Megaworld Corporation (MEG) Earnings Call Transcript & Summary

Good afternoon, everyone. Thank you for joining us today for Megaworld Corporation's 9 Months Financial and Operating Results Briefing for the Year 2023. I am Dexter [indiscernible], and I will be your host for this session. We have an informative agenda plan for you, so let's get started. Our distinguished panelists are here to provide insights into our group's performance and answer your questions. Joining us today are Mr. Noli Hernandez, Senior Vice President, Sales and Marketing; Mr. Roland Tiongson, First Vice President, Megaworld Premier Offices; Ms. Cleofe Albiso, Managing Director, Megaworld Hotels & Resorts; and Mr. Andy Dela Cruz, Investor Relations Officer from Megaworld, who will be our presenter for today. [Operator Instructions] Without any more delay, I will now turn the floor over to sir Andy Dela Cruz.

Thank you, Dexter. Hi, everyone. Good afternoon. Thank you all for joining us today. We will discuss Megaworld's results. I'd like to begin with an overview of our financial performance before diving into our business segments. We sustained our strong operations as Megaworld's profit to shareholders in the third quarter grew by 58% compared to last year and reached PHP 4.1 billion. This is also a 9% sequential improvement compared to the previous quarter. For the first 9 months of the year, our net income improved by 43% to PHP 12 billion. We sustained our above pre-pandemic performance as consolidated revenues for the period grew by 14% to PHP 48.6 billion. Businesses across the board all saw strong performances from our real estate projects, our leasing and our hotel operations. And moving to our margins. Our real estate GPM is stable at 49%. Our EBITDA margin, excluding ForEx movements in the third quarter, improved to 46%, better than last year's 44%, still in line with the expansion of business activities as we aim to capture more opportunities. Cost and expenses, particularly operating expenses and hotel operation expenses, grew faster than our revenue growth. With this, our EBITDA margin for the first 9 months, excluding ForEx adjustments, ended at 43% from 45% last year. During the third quarter, for everyone's information, we booked some PHP 836 million in unrealized ForEx losses. That's PHP 836 million. That's related -- and that's related to our $550 million unhedged obligations. This reversed our previous unrealized ForEx gain of PHP 364 million in the first half of this year to a total ForEx loss of PHP 472 million during the first 9 months of 2023. For comparison in the first 9 months of last year, we had about PHP 2.8 billion in ForEx losses, while in the third quarter of last year, we had about PHP 1.5 billion in ForEx losses. Moving to our revenues. Real estate sales continue to hold the largest share of the pie at 60% of our revenues followed by our offices at 19%. On a per segment basis, real estate sales grew by 11% to 29 billion on an accelerated pace of project completions compared to last year. Office rental is up 3% to PHP 9.4 billion on continued rent escalations and renewal of expiring contracts. Mall rentals rose by 70% to PHP 3.9 billion on higher occupancy rates, full rental collection beginning last January. And tenant sales is higher than pre-pandemic figures by a huge margin. Hotel operations also saw a growth of 51% to PHP 2.6 billion as domestic tourism and MICE activities continue to pick up. Our hotel revenues already exceed our full year 2019 levels despite logging in only 3 quarters of results so far. Now moving on to a snapshot of our balance sheet. We ended the period with gross debt amounting to PHP 98.9 billion, of which 8% would be bank loans, and 59% of the interest rate is fixed. Our dollar exposure is at 33%, and that's the $550 million obligation of our gross debt. Our balance sheet remains strong, and our net debt to equity remains at a very healthy 27.7%, among the lowest in the industry. Meanwhile CapEx spend for the period amounted to PHP 38.8 billion. This was used primarily for project development across our projects. Next, we'll discuss operating updates from our business segments, and we'll start with the real estate segment. Our reservation sales hit PHP 109.5 billion as of the first 9 months, which already accounts for 84% of our PHP 130 billion year-end target. This is due to the strong demand that continued its momentum into the third quarter of the year. We also launched more projects this quarter, causing our project launches to reach PHP 69.3 billion for the period. This is already than -- already higher than our PHP 60 billion target for the year. In this slide, we break down our real estate sales. Of the PHP 29 billion estate sales, around 81% is still from our upper middle to high-end projects. These are catered by Megaworld and Global Estate brands. These showed a 16% growth from last year. Our economic to mid-income category, which is catered by our Empire East, Suntrust Properties and Stateland brands account for the remaining over 19% of our sales and remains largely flat. Moving on to the middle chart, which shows the breakdown by location. Projects in Taguig, which accounts for 24% of our sales, increased by 23%. Bookings in Metro Manila, excluding Taguig, which accounts for 39% of our sales, was flat. Luzon, excluding Metro Manila, grew by 12%, while Visayas, Mindanao also grew by 25%. And by classification, bookings of vertical developments accounted for 83% of our sales. That improved by 15% compared to last year. Horizontal developments or lots, which accounted for 17%, declined by 6%. Now moving on to our reservation sales. Reservations sales grew by 28% from year-ago levels to PHP 109 billion. Demand from international buyers account for about 25% of our presale figures, which is stable from the first half. By location, projects outside Metro Manila accounted for 58% of our presales figure, while Metro Manila accounted for 42%. Vertical developments remain to be the largest chunk of our presales and accounts for 84% of our figure for the period. Our unsold inventory stands at PHP 132 billion as of end September 2023, which is roughly around a year's worth of sales, given our current trajectory this year. That is because of the huge launches we launched this quarter at PHP 41 billion. Our current unbooked reservation sales stands at PHP 146 billion. On our project launches, we launched a total of 15 projects for the year so far. That's worth PHP 69.3 billion. In the third quarter alone, we launched 5 projects, and that's PHP 41.5 billion in total, which includes a PHP 29 billion Uptown Modern in Uptown Bonifacio. By segment, 89% of our launches remains to be with upper middle to high-end markets. This quarter, we launched 2 projects in Metro Manila, again, Uptown Modern and Laurent Park in Manhattan Garden City. This caused our launches in Metro Manila to account for 51% of our total launch value coming from no Metro Manila project launches in the first half. And our provincial launches this quarter are across our townships in the Upper East, Bacolod, Maple Grove, Cavite, and Boracay Newcoast. And by classification, 89% of our launches this year remains to be vertical developments. Now among our notable launches this year, first is Laurent Park residences in our township in Manhattan Garden City. This project is valued at PHP 6.5 billion, [indiscernible] has a sellable area of 28,000 square meters and 750 units. This project is 20% sold as of end September. Average selling price for Laurent Park is PHP 234,000 per square meter. That's 20% higher than our previous project in the township, Manhattan Plaza Tower 3. That's launched in 2019. We also launched Kensington Sky Garden Tower 1 in the Upper East, Bacolod. The project is valued at PHP 2.5 billion, has a sellable area of around 10,000 square meters. We have 330 units and is currently 10% sold. The ASP for Kensington Sky is 240,000 per square meter. That's about 25% higher compared to our last residential project in the township, Herald Park Suites launched in 2022. Next, we also launched Maple Park Residences in our township in Maple Grove. The project is worth PHP 1.8 billion with a sellable area of 7,000 square meters and 200 units. The project is 18% sold. ASP for Maple Park is at 253,000 per square meter. That's about 45% higher compared to the previous project, La Cassia Residences launched in 2021. Finally, our biggest project this year is Uptown Modern in Uptown Bonifacio. The project is expected to bring in PHP 29 billion in sales with a sellable area of 68,000 square meters and 1,050 units. The project is 8% sold as of end September. The ASP for Uptown Modern is 428,000 per square meter, about 25% higher compared to our last launched project in 2018, Uptown Arts. Moving on to the performance of our office segment. Our GLA remains unchanged at 1.4 million square meters. Our overall occupancy rate stands at 89% as of end September 2023, stable compared to the previous quarter but lower compared to last year's 92%. Our office unit required 247,000 square meters of transactions in the first 9 months. Broken down, new leases account for 95,000 of the figure, while the remaining are renewals. Megaworld Premier Offices maintained its strong market share with up to 19% of the recorded new leases in the market. On MPO's portfolio, 74% of our tenants -- of our occupied space is accounted for by BPO tenants, 18% by traditional office tenants. These are quality tenants that are likely to stay for the long term. And our weighted average lease expiry as of end September is at 2.8 years. So far, we also renewed 91% of the expiring leases so far in the first 9 months of 2023. Sharing with you some updates on the 2 office buildings we're targeting to open by late this year. In Bacolod City, #1 Upper East with roughly 8,600 square meters of GLA is now at 78% construction completion. That's currently 5% pre-leased. Next is International Finance Center in Uptown Bonifacio City -- Taguig City. The building has a total GLA of 69,000 square meters. It's now 60 -- it's now 98% completed and 100% pre-leased. Now moving to our mall segment. Mall revenues in the period saw a 70% jumped to PHP 3.9 billion, improving spend and as we removed all rent concessions beginning January of this year. We also added around 30,000 square meters to our GLA in the third quarter. So that brings our mall GLA to 514,000 from 484,000 last quarter. That's from Landers Upper East at 25,000 square meters and we all live in Eastern Heights at 5,400 square meters. Our occupancy rate improved further to 92% as of end September. That's an improvement of 1 percentage point from 91% in the last quarter as we added new tenants in our malls and 2 percentage points compared to last year. Our strong growth in malls was in part due to the average basket size that grew by a further 4% in the first 9 months compared to last year. And this is much higher compared to pre-pandemic period. Total tenant sales in the first 9 months improved further and is now 26% higher than pre-pandemic levels. And we're also -- we're seeing improvements here. In the first half, we were seeing 24% higher than pre-pandemic levels. Foot traffic improved by 11% compared to a year ago. Though our foot traffic level is still below 2019 levels, our much higher tenant sales and basket size more than offset the decrease in foot traffic, causing the large jump in our revenues. Now our malls team always continue to innovate and to improve the experience of our customers. During the third quarter, we introduced the Megan ultimate lifestyle app, which features [indiscernible] interactive maps for malls, transport schedules, shopping via your personal shopper, Megan, and among others. So really, this is the one-stop app for our customers who are -- who want to visit our malls. And our malls team is also improving their customer support in their respective Facebook pages of each mall using our chat bots. Currently, we're also developing a ChatGPT-based Gen AI agents that is sure to cater to every need of our customers in our Facebook pages. Now as we have announced last quarter, SuperPark Philippines finally opened in Eastwood City. And SuperPark is operated and managed by our malls team, and it just opened October 27, 2023. Now on our hotel segment. Revenues in the first 9 months grew by 51% to PHP 2.6 billion, and this was largely due to a higher Metro Manila occupancy of 66% compared to 64% last year and of course, improving demand from MICE activities. We currently have 4,700 room keys and expect to add more as the year closes. Now our hotel revenues already far exceed our pre-pandemic performance, as you can see in this slide, because we nearly double our average daily rates. Alongside the rise in MICE activities, our EBITDA margin during the period is also higher compared to last year by 3 percentage points and is now at 10%. During the third quarter, Megaworld Hotels & Resorts proudly obtained certification from Good Travel Scan. We received an exceptional average compliance rating of nearly 100% based on the Good Travel Scan's 10 universal values and tourism sustainability. So this award really exemplifies our commitment to sustainability through exceptional and responsible hospital experiences. Now we'll run through quickly the various targets and goals we have in place for the continued growth of Megaworld. We're maintaining our targets and expect to spend PHP 55 billion in CapEx this 2023, 80% of which is for our project development, while the remaining will be for land acquisitions. And our project launches of PHP 69 billion so far this year already exceeded our target launches for the year. But we're keeping our targets, but we are looking at least one more launch in the fourth quarter, which will bring our year-end launch value to a little bit over PHP 70 billion. Our reservation sales target remains at PHP 130 billion for the year. And on our office pipeline, we'll grow our portfolio by 209,000 square meters or by 15% by 2026. These will be in 5 different townships of Megaworld. And for those that have pre-leasing arrangements currently, we've also added a column here that will help everyone track that. Aside from the 2 buildings discussed earlier, Pasudeco Tower in Capital Town Pampanga is also 31% pre-leased. Now next for malls, we expect to increase our portfolio GLA by 30% over the next 3 years or by 154,000 square meters. The larger portion of our mall pipeline will be coming in, in the years 2025 and 2026, which include our Boracay Newcoast, Beach Walk Capital Mall in Capital Town Pampanga and Highland Mall and Park in Highland City, Cainta, Rizal. Lastly, we are growing our hotel rooms keys by 3,500 room keys or about a 70% growth from the current 4,700 room keys. Grand Westside Hotel, which is slated for opening this year at 1,500 room keys, is set to open in phases beginning late this year and early next year. Now finally, we'd like to end this call with the following key takeaways. So for our real estate segment, bookings continue to increase sequentially, and we see this to continue improving. We see strong demand in both our provincial projects and in Metro Manila projects. They certainly helped our reservations sales grow at a faster pace and that we expect demand to continue through the year. For offices, our high tenant retention and ongoing rent escalations allowed us to still continue growing amidst a market with many headwinds. We expect to continue renewing most of our expired contracts and see oncoming demand from the still growing BPO industry. And for our Lifestyle Malls, we saw a surge in rental income driven by higher tenant sales, full rental collection and higher operational occupancy. We expect mall rent to improve sequentially into the fourth quarter and into next year as our operational occupancy improves further from the current 85% to 86% operational occupancy. Now finally, for our hotels, hotel revenues continue to grow beyond pre-pandemic levels as we see a large pickup from tourists and MICE activities. We expect hotel revenues to continue its growth and hopefully to parallel with the expected improvement in international tourist arrivals. And that wraps up our presentation for Megaworld's third quarter 2023 results. I'll pass on the floor to Dexter, who will open the floor for questions. Thank you.

[Operator Instructions] We are now ready to address the first question from our participant, Carl Sy.

Let me just check if you can hear me?

Yes, Carl.

So I have a couple of questions. I'll start off with the residential segment. It looks like there were more sales made abroad so through overseas channels in the third quarter. I'm guessing more than 1/3 of your sales for the third quarter -- or for reservation sales were made overseas. And I wanted to check if there's -- what you would credit this, is it more activity on your part? Is it just more demand that you didn't -- you were just doing the same things, but there just happened to be a lot more sales from abroad? Also, did this come much more from OFWs? Or was there a pickup from sales to foreigners?

May I call on Mr. Noli to answer the question, please?

Yes. Thank you so much, Carl. I would say it's a combination of both our efforts and the growing demand for our products. We've seen the surge of inquiries from abroad. And as we all know, the world is getting smaller and smaller. It's so easy to sell to the farthest flung, remotest locations on Earth. So we've intensified all our efforts on the international. But fortunately, we've been -- our efforts are rewarded with the corresponding demand. And we're very confident that we can sustain this in the next -- in the coming years.

And Carl, on your question on...

[indiscernible] OFW or more foreigner?

We're seeing a healthy mix of sales coming from foreigners and our overseas Filipino workers.

And were there particular products you noticed that sell better for OFWs or foreigners versus local?

Well, let me just clarify, Carl, that I'm not speaking on behalf of international. I'm just relaying to you what we know because I'm handling our projects in Manila, specifically Fort Bonifacio as well as in Bulacan. So -- but I'm here because I think our segment is a good indicator of the overall demand for -- coming from the market.

Got it. And with -- and just let me know if you aren't the correct person to ask about this. But for, let's say, origination of overseas sales, is it driven more by sending agents abroad or having people who live abroad selling your product? Or has it become much more of an online channel?

It's a combination of all the channels, Carl. The group, as I've been -- also in touch with the head of this group, they've been doing all -- a lot of activities relating to all these channels. So they have a lot of agents there. They have residents of these countries are fellow Filipinos who are selling for us. And they are holding a lot of activities in unexplored locations.

Okay. Then I'll ask this time about the office segment. Roland, during the [ MLEAP ] briefing, you did mention that it was more common for traditional tenants to do more work-from-home than for BPOs. But on the part of Megaworld, I believe your BPOs are mostly availing of PEZA incentives. And so for that reason, they're actually limited in the amount of work-from-home they can offer, right? I don't think -- if you're under PEZA instead of BOI, I think there are still limits on how much -- on, let's say, going full work-from-home. So I was wondering if, in your view, if the BPO tenants were allowed to go full work-from-home and still avail of incentives, would they choose to do so? Or at least what do you think there will be an extra day or 2 days working from home for the BPO firms?

That's a good question actually. That's a good question because you're right. If you do a PEZA, there are limitations in terms of your ability to allow people to work-from-home. And so far, the way we see it, the recent permissions given by the government for PEZA companies who allow work from home is only limited to existing locators. Therefore, for new locators, once they register, they have to choose already. And as I mentioned during the [ MLEAP ] briefing, companies have reference to be under PEZA, in which case the new companies registering with PEZA are actually required to work in the office.

Okay. So I should clarify or I should provide some context here. So my concern is that the government will start allowing PEZA registered enterprises to implement full work-from-home policies and still avail of incentives. So as you said, right now, that's not the case, right? They still are not allowed to do so. So my concern is what if they are allowed to go full work-from-home. That doesn't mean everyone will choose to do so, right? There will still be some who might say, we're doing 1 day a week now, maybe we'll do 2 days or 3 days, work-from-home. So I guess where I'm coming from is your best guess on where the BPO firm -- at least your tenants might stand. Like will it be status quo? Or would you guess there's going to be an extra day, 2 days working from home for them?

I think it's actually, Carl, it's -- the appetite for work-from-home depends on the kind of business of the locator. If for example, the locator is in finance or is a bank, chances are their appetite is to work in the office and not to work at home because of their privacy and security requirements. So it's on a per industry basis. Voice-related companies are more open to work-from-home. But knowledge-based companies tend to prefer work in the office, generally.

Got it. And for your own tenants, so maybe 80% of your space is occupied by BPO firms, are you more voice or more KPO or more banks? Yes.

In Metro Manila, the closer you are to Fort Bonifacio, the more you -- the more nonvoice you are. And the farther you are away, it's more voice. That's how it is distributed.

[Operator Instructions] We have a question here from [indiscernible] that we resales by apart and partner and year-on-year? Should we be worried? Maybe sir, Andy could answer, please.

Thank you, Dexter. Presales fell quarter-on-quarter -- and year-on-year is because that was when the Philippine economy really opened up. And that's where pent-up demand really came going in into our presales last year third quarter. I think we had almost PHP 35 billion last year, and that was really the reason for that. Quarter-on-quarter is really just -- we think it's really a timing issue. It did not significantly decline. We're still ahead of our initial projections of PHP 130 billion presales target for the year, currently at 84%. So going by that, we're still hoping to exceed that by the end of fourth quarter. And I don't think it's telling. It's really -- we -- our biggest launch for the third quarter of 2023 was Uptown Modern, that accounts for about PHP 29 billion already. And that was launched on the last month of the second -- of the third quarter. So we should see more presales coming in from that into the fourth quarter.

Thank you for that, sir, Andy. Next question will be from [indiscernible]. How is the outlook for presales as PHP 190 million has already been achieved close to your PHP 130 billion guidance.

Yes. I'll take that as well, Dexter. So this year, we'll definitely cross the PHP 130 billion. And for next year, we're looking to grow from our PHP 130 billion guidance. So we're still looking to grow next year. We're seeing no slowdown really in terms of demand from both locally and our clients internationally. In fact, I think international has been doing quite well as well going into the early parts of the fourth quarter. And we -- it's really sustaining their strong performance. So looking to end the year strong. And next year, we're still looking to grow our presales.

Thank you for that, sir, Andy. And for the last question from [indiscernible], what [indiscernible] 3Q 2023 earnings beat? I'm just now talking about the 9 months ended 2023.

Okay. On the third quarter earnings beat, a couple of different factors. Of course, revenues still grew at a double-digit pace. Our EBITDA margin improved from 46 -- to 46% really from 44% last year. So that's a 2 percentage point improvement. That's driven mostly by -- on a quarter basis, a year-on-year lower OpEx costs, our GPMs. Though the market may be seeing higher construction costs, our GPMs remails largely thanks to our contracts that we secured early on and as we continue to offset some of the increases in cost by increasing our selling prices. So that's one of the reason why we improved -- how we improved our margin. Now removing -- excluding any ForEx losses, so this year -- this quarter, we had about PHP 836 million. Last year, about PHP 1.5 billion. With -- including that, then that may be one of the reasons why our earnings growth was so much higher compared to our revenues. And the next -- if you look at our income tax rate, our income tax -- effective tax rate for this quarter is much lower compared to the previous quarters. Though we don't like to see this -- we don't see this as something sustainable, and it's really a onetime timing issue type of income tax.

Thank you. Thank you, sir Andy. we also have a question here from [ Paolo Garcia ] from [indiscernible]. How are cancellations versus 2019? Sir, Andy can answer, please?

Cancellations, so back in 2019, we were experiencing around 5% of our presales cancel any time within the period of their reservation. In the -- so last year was still a bit above 5%. But this year is much lower than 5%, some to the tune of 3% to 4% this period. Especially as we move on into the second half of the year, there are less and less cancellations during the second quarter and the third quarter of the year. So it really speaks of the optimism and demand and the spending capability of our clients.

Thank you for that, sir Andy. Another question from Paolo Garcia. Maybe sir Noli could answer this. For payments teams, have they normalized or still stretch?

I would say we've normalized our payment schemes, although we are responding to market demand. And as such, we are always looking for ways to make our projects more attractive by offering a number of payment schemes that will conform to the number of years that we'll have to wait -- they will have to wait before completion of the project. But I would say, generally, we have normalized our payment options.

Thank you so much for that, sir Noli. Another question from [ Paolo Garcia ]. In terms of land bank, what is the company's plan moving forward, more aggressive in acquiring more land or focused more on new launches? Sir Andy, please answer.

Thanks, Dexter. So in terms of land bank, we generally have allocation per year of about 20 -- 10% to 20% of our CapEx budget. So the budget is always there. It's a matter of finding the prime location or a prime location that we're willing to buy. If not, I think most of, if not -- most of our projects or our land acquisitions [indiscernible] have been in the form of joint ventures. These joint ventures really play a crucial role in terms of our land acquisition process as these lands -- these usually are the primest of prime, easily accessible, good infrastructure. And we partner up with the owners of the land and -- to "acquire" the land and build on it a Megaworld township for the future. So in terms of -- so far this year, we haven't acquired any sizable land bank. That remains to be seen in the fourth quarter, but we do have the budget. And I believe we're looking at a couple of land banks that we are maybe closing into an acquisition. So I think definitely, we're still focusing more on our launches, selling our inventory. As you know, we have 4,500 hectares of land. That's already capable of providing us enough land bank for -- in the next 15 to 20 years. So it's more opportunistic for our land bank acquisition.

Thank you for that, sir Andy. And we have a question here from [ Angeline ] [indiscernible]. Can you give color why the EBITDA margin declined to 43% from 45%?

Yes. Okay. So in the first half, cost and expenses were really ramped up. And that was really the biggest reason for the decline in the 9-month period to 43% from 45%. If you look at our first half numbers, our EBITDA margin back then was 42%, so much lower than the current 43% in the 9 months. So we actually already improved our EBITDA margin coming into the third quarter. And these are largely business expenses related to expanding our activities, commissions, A&P, OpEx and the like.

Thank you for that, sir Andy. As we await the questions that will be coming into the Q&A tab, let's begin addressing some of the questions that were sent to us via e-mail ahead of this session. We will read the questions by business segment, starting with the hotel business. So Ms. Cleo, as the Philippines has witnessed a notable increase in tourist arrivals, has there been a corresponding increase in foreign tourist bookings at Megaworld hotels or if the demand booking is to be primarily driven by local tourists?

Yes. Thank you, Dexter. Last September, the Department of Tourism marked a 4 million count of arrivals of tourists. We are not yet at the level where we actually expected as projected for the year, but we are also very dependent on domestic travelers and guests. But our hotels for Megaworld Hotels & Resorts actually reflect the same source markets that have come in, in the Philippines. And that's South Korea, the U.S. and Japan. So we're hopeful that if the tourists in 2024 come in with the markets that used to really travel here in our country travels back with the existing domestic contribution, we should be in a good position.

Thank you for that, Ms. Cleo. And for your second question, in a highly competitive market, what strategies do you employ to sustain the competitiveness of your hotels?

Yes, there are a number of hotels that recently opened after the pandemic, and we continue to also have our very own in the pipeline. But what sets an advantage for the group is our focus now into getting improved e-commerce platforms. Our online travel agencies, our distribution channels has been a key focus area. In fact, we migrated to a new system provider and new partners so that our reach will really be improved, given the changing landscape of the booking pattern of our guests and travelers globally. We also gave focus on improved and increased projects that will cater to providing MICE facilities. Our Boracay Newcoast convention center contributed a lot in making our hotels in Boracay Newcoast at least survive. And we have recently launched our Mactan Newtown -- Mactan Expo Center, which will be a very big convention center that will open in 2025. So the group is trying to position to be one of the biggest providers of the MICE facilities here in the Philippines so that we can capture the MICE segment and business. And being a high-touch business and industry, we also keep in touch with our customer experience focus. That's why we launched the Sampaguita Project, which I -- we have been very open in talking about across all media platforms to really give a visual of what the Filipino brand of service can provide. For markets like Cebu as well as Boracay that continue to be challenged, meaningful relationships will keep us thriving and keep us afloat.

Thank you so much for a very informative answer, Ms. Cleo. We will now read questions for the real estate business. So sir Noli, I've noticed that you've begun reintroducing residential projects in Metro Manila and in a big way. Does it mean that there are opportunities, again, for vertical residential projects in Metro Manila? Or this is [indiscernible] for select areas only?

Well, as our figures so far show, we are very confident that this is a pattern that can be sustained in the coming years. As I've mentioned earlier, the demand is really there. And we're just capitalizing on that, and we're making every effort to make sure that we capture most of that demand. Now Andy mentioned that we have launched our biggest project yet in Uptown Bonifacio, which is Uptown Modern, which is worth about PHP 29 billion. And we have -- despite the price point that we have, it's quite remarkable that the market is quite accepting even at that price point. So again, that makes us even more confident for our prospects going forward.

Thank you, sir Noli. And for your second question, how has the market's response be to Uptown Modern, especially given its current price of over PHP 400,000 per square meter. Could you provide insights into the profile of the buyers that have strong interest in this development?

Yes, it's too -- perhaps it's too early in the day to be able to generate some meaningful insights because we launched this only towards the tail end of the last month of the third quarter. But having generated about 8% or having sold about 8% of the project, I think that points to -- that supports our confidence. But as I've mentioned, it's too early in the day to have any insights, to generate any insights. But the price point of PHP 428,000 is a bit high. And so far, we're still getting a lot of inquiries, and we are confident we'll be able to sustain our momentum going forward.

Thank you so much for that, sir Noli. And now we will read the questions for the office business. Sir Roland, Megaworld offices occupancy rate declined quarter to quarter, but it's still above the market outlook. Are you expecting this level to hold even in the wake of impending huge supply in the office segment, especially in Metro Manila, plus the ongoing hybrid setup that seems to have already affected demand for office space?

I think there is a -- there will be a slight reduction once our new buildings get completed. But that also means that we are going to get a reduction because of new inventory and not because of non-renew ones.

Thank you so much, sir Roland. And finally for questions about Megaworld. sir Andy, are there any plans to incur more debt towards the remainder of the year?

Thank you, Dexter. Nothing significant for that matter. If any, all of our debt currently even during the year are more in the form of -- for our day-to-day operations, to fund our day-to-day operations. So we're mostly focusing really on short-term debt as of the moment because interest rates are quite high for longer term. So shorter term and not looking to book any sizable debt near term.

Thank you for that, sir Andy. And for your second question, there has been a continued rise in the prices of construction materials. How is MEG affected by these? And how do you protect your development margins?

Thank you, Dexter. So as mentioned earlier, we -- our contracts or construction contracts, we already lock in our prices back when we secure our contractor. So that in its way already secures us from some of the rising raw material costs. But of course, there will still be some impact, especially given the recent rises in construction costs. So we've been constantly increasing our prices. It could range from 5% to 10% depending on the project. It could be multiple times per year. And generally, these are already enough to offset the rising raw material costs. And hopefully, we'll be able to maintain this going into the next year. Our team on the ground or construction -- those are manning the construction, they have been very, very conscious on maintaining margins, on saving costs in any -- as long as it makes sense without, of course, sacrificing our quality. And that is our promise to our customers.

Thank you very much for your answers, sir Andy. [Operator Instructions] So it seems like there are no question. And since that we are rapidly approaching the end of our allotted time for today's webinar. Now before we wrap up this session, I would like to give the floor again to sir Andy for some announcements.

Okay. Let's just go to that slide first. Okay. So very, very happy to announce this. We'd like to invite everyone in this call, our analysts, our investors, even our panelists, to our year-end holiday party. It's been a while since we've had this. I think the last one was 2019. We're very eager to meet you guys again face to face. And we will send the details afterwards, but this will be on December 5. It sits in the middle of the week so that we're sure that there aren't any conflicts in your calendar. So it starts at 5 p.m. It will go on until when it ends, when the last person leaves. So hope to see you there. It's in the Whiskey Library. This is new. We recently opened it this year. It's in our Township Newport World Resorts. And hope to see you there. And hope everyone can come, enjoy the food and drinks.

Thank you for that announcement, sir Andy. As we wrap up this session, we would like to extend our heartfelt gratitude to all of you for attending. Your presence has made this webinar a success, and we couldn't be more grateful. We hope that you found the information shared today [indiscernible] and insightful. If any of you have any queries that we were not -- we were unable to address during this session, we kindly invite you to send them to us via e-mail. We look forward to the opportunity of connecting with you all again in the near future. Once again, thank you for your participation. You may now disconnect.

Thank you.

Thank you.

Thank you.