary business as usual. And notice that throughout the pandemic -- so while these are net income and revenues, these are actual reservation sales. So this is the peso value of the contracts we are actually signing up. So I do want to show you, this is -- for me, this is quite eye-opening. If you've ever wondered or thought about [Foreign Language] market on housing [Foreign Language] in Visayas and Mindanao, especially in the markets that we're serving in, this tells you a lot that even at the height of the pandemic, in '21 -- 2020, 2021, people kept continuing to buy homes from us. Okay. Next slide. So just some key highlights for our 9-month results. Finally enough, we are about to come out with our full year results. But of course, these are the numbers as of the prospectus -- the approved prospectus. So I will just highlight sustained earnings growth year-on-year and robust top line growth. Record-breaking sales performance, which we once again were able to achieve [Audio Gap]. The launch of projects that -- continued launch of our projects that serves as our pipeline and assembly line for our revenues and cash collections as well as land bank and the asset base that we're using to drive this growth. Okay. So I'll talk a little bit now about our financials. By the way, before I do that, I could actually see that there are already some questions coming in, in our chat box, in our Q&A. So I do encourage that you put in your questions there. I look forward to answering them. Okay. So I just wanted to quickly highlight here, so that we have time for our Q&A, a few things. You could see the strong growth rate of our revenues and our net income. And you could see that we achieved those growth rates without sacrificing margins. In other words, we didn't just expand our market share and won market share by slashing prices or going out. We were able to deliver our financial model and our business case to new markets and continue to grow while protecting our year-on-year margins. So from a growth perspective, this signifies what I feel is a compelling case that shows you we do have the track record of sustained growth while maintaining the margins and delivering these results. Next slide, please. And this is fueled by our reservation sales. So reservation sales, again, this is the peso amount of the cumulative contracts we were able to sign in a particular year. By the way, net of cancellations, net of people who cancel their contracts somewhere in the middle. So you could see the consistent growth rate. And as of 9 months 2023, we're already at PHP 17 billion. I can tell you that end of 2023, we'll actually see an improvement from last year. And if you look at where the sales are coming, they're coming from our economic housing segment, the Casa Mira brand right here. And if you look at where they're coming from geographically, they're coming from all over Visayas and Mindanao. So we're not reliant on just one city and one economic center. Next, please. Okay. Here, I just quickly show our pipeline of construction. What do we mean by this is the numbers or the text that you see here, I know it's small, it's not meant to be, right? It's actually meant -- it's not meant to show it per project. It's meant to show density. Most of our projects are in the construction and turnover phase. So if you look at everything that CLI has built here in year 5 onwards, these are projects that are matured and we've already delivered. Every -- all the projects you see here in the earlier part just show you how much more we plan to deliver in the next 4 to 5 years and it is -- they are at their respective places in the production assembly line before we're able to deliver them to our customers. And right here, I just wanted to quickly highlight, sorry, how much cash collections we expect to get from our reservation sales from the signed contract from buyers as we deliver these units. Just for context into the kind of capital and when you look at our financial statements. Okay. Next slide, please. So this lends to this kind of balance sheet. We do feel we have a very solid, very healthy financial position. Yes, you might be -- some of you might know this, we do have a relatively elevated debt equity ratio compared to our industry peers, but I'll comment very quickly that, first, in high capital intensive industries like real estate, you must be prepared to raise capital with a mix of debt and equity. And for a company like CLI, that's not necessarily -- we are not part of a conglomerate where there are other industries or other businesses of the parent or the conglomerate company that can continuously pour capital in the real estate company. For us, every single peso of capital that we raise, whether it's debt in the form of bad debt or bonds or whether it's preferred share equity, like preferred shares right now, this is capital that we have a strong -- where we have a commitment and a very clear intent of how to drive returns for that investment. Next slide. And here, I just wanted to show you the breakdown of all those sales contracts. Again, as of 9 months 2023, you're looking at PHP 76 billion. As of today, that's over PHP 78 billion. And we wanted to highlight when we plan to collect on these contracts, and they really follow the timeline I showed earlier, where once we deliver the houses and once we deliver the product that they signed up for and that they reserved for, then that's when the bulk of the collections can come in. So in fact, a lot -- there's still a lot more upside. If we were able to sell out PHP 14 billion worth of inventory, you could see all the upside in terms of us generating revenues and cash flow. Okay. Next slide, please. And here is a quick look at our debt maturity profile. So the preferred shares will land in this tower and then included in that bucket is the 2031 tower, which is much lower. So this, for us, is an opportune time to raise the preferred shares even as we -- and this is for CapEx really, the new projects that we are launching and that we have already substantially sold. So what we wanted to show you here is when we manage our capital, we make sure that we -- our debt obligation, our debt maturity towers won't be so lumpy so as to also manage refinancing or capital-raising environment as well come the time. Meaning that when 2025, 2026 comes around, I expect I should be able to pay this down with my internally generated funds and then be able to reavail of certain facilities for our newer projects, in other words, to start a new cycle, a new product cycle. But should the financial markets tighten up and should financial markets not be able to lend us freely as they did, if there was a repeat of any financial crisis beyond our control, we wanted to show that the PHP 76 billion of collections that we have in our pipeline should easily be able to meet our obligations. Okay. Next slide. Okay. So finally, I'll talk about our operations now. So a couple of very interesting things about CLI that makes us a little unique in the market. On construction, we don't have an in-house construction or general contractor. If you think about other developers, they have their sister company or their affiliate company that serves as the construction firm. We don't. What CLI does is we have project managers or owner construction managers and all our gen con engagements and contracts are bidded out. We feel that this is -- it gives best value for our business. On our sales headcount, we don't actually have employees that earn commissions. So all our sales, all those reservation sales, goes through our network of independent third-party brokers. So there's over 11,000 of them all over the Philippines. And to the extent that we have a sales department, they do the marketing, they assist in the documentation, the payment collection, the collection of buyers' data and also putting together programs and incentive schemes for our brokers. But the fact that all our sales go through third-party brokers and not in-house brokers should tell you a lot of things because these brokers are not exclusive to us. They carry other developers' products as well, but there's a reason why CLI products continue to be the ones that's good for them. So this is a partnership that has worked for us. Go ahead, next slide. Finally, just the last few things about our corporate governance. You've got two arrows from the ICD last year. Again, it's in recognition that we are a company that is relatively young, but we're -- what we aspire to be is to be a model company, not only for companies that are going on their public journey as well, but companies based here in Visayas and Mindanao that you can be a paragon of good corporate governance as well. Okay. Next. I think that concludes my portion. I'll turn you over now to our friends at BPI, and I'll catch you all later during the Q&A.

Thanks, Grant. It is indeed commendable that CLI is cautiously upholding its commitment to growth while delivering substantial value to its investors. At this point, I'll be discussing the terms of CLI's preferred shares offering. So for this issue -- this issuance is an SEC registered peso-denominated perpetual cumulative nonparticipating, nonvoting, nonconvertible and redeemable preferred shares with a base offer of PHP 3 billion with an oversubscription option of up to PHP 2 billion to be offered in two subseries, Series A-1 preferred shares and Series A-2 preferred shares. The offer price shall be at PHP 1,000 per share to the upgraded two subseries with an initial dividend rate of 7.5850% per annum for Series A-1 and 8.25% per annum for Series A-2. Series A-1 preferred shares shall have an option to redeem all but not part of outstanding shares on the fourth anniversary from issue date or any dividend payment made after the fourth anniversary of the issue date. If not redeemed on the fourth anniversary from the issue date, the additional dividend rate will adjust to the higher of initial dividend rate or the 7-year BVAL rate plus 300 basis points. For Series A-2 preferred shares still have an option to redeem all but not part of the outstanding shares on the seventh anniversary of the issue date or any dividend payment made after the seventh anniversary from issue date. If not redeemed at the seventh anniversary from issue date, the initial dividend rate will adjust to the higher of initial dividend rate or the 15-year BVAL rate plus 300 basis points. Dividends will be paid quarterly in arrears and as and when declared. Dividend income is subject to 10% final withholding tax for Filipino citizens and tax exempt for domestic corporations. Each application shall be for a minimum of 50 offer shares and thereafter in multiples of 10 offer shares. No application for multiples of any other number of offer shares shall be considered. And lastly, the listing venue is the main Board for the Philippine Stock Exchange, Inc. Moving on to the key dates for the trading participants. So start of the offer period is at 12:00 noon, March 19, today, deadline for TPs to submit their firm undertaking to the receiving agent is 11:00 a.m. on March 25, Monday. Issue manager to send the notice of final allocations to TPs at 9:00 a.m. on March 26. End of offer period is at 12:00 noon, April 2. Deadline for TPs to submit the application documents, proof of payment, sales report and ATP required attachments, which are enumerated in the TP guidelines to the receiving agent is at 12:00 noon, April 2. Deadline for submission of original copies of the application documents is 3:00 p.m. April 2. And finally, listing and trading will commence on 9:30 a.m., April 12. We just have a few reminders for the trading participants. TPs are reminded of the following items during the offer period. Each participating TP shall have a guaranteed allocation of 4,910 offer shares based on the 122 participating TPs. The minimum order size of 50 offer shares and incremental lot size of 10 offer shares. The TPs may undertake to purchase more than the allocation per TP. Any request for shares in excess of the allocation per TP per series may be satisfied via the reallocation of any preferred shares not taken up by other TPs. A firm undertaking must be submitted at the office of the receiving agent at the 35th floor, Unit B, Rufino Pacific Tower, 6784 Ayala Avenue, Makati City or via email to [email protected] with the subject mail CLI 2024 Series A preferred shares firm undertaking and then indicating the name of the participating TP along with the scanned original proof of authority signed by 11:00 a.m. on March 25, 2024. Deadline for the application forms and the following documents is on 12:00 noon on April 2, 2024, at the office of the receiving agent or via email to [email protected]. And the required documents to be attached to the application forms is duly accomplished application forms and duplicate copies, one of which shall be returned to the participating TP with required attachments to the application form, which are the two properly filled out signature cards each bearing the specimen signatures of the participating TPs designated signatories duly certified by the authorized signatories of the participating TP, four hard copies of the sales report duly certified by the respective authorized signatories of the participating TP, a USB containing a soft copy of the accomplished sales report and proof of full payment for the total shares awarded to the participating TP pursuant of the final -- pursuant to the notice of final allocation. And please refer to the implementing guidelines included in the sales kit for a more comprehensive discussion on the procedures for the TPs. Thank you. So we are now ready to open the floor to any questions from the audience. [Operator Instructions] We will endeavor to answer your questions as much as we can during the today's session.

Allow me to start off with the questions asked by participants during the earlier part of this program. So this is for Grant. Can you talk about -- so can you talk more about CLI's cash flows and its ability to pay its debts to redeem its preferred shares?

Yes. Thank you, Philippe. In fact, I see two questions that I can answer simultaneously. That's this question about our cash flows and there's a question down there about the likelihood of us to redeem our preferred shares. So I'll answer this a little more thoroughly because that's really the most common question that we get. But more importantly, it's also one of the most important aspects of the company that we're obviously managing. So the first thing I do want to emphasize is that when you review a company like CLI, please note that our efforts does not reflect all of our sales reservation at any time because revenues and therefore, receivables and contract assets are only reflected on a percentage of completion basis, which is why I kept emphasizing my pipeline of receivables. Philippe, would you mind going to that slide, showing the outstanding receivables as of September 2023, I think it's Slide 25, okay? Yes. [Foreign Language], one more. The one with the PHP 77 billion. Go ahead. Next one. There we go. Okay. So I'll highlight this one. So the number that you see here, that is the peso value of the remaining uncollected receivables from contracts we have already signed. So again, this is not a sales projection. This is the uncollected portion of sales that CLI already booked. Of that, PHP 17 billion are from projects that are already completed or ongoing turnover. So [Foreign Language] that means that -- well, because some projects, we collected most of the proceeds from buyers who bought our units. But really, we still have PHP 15 billion of collections from projects that are turning over now in 2024. Another about PHP 20 billion that is for turnover this year and next. [Foreign Language]. And about PHP 38 billion from projects in the pipeline [Foreign Language] or right in the middle of construction, where the bulk majority of the collections will come. So when you look at the context of our financial statements, all our debt is already reflected in our financial statements. That's the amount -- that's actual debt that we incurred. So it's around PHP 47 billion at this point that's interest-bearing, net of tax. And then you compare that against the pipeline of collections we're about to get, PHP 78 billion and then all the upside that we have from unsold units, that's the first thing to remember about our cash flow. The second thing is remember also that all the debt that we are incurring, which is at around PHP 45 billion when you review this, that debt is used to fund not only the projects that we are selling, the unsalable projects or my selling projects have already generated me receivables pipeline of PHP 76 billion. That's also used to fund projects in the recurring income space. So the hotels that we're building up, we're not selling those buildings, but they are slated to start generating consistent and steady recurring income revenues in the long run that should help us stabilize our cash flow cycle. And again, there's a lot of upside when we -- eventually when we decide to put them in a REIT but putting them in a REIT is upside and that's really equity upside. In order for us to address and to make sure to then commence our cash risk management, we really look at the amount of sales that are coming in. And by the way, I should quickly add that the quality of the receivables and the sales contracts that we are holding, we're quite proud of. It's less than the 5% -- the delinquency rate of buyers, meaning buyers who are late in the payments with us is less than 5%. So there's a very strong likelihood that anyone who signs up as a sale to CLI, it will come to fruition. And finally, I do want to add that the reason why we're raising money right now, the pretext of raising, that's for future projects. We keep expanding and we launch projects because our track record is that if you look at the rate at which we're selling out our houses, we are over 98% sold. So it means that if we stick to our design and location and building rates, essentially our business model, and we just repeat that in markets that are continuously and perpetually underserved their housing needs, we should be able to deliver these kinds of returns. So that's our operating cash flows and how we plan -- how we're planning to pay and redeem our preferred shares. So the questions [Foreign Language] and just to answer that specifically, how likely is it that CLI will redeem its preferred shares, I want to be careful here because this is not a legal obligation. Of course, it's equity. But if you go to the terms, Philippe, if I can request you to go to the summary of the terms, okay, we have put in here terms that hopefully give you a very strong indication of our intentions. [Foreign Language] this will hurt us more than anyone else if we don't redeem it. Look at the step up, if we allow it to step up, we are not only converting a 4-year priced instrument into a 7-year priced instrument, then we're paying 300 extra basis points. This almost a default rate premium. So how likely is it we don't self-harm with, there is a strong likelihood that we will. And against our maximum offer of this preferred, [ which is PHP 5 billion ]. And then you put that into context of how much sales I already have in my pipeline, plus the over PHP 20 billion of sales that I will expect to continue to pay every year based on our track record, that gives you some context of our ability to be able to pay down, not only this debt, but likelihood to avoid a very painful dividend rate when the step-up event comes for Series A-1 after 4 years and Series A-2 after 7 years. But given that this is the part of the market right now, in our business, you do have to continuously raise capital, you do have to make sure that you can be in the market because the alternative is we just stop building houses, and we're not going to do that. Hope that answers those two questions.

Definitely. Thanks for that, Grant. We have another interesting question from the chat box. How does CLI choose the location where it expands? What is the process? And can you share any existing land banks of the company?

Right. And how we choose our land bank, this also gives me the opportunity to answer another question about how we differentiate ourselves from the likes of Ayala and SM, and do we see ourselves growing as big as them. The answer to growing as big as them is not in the immediate future. They definitely have a much longer head start than us. And again, they're part of much larger conglomerates and they have access to capital that we don't have access to, access to land bank honestly that we don't -- and to the size of a land bank that would not be in the range that we're considering. So when we choose land bank, we choose land, a, that has immediate potential for revenue generation. And in other words, we choose land that we continue to do business with -- or sorry, we can immediately have business with. In other words, we don't land bank for the sake of land banking. We're not going [Foreign Language] land thinking that the price will appreciate or that future infrastructure projects might run along that piece of land and then I'm buying it so cheap right now. Because every -- again, it goes back to how our philosophy on capital usage and capital raising. If I raise equity in the form of preferred shares or common shares or debt in the form of bank loans or any other interest-bearing instrument, our financial -- or our philosophy is how do we put this capital at work? And the best way to know -- we know how to appreciate that capital is to put it through our business model, which is we develop something, we sell it, and we collect the proceeds at a good margin that we can protect and that's the way we can do it. So that's really what distinguishes us. For us, we -- I'd like to say that for the company that we're raising -- for the capital that we are raising, we, as a company, are -- we're of the philosophy that we've got to put that money to work again and that we cannot sit on it and that we need to convert this into a project that can generate returns and therefore, cash flow. So even before we start choosing the land bank, we already have a good financial plan in place before we acquire it. So that's about it on a financial point of view. But in terms of consideration, the land itself, of course, you look at everything from topography to the natural resources around it, meaning does it traverse a river, its proximity to national highways and its proximity to commercial and educational establishments, for example. Another aspect of choosing land bank that cannot be understated though is how business-friendly a certain LGU is because I can also share with you that some LGUs are just more inherently business-friendly than others from a bureaucracy standpoint, from their interpretation and their actual implementing of the national code, the tax laws as well as the peace and order situation. So these are all considerations when acquiring land.

Thanks for that, Grant. Now we actually have a question on the TP guidelines. So does the issuing banks charge a servicing fee to avail of these? How much? How about other selling agents? So I'll be answering this. So this varies from bank to bank, selling agent to selling agent. We suggest to reach out to your preferred institution for the specific rates. I hope that answers that question. Another question regarding the TP guidelines is there is no indicated nominated bank for the receiving agent. The nominated bank of the receiving agent for this issuance is BPI and bank details will be disclosed in the notice of allocation, which will be delivered to the TPs no later than 9:00 a.m. on March 26. Grant, we have another question here for you from the chat box.

Go ahead.

Are future projects more on residential, office, hotel or commercial? And where are most future projects located?

Most of the projects will still be residential. Again, that's our core business. It's what powers our revenues and our positive operating cash flows coming from those projects. But we will continue to develop those recurring income projects, which are -- on which we are already committed to and which we are already in the middle of building so that we can bring them to -- becoming operationally viable, become profitable in its own right and start generating its own cash. And those are permanent assets on our books. But for the most part -- and again, just to directly engage and answer the question, the majority of our projects will be in the residential portion.

Okay. That's clear. Sorry, I'm just conscious of the time. I know it's 4:56. Unfortunately, that's all the time we have for our Q&A. So for any questions related to the offer or the guidelines and procedures of the offer, may be directed to the representatives of the joint lead underwriters and joint book runners, which can be found in the implementing guidelines. For any questions related to documentary submissions and payments, can be directed to the representatives of the receiving agent, which can be found also in our implementing guidelines. So this brings us to an end of our program. As with CLI's prior offerings, we look forward to your continued interest in CLI. And thank you very much for joining us, and have a good day. Thanks again, Grant. Thanks again, everyone for your time.

Thank you, everyone. Thanks for putting this together, BPI team.

Thank you. You may now exit the briefing.