Megaworld Corporation (MEG) Earnings Call Transcript & Summary

Hi, everyone. Good afternoon. Thank you for joining us today for Megaworld Corporation's full year financial and operating result briefing full year 2023. I am Dexter Zambale, and I will be your host for this session. [ Our distinguished panelists ] are here you to provide you the group performance and answer your questions. Joining us today are Mr. Roland Tiongson, First Vice President, Megaworld Premier Offices; Ms. Cleofe Albiso, Managing Director, Megaworld Hotels and Resorts.

Good afternoon, everyone.

Mr. Graham Coates, First Vice President, Megaworld Lifestyle Malls.

Good afternoon...

and Mr. Andy Dela Cruz, Investor Relations Officer from Megaworld, who will be our presenter for today.

Hi, everyone. Good afternoon.

Throughout this session, we encourage you to actively engage and participate by asking questions or seeking clarification. To do so, we have 2 options available. [Operator Instructions] Without any more delay, I will hand over to Mr. Andy for the presentation. Andy?

Thank you, Dexter. All right. Thank you for joining us, everyone, for Megaworld's full year '23 results. Next slide, please. So just like to begin this presentation or this call with just a snapshot of what happened in 2023. 2023 was indeed a milestone for Megaworld, not only for our financial performance, but also for our innovations and sustainability initiatives. To recap the year, we launched Baytown Palawan right at the end of the year. This is a 6-hectare lifestyle township in Puerto Princesa Palawan. We also launched 19 projects in total for residential segment in the year, capping off the year with PHP 72.6 billion worth of launches, which also includes our Uptown Modern, which is our next high-value project in Uptown Bonifacio. We also inaugurated our Township Analytics and Technology Lab, which focuses on harnessing data science and technologies to really improve our township safety and accessibility. We also launched Uptown Tempur Cinema in the fourth quarter of 2023, providing really a new experience to our movie watchers. Finally, we paved the way for many sustainability initiatives and milestones for the year with the inauguration of Dr. Andrew L. Tan Data Science Institute. We also have LEED certifications for various office buildings under Megaworld Premier offices, and our hotels move to implement our country's national flower Sampaguita to their hotel experience. So really 2023 was filled with a year -- with a year that we are proud of here at Megaworld. So moving on to just a quick update on our land bank and our township footprint. There you go. So we ended 2023 with 31 townships, spanning 5,178 hectares all over the country with a new Baytown Palawan launched last -- first quarter in 2023. So our land bank as of end 2023 is at 4,430 hectares, 87% of which is Luzon, the rest outside Luzon. We have 2% in Metro Manila. In 2023, we also launched our -- as discussed earlier, we also launched our MEGreen program with a tagline, "Green starts with ME." So this is really Megaworld's official sustainability program with a team dedicated to really ensure Megaworld is on track for its sustainability targets. And as of end 2023, 35% of our own and contestable properties have shifted all to renewable energy. Megaworld is targeting to reach 100% renewable energy by 2027. And aside from this, we also implement the use of several low-hanging fruits to conserve energy, such as the use of natural [indiscernible], energy-efficient equipment, among others. Megaworld also [indiscernible] just showing that Megaworld also aims to protect and preserve natural forests and ecosystems. With this, Megaworld is targeting to reach 1,600 hectares for reforestation and management. And of the 1,600 hectares, we currently have 240 hectares already existing as our carbon forest, 525 hectares of that 1,600 would be from our land bank and the rest we will adopt. We planned Cacao trees as well. So far, 72,000 trees was planted in 2023 on 120 hectares worth of land. So we plan to plant another 72,000 trees in another piece of 120-hectare land. So this not only helps our sustainability initiatives but also helps the local community by providing livelihood. For our water and waste management, we also began the implementation of our sewage treatment plant in a building in McKinley Hill. The STP will treat the water for used -- for reusing toilet flushing among others. We target to have all our own buildings connected to our STP -- to an STP, ensuring we can serve and reuse the precious water in the long run. We also have various waste management initiatives and our partners in these include Globe, [ PetraPac ], Ecowaste Coalition among others. Finally, we continue to include the community we build in. So far, we have more than 16,000 beneficiaries of our social programs and efforts, such as scholarship grants, medical missions and other education-related programs. Now moving on to our financial performance. So net income for the year ended at PHP 17.3 billion, which is 29% higher than 2022. This is, as we sustained the strong pace of growth in our consolidated revenues. Consolidated revenues in 2023 finally hit record levels with a 17% growth to PHP 69.7 billion. Business across the board all saw strong performances from our real estate projects, leasing and our hotels. Our real estate gross profit margin and EBITDA excluding ForEx margin is largely stable at 49% and 43%, respectively as we were really able to successfully implement effective pricing and cost management strategies. In the fourth quarter alone, revenues grew by a faster 24% as real estate sales grew by -- also a faster 28%. Net income, on the other hand, grew by over 5%, but only largely due to a higher ForEx gain recorded in the fourth quarter of 2022. So ForEx gain in the fourth quarter of 2022 was PHP 1.1 billion compared to this quarter's ForEx gain of PHP 730 million. And just to compare, this brings our total ForEx gain for 2023 to PHP 257 million compared to 2022's ForEx loss of PHP 1.7 billion. Now moving on to our revenues. Real estate sales, we continue to hold the largest share of total revenues, still at 61% of our total revenues, followed by offices at 18%. On a per segment basis, real estate sales grew by 16% to PHP 42.7 billion on an accelerated rate of project completions compared to last year. Office rental is up 3% to PHP 12.6 billion on continued rent escalations, renewal of expiring contracts and new leases. Mall rentals rose by 54% to PHP 5.3 billion on higher occupancy rates, full rental collection beginning January of 2023 and tenant sales are already much higher than pre-pandemic figures. Hotel operations also saw a strong growth of 46% to PHP 3.8 billion, which is a record for Megaworld hotels as domestic tourism and MICE activities continue to pick up. Moving to our balance sheet. We also maintained our strong balance sheet. We ended the period with gross debt amounting to around PHP 103 billion, of which 70% would be bank loans and 51% of the interest rate is fixed. Our dollar exposure is at 30%, which is about PHP 550 million of our gross debt. Our net debt to equity remains healthy, very healthy at 29.8%. Meanwhile, CapEx spend for 2023 amounted to PHP 50 billion, and this was largely used for property development across our projects. Next, we'll discuss operating updates from our business segments, starting with the Real Estate segment. Our reservation sales reached to PHP 139.2 billion in 2023, up by 17% and 7% above our year-end target. This quarter, we launched 12.9 -- PHP 12.8 billion worth of new projects causing our project launches to reach PHP 72.6 billion for the period. This also marks a 61% improvement to last year's PHP 45 billion worth of launches and 21% higher than our PHP 60 million target for the year. Going back to the real estate sales, yes. In this slide, we break down our real estate sales, really, of the PHP 42.9 billion, around 82% remains from our operative middle to high-end segment, which is catered by Megaworld and global estate brands. These showed a 20% 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 or 18% on of real estate sales, and these grew by 2%. Moving on to a bit of our projects in Taguig, which accounts for 23% of our sales, increased by 32%. Bookings in Metro Manila, excluding Taguig was largely flat. Luzon grew by 24%, while Visayas, Mindanao also grew by 41%. Now by classification, bookings of vertical developments accounted for 78% of our sales and grew by 25% year-on-year. Horizontal developments or lots, which accounted for 22%, grew by 37% year-on-year. Now moving to our reservation sales. Demand for residential projects are largely local at 75%, while demand from international buyers account for about 25% of presales figures. By location, projects outside Metro Manila accounted for 45% of our presales figure while Metro Manila accounted for 55%. And vertical developments remain to be the largest chunk of our presales and accounts for 87% of the figure. Going to our project launches. We launched a total of 19 projects worth PHP 72.6 billion so far. In the fourth quarter alone, we launched 4 projects totaling PHP 12.8 billion. By segment, 85% of our launches remains to be with the upper middle to high-end markets. By location, 65% would be in provincial areas and 35% in Metro Manila. We also continue to launch multi-vertical projects at 93% of our -- all of our project launches in 2023. So I will just quickly list down the project launches we had for the fourth quarter of 2023. The first is Positano Mactan Tower 2 in Mactan Newtown. This project is valued at PHP 2.2 billion, has a sellable area of around 7,200 square meters with 148 units. The project is 51% sold as of end 2023. The average selling price for Positano Mactan Tower 2 is PHP 307,000 per square meter, which is already 23% higher than the Tower 1 of Positano Mactan, which was just launched in the first quarter of 2023 as well with an ASP of PHP 250,000. We also launched Paragua Sands Hotel in Paragua Coastown. The project is valued at PHP 4.2 billion, has a sellable area of around 9,600 square meters and around 310 rooms. This is currently as of end 2023, 24% sold, and the ASP for Paragua Sands is PHP 438,000 per square meter. Next, we also launched Bellara Tower 3 in Highland City. The project is worth PHP 3.7 billion with a sellable area of 26,000 square meters and 910 units. The project is 73% sold, and ASP is at about PHP 140,000 per square meter. Finally, we launched Eastland Heights Village P2D and P2E in Eastland Heights. The project is worth PHP 2.8 billion with a sellable area of 87,000 square meters divided into 108 lots. The project is 2% sold as this was only launched in the last week of December, and ASP for Eastland Heights is currently at PHP 32,000 per square meter. Next just -- so in this slide, we launched Uptown Modern in the third quarter of 2023. So I just wanted to provide an update to everyone. Recall, we did say that we launched Uptown in Modern with a value of PHP 29 billion in third quarter. But we finalized the project and launched only Tower 1 in 2023 with a total project value of PHP 19 billion. We're reserving the Tower 2, which is roughly PHP 10 billion into 2024. So the project -- the Tower 1 project of -- the Tower 1 of Uptown Modern is currently 16% sold as of end 2023. Now moving on to the performance of our office segment. Our office GLA is now at around 1.5 million square meters after completing International Finance Center and adding 69,000 square meters to our GLA. Our overall occupancy rate stands at 88% as of end 2023. We did have some exits in the fourth quarter of 2023. I think largely from our POGO tenant, which caused our occupancy to contract quarter-to-quarter from 89% in 3Q and from 92% the year before. So Paragua Premier offices actually recorded an sounding number of transactions in 2023 at 284,000 square meters, broken down new leases accounted for 133,000 of the figure, while the remaining are renewals of this year's expiring contracts and next year's -- and future expiring contracts beyond 2023. Compared to the industry, MPO remains well and above the average occupancy rates, thanks to the quality of our assets throughout 88% whereas Colliers and CBRE has their occupancy -- industry occupancy at 81%. On MPO's portfolio. Next slide, please -- thank you. On MPO's portfolio, 74% of our tenant mix is accounted for BPO tenants, 20% by traditional office tenants. And now our POGO exposure is at 4%, down from 5% in the previous quarter as we had some exits in the fourth quarter. Our weighted average lease expiry as of end 2023 is at 3.1 years. We renewed 66% of our expiring leases in 2023. Again, as we had the expiring contract as of end 4Q from our POGO tenant among others, so that was the reason why our renewal rate is much lower this and year compared to our third quarter 90% renewal rate. Okay. Now just an update on our International Finance Center. We promised that we would turn over this in 2023, which we did. We have turned over the International Finance Center to our tenant and fit-out is currently in progress, and we expect this building to be revenue generating sometime in third quarter of 2024. As we have -- we gave them 9 months for fit-outs because they essentially rented the whole building. Next slide. Now just jumping to our mall segment. This time around, Mall revenues in the period saw a 54% jump to PHP 5.3 billion, on improving spend. Our foot traffic also improved year-on-year. And as we removed all rent concessions beginning January of 2023. We ended the year with 517,000 square meters of GLA. We added 3,000 square meters in the fourth quarter alone from our Davao whiskey Park. And our occupancy rate improved further to an all-time high of 93% as of end 2023 from 92% in the previous quarter and from last year's 90%. Total tenant sales. Total tenant sales continued to improve in 2023, growing by 19% year-on-year in the fourth quarter alone -- in the -- growing by 19% in the full year. And in the fourth quarter alone, tenant sales improved by 8% compared to year ago levels. Foot traffic also improved by 24% compared to 2022. The increased foot traffic, combined with rent rates that are now back to pre-pandemic levels, and higher operational occupancy of 88% as of the fourth quarter of 2023, all contributed to the rapid growth of our mall revenues. Now our malls team prides themselves really on the continued innovation of mall offerings, and we were thankful to have received the following awards during the year, 3 awards from -- so one is Gold Stevie Award for innovation and sustainability and 2 Bronze Stevie Awards for innovation in the use of events and in consumer events. And we -- our malls team also continue to redefine the experience in our lifestyle malls. So as mentioned, we brought in Uptown Tempur, we brought in SuperPark, and these are all in the sense of us focusing on our loss as a destination mall. So these are among some of the action activities that we have currently. We have SuperPark among others, Manila Polo Club. So really brings guests and customers to our malls as a destination rather than just going there to shop. Next, on our Hotel segment. Revenues in 2023 grew by 46% to PHP 3.8 billion. This was largely due to a higher Metro Manila occupancy rate of 67% and improving demand from MICE activities. We currently have 4,713 room keys as of end 2023. So our hotel revenue is already far exceeded our pre-pandemic performance. We nearly doubled our average daily rates compared to pre-pandemic alongside the rise in MICE activities. Our EBITDA margin during the period is at 17%, some 200 basis points lower than 2022, but largely on higher costs such as manpower as we rapidly expanded our operations. So one of our hotels, Savoy Hotel Boracay was recognized as one of the best luxury destination hotels in Southern Asia, really at the prestigious 2023 World Luxury Hotel Awards. So really this is a testament to our Megaworld Hotel team's commitment to delivering the best hospitality experience for our guests. And as mentioned earlier, Sampaguita is really a big part of Megaworld Hotels offerings and branding. So we planted 2,500 Sampaguita [ ceilings ] across 4 of our townships in Cavite, [indiscernible] and Mactan town. This not only has our operations and costs, but [indiscernible] and service to our guests. This also allows us to really remain sustainable in our efforts to really incorporate the Sampaguita in our Megaworld hotel branding and offerings. Finally, Megaworld Hotels & Resorts also received a Great Place to Work certification, which highlights our hotel's competitiveness in providing jobs and securing top talents in the hotel industry. So this is really to ensure that we remain committed to the well-being of our employees while solidifying the foundation for further growth of our hotels. So that's it for the operational performance highlights. Now we'll go through the various targets we have and goals for the continued growth of Megaworld this year. For 2024, we're allocating PHP 55 billion in CapEx, 80% to 90% of which is used for project development, while the remaining will be for -- budgeted for land acquisitions. We're also looking to launch PHP 40 billion worth of projects since 2024. This is, as we continue to digest the large launches we had in the second half of 2023, and as we prepare also for more launches coming in 2025. Finally, we're targeting to hit PHP 145 billion reservation sales this year, which represents a 4% growth from last year's actual figure. For our office pipeline, we plan to grow our office portfolio by 148,000 square meters or around 10% by 2026. These will be in 5 different townships of Megaworld, all of which are outside Metro Manila. For this year, we plan to turn over Enterprise 1 and #1 Upper East, which will add a total of 48,600 square meters of GLA. For our malls, we expect to increase our portfolio GLA by around 29% or 151,000 square meters until 2026. The -- largely, our malls will be online coming in 2025 and 2026, which include our Boracay Newcoast Beachwalk Capital Mall in Capital Town Pampanga and highlight more in Park in Highland City. Lastly, we are growing our hotel room keys by 3,533 room keys or about 70% growth from the current 4,730 room keys. Grand Westside Hotel, which we expected to open last year was unfortunately delayed to maybe first quarter or second quarter of this year. But rest assured, we'll open it this year. Well, that will add around 1,000 at least -- the first wing will add around 685 room keys for this year and Chancellor Hotel Boracay will add around 550 room keys. Finally, I'd just like to end with the following key takeaways from this call. For real estate, the bookings continue to increase sequentially. And we see this to continue improving in 2024. We see strong demand in both our provincial projects and Metro Manila projects like. They certainly help our reservation sales grow at a faster pace compared to our initial target. And that's why we're also targeting a much -- a higher reservation sales target for this 2024. So we expect demand to continue this 2024. For offices, our high tenant retention and ongoing rent escalations allowed us to still continue growing. Amidst a market with many headwinds, our occupancy remains well and above the industry average. We expect to continue renewing our expiring contracts and see oncoming demand from the still-growing BPO industry. For our Lifestyle Malls, we saw a surge in rental income driven by 1 higher tenant sales, rent of collection, higher foot traffic, higher operational occupancy. We expect mall rents to continue to grow in step as we improve our operational occupancy this year and as we continue to open more -- or to add more GLA into our malls in the next couple of years. Finally, for our hotels, hotel revenues continue to grow beyond pre-pandemic levels. As we see -- we really saw a large pickup from tourists, local tourists and MICE activities. We expect hotel revenues to continuous growth, really in step with anticipated increase in international tourist arrivals and activities this year and moving forward. And that wraps up our presentation for Megaworld's full year 2023 results. I'll pass on the floor to Dexter, who will open the floor for questions. Thank you.

Thank you, Andy, for that very comprehensive presentation. As we move forward, it is now time to open the floor for questions. [Operator Instructions]. Mr. Carl Sy.

Yes, I'll ask first about the office business. So a new building was completed and was fully pre-leased. Despite that, total system-wide office occupancy actually dropped a little bit. And I just wanted to check if it was all because of POGO or if there were any traditional or BPO tenants that closed in the fourth quarter?

Thank you for that question, Mr. Carl Sy. May I call Mr. Roland Tiongson to answer the questions, please.

Dexter. Hi, Carl. It's actually a mix, but bulk of it must from POGO.

Got it. And I guess, looking ahead, do you still see a lot of inquiries from all categories, BPO, traditional, POGO or just one category or in fact are inquiries weak right now?

For BPO, it's stable, I would say, and it's getting better traction. But -- the one that is [indiscernible] are traditional occupiers. They are the ones who have been filling up the gap during the time when the delinquent coming in. But towards the end of 2023, those BPO increase started coming in, including this part.

I do apologize, Roland. You're coming off quite faint. Could you repeat what you just said about traditional tenants?

Well, last year, most of the increase -- there were more increase from traditional than BPOs. But towards the end of the year, the BPOs started to have some traction all the way to this quarter. Did you get that. I'm having a connection problem. I'm sorry about that.

Okay. And then if it's available, could you tell me the pre-leasing levels of the buildings coming up this year?

For what's coming up this year, we have not really leased anything yet except for Bacolod, which has a 5% pre-leasing percentage. Other than that, none yet.

Got it. And then I'll ask about the residential business. So a few things. First, the presales or reservation sales fell for the second consecutive quarter. And I was wondering if we should -- how we should think about this? Was there -- was it a blip from your perspective? Was there some weakness in particular areas or particular categories? How should we think of it?

Thank you, Carl, for your question. I'll answer the residential questions this time around. Well, we -- actually, what we saw was an unusually strong first and second quarter, which was quite surprising for us as well as we went through the year, right? So what happened was demand just normalized during the second half. So I think although it's lower quarter-on-quarter, I think typically fourth quarter has been much leaner compared to maybe the first quarter or the other quarters as people really just focus on the holidays rather than buying properties. But I think how we should digest this? Going into 2024, we're expecting more -- the reservation sales target we have is PHP 145 billion, it is high much higher. So we're, in fact, still seeing a similar level of reservation sales as 2023 on average, right? And in terms of weakness, so far, we've been -- our projects have been doing very well, especially for many of our townships. But if you see us in our update a while ago, Uptown Modern, which is currently 16% sold, that has been, I think, lagging in terms of what our expectations are. Typically, we reach 70% to 80% sold within 8 to 12 months. And that has been launched by about 4 months already, and we've reached just 16%, right? So that has been lagging. I think the main question, the main feedback there was -- is really maybe affordability of BGC project, which is already at 400,000 square meters. But we try to really cater to these -- we remain flexible and hope to sell and maybe improve our payment terms. But currently, we're selling already at 7 years. I think that's our pre-selling term, which is very attractive already. So we're hoping to increase our efforts on marketing this project.

Understand. And could you tell me the unsold inventory level as of the fourth quarter?

We have around a year's PHP 148 billion.

Got it. And then I'll ask about the hotel business this time. So revenue is a lot higher than 2019 levels. Could you give me an idea though of maybe how many rooms you have? I can check it out as well. But if you know of how many rooms you have now versus 2019? Is the portfolio 20%, 30% larger?

No, there's actually just an addition compared to 2019, there are 2 properties that we added, and this is the inventory of Kingsford Hotel Manila, that's 550 rooms, which opened in 2021, Carl. And this is -- and apart from that, we also opened by mid of the year in 2023, the addition of the Belmont Hotel Mactan, which was fully turned over within the fourth quarter of 2023. The additional contribution, I'm also always very curious if the increase is coming from the additional inventory, the contribution of both properties result to about 19% only. So the balance from the 46% is really organic growth, and this can be contributed to the increase of numbers of tourist arrivals, that's really one that we should credit it to. The other is, the increase of the MICE business that our corporate accounts have been mounting throughout 2023. You see a lot of conventions have happened. The addition of the Boracay Newcoast Convention Center has also been a great addition to this. We were able to host not just local conventions but even international ones.

Okay. Those are all of my questions.

Thank you, Mr. Carl Sy, for your questions, and thank you also to our panelists for answering the questions. On that note, [indiscernible]

Okay. Sure. I just -- we just have a follow-up of the modern discussion. It has mentioned that there are plans to address the relatively lagging pace of preselling. What exactly are you thinking about? Do you plan to extend further the payment scheme, revise the prices if ever or tweak the size of the units to address the profitability on a unit level? So that's the first set of questions.

Thank you, [indiscernible]. I think we already implemented at least extending the payment terms to 7 years, which accounts -- which is the same as the construction period of the building. The other thing that we did is, again, we deferred the Tower 2 of Uptown Modern just to make the size of the building much more palatable. So that's another boost that we did. And I think with that, we should have more room for at least for -- when looking at it, I think we launched at PHP 430,000 per square meter in the third quarter, now the average selling price is around PHP 428,000 per square meter. So there may have been some slight -- very slight discounts or maybe that was because of the Tower 2 units, not -- essentially, on average, the ASP for Tower 1 is much lower than the whole project itself.

My second question is on the profile of the new launches for this year is around PHP 40 billion. Can you share how much of that will be in Metro Manila, how much vertical and how much will be resi lots?

I think vertical would probably be at least 80% to 90% still. Most of our horizontal launches will be coming from [indiscernible]. And they've -- you can see PHP 40 billion project launches for us is lower than last year. They've also increased, on average, I think for all our brands, we've decreased our launches this year, right? So largely that. And I think still largely outside Metro Manila.

For the horizontal?

For -- PHP 40 billion, still outside Metro Manila, but again, we remain flexible, right? Whatever -- wherever we see demand, we can quickly and be very adaptable to the current environment. So we may launch depending on how demand dynamics go through the year.

Understood. And my last question is on the breakdown of the unsold inventory. Would you have the value breakdown with regard to vertical versus horizontal, Metro Manila versus outside Metro Manila? That's all.

Yes, I do. So around half would the RFOs, and then around half will also be in Metro Manila, while the rest is in provincial.

Okay. Got that. Sorry, about that RFO, it's relatively high compared to history. What are you trying to do to move this ready-for-occupancy units? And is it different compared to other industry players?

Yes. You're right. I think talking to our RFO team, definitely, when they handle their RFO units, we have a team dedicated for that, maybe refurbishing it, marketing it to the relevant target market. Typically, it falls in the range, right? We have a number of units. And I think currently, in 2023, it's at the high end of that range. So you're right, it's elevated at the moment. But they've always successfully just moved between that range, right? So we're hoping that we can significantly reduce this. Again, we're launching PHP 40 billion this year because we want to really reduce our units as well in our existing unsold inventory. So various marketing initiatives, I think there are also some units would come in as furnished to -- or more appliances as freebies. There could be for some projects, a more lenient payment term with respect to how much they would pay. I think it's 20%, 30% for them to move in. So that's among the initiatives that we have to move these RFO units.

[Operator Instructions] Since we don't have any other participants who have raised their hands at the moment, we will now address the questions that have been submitted in the Q&A tab. We have 3 questions here from [indiscernible], but some are already answered earlier. So we'll just read those, that are not to be discussed. This is -- this question is for sure Andy. Sales takeup decreased year-on-year and quarter-on-quarter. Was there anything in quarter 4 that caused weaker presales?

Thank you, Dexter. Yes, similar question to Carl's. We actually -- actually fourth quarter was as expected in terms of what our expectation is for the presales. Again, we target PHP 130 billion for the year, right? Typically, fourth quarter has been much leaner in terms of selling properties. So that, I think, it was the cause for the sequential decline. And also -- we also really saw a huge jump in reservation yes in the first quarter and second quarter of the year. I think that was the -- because this was the year that the Philippines actually opened up already from the pandemic. So there was a surge of pent-up demand back then. But going forward, we -- again, we were targeting PHP 145 billion presales, and that should allow us to grow from our previous year's number. I think we have another question, I can read it out, so we don't have to. So [indiscernible] asked as well what percent of buyers were OFWs? And -- So percent of buyers were OFWs? So 25% of our presales are from our international account, our international marketing team. And of that, 90% would be OFWs, around that figure. So of the total presales that would be around 20% are OFWs. The next question, what about Chinese and Americans and how do these compare to 2019? They are a relatively low contributor to our total presales at least in terms of our international marketing department, which handles our international sales. They just account for 10% in total of all the other nationalities. So I think -- as a whole, these would be much higher than 2019 because international contribution to our total presales have been much higher. I think in 2019, it was less than 15%, if I'm not mistaken. But now it's 25%. So it's much higher as a whole. But I think looking at our numbers on looking whether it's American or Chinese, Americans have been -- I think they have been the #1, one of the highest contributors for our presales this year. In Chinese, it's very rare. Very rare, but very minimal compared to 2019. And our payment terms back to 2019 levels, how long are they now? Generally, in 2019, I think we -- on average, for horizontal development, we had 3 years or 4 years. For vertical, it's 5 years. I think prepayment terms right now on average is still largely 5 years, but yes, no, that's right, still largely 5 years. But where we remain flexible was the -- how much they pay over 5 years? Last time, we collected 60% always over 5 years. Now we -- of the equity, of the property, now we collect -- depends on the property, we may collect 40% and 50% or even lower than that, right? But the guideline is still 60% over 5 years.

As we are with the questions that we will be coming in through 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 mall segment. Mr. Graham, your first question is, when do you anticipate many malls sales to fully recover returning to pre-pandemic levels?

Well, I think you can see from the report we're already there. The most sales have already exceeded pre-pandemic levels already. That's why we are able to see a significant growth. So to answer that question, we're already at that point where the mall sales have really exceeded pre-pandemic levels.

And your next question is [indiscernible] spending due to inflation effect to sales from your tenants? Do you see this effect in tenant mix of your malls?

Well, I think what we're seeing is a recovery across all sectors. And we are seeing some of the categories that were obviously not doing well during the pandemic, they're recovering as well. But we're also seeing a shift in a lot of category mix and all. So I think Andy mentioned previously that we're putting a lot of emphasis on entertainment, retail entertainment in the mall. This will really help in 2 ways: number one, it will make our malls more attractive for the people to come, more destinational driven. And secondly, once they're in the mall, they will stay longer in the mall. So the adjacent categories, particularly food and beverage will also increase as people stay longer in the mall. So we are seeing a slight shift in some categories, a little bit less of the retail, more on the retail entertainment.

So these all the questions for mall segment now. I will now read the questions for the hotel business. So Ms. Cleofe. How has the occupancy rate been affected by the increase in [indiscernible]?

I think our numbers show, Dexter, that our occupancy has been continually improving. We are very glad of the efforts of the Department of Tourism as well as the partnerships across all our exposures in key cities and key areas of the Philippines, I mean of the world. We also try to continue to do our own marketing efforts, and lately, because of the changing customer behavior, we have created our commercial division. So we are not selling our hotels the same way we've been selling them in the past. So we created distribution and revenue management -- sorry for that. Regular sales and strategic partnerships as well as our marketing innovation. So these [indiscernible] have been great contributors to the occupancy and of course, continuous efforts to build brand equity with [indiscernible].

And next question is, how are you positioning the MEG hotels in anticipation of the continued strong demand for leisure and tourist activities this year?

Yes. We have very good offerings for our destinations. The MEG hotels has continuously been a favor for our [ NCR ] travelers who do not want to have to fly or have to travel so far -- it's always fully occupied over the weekend. So we encourage our guests to also try doing MICE business because they've got a very good ballroom facility. Our destinations like Boracay and fully renovated beach resorts in the Mactan Newtown is really worth drawing. We are hopeful that this summer, we will be able to pick up some great occupancy [indiscernible] into the past couple of years. So I think we have had the positioning of the brand, whereby it's not a dependency on the number of room keys that we have, so it's not the strength in numbers that we're banking on, where we can sell partnerships for MICE business potential, but also the destinations that we can offer in the unique offerings that we have in various townships.

Now let's move forward to Roland Tiongson for office segment. So Roland, [indiscernible] segment. What is the target occupancy for this year?

We think that our office segment is, like I mentioned earlier, we are gaining traction. And so we are looking at hitting somewhere between [ 88 and 90 ] for this year, little bit improvement, in spite of the new inventory...

[Technical Difficulty] are there any concerns or job displacement due to AI? Are you seeing this as one of the reasons for the downsizing of your tenants? How did you address these constraints?

I think that AI is here, yet not in a big way, but there may be -- it will be here, but not just now. And I think that once AI comes in, while there will be displacement that will happen. The current industry is aware of this and are doing things to prevent this from happening by upskilling their people so that this people can also function when AI is already here, so -- in a different manner. So because when AI comes in, people will also need space for employees or programmers who are into AI. So that will be where the demand will come.

So that's all for the office segment. So we have questions here from the Q&A box from [ Sandra Silva ] It was mentioned that the company is implementing new strategies to check market demand for residential sales. Can you give us some feedback and insight on this? Has there been a demand pickup? Or is this -- or is market demand is still lagging -- or it still lacking?

Thank you, Dexter. Well, actually, demand has been picking up, right? We're reaching -- almost reaching our 2019 high of around PHP 150 billion, PHP 160 billion reservation sales back then. So definitely, we're on our way there. And then we're seeing this to continue to improve this 2024. Extend us -- going back to what I said earlier, that was only for very specific projects, very specific projects such as Uptown Modern. But on average, we're still collecting 5 years' worth of payments, not extending it to 7 years. But this one, 7 years, I think, is largely because as well our water affordability; and two, the construction time line also takes roughly 7 to 8 years to complete because the scale of the project is so big, right? So yes, I think that answers that question. So in a nutshell, we were still seeing demand to pick up, not seeing any slowdown -- if at all, we're seeing at least this year, just a slight pickup in demand, but we're gearing up and hopefully we're always trying to hit or beat our target in that respect. That's as we did in 2023.

We have another question here from the Q&A [indiscernible]. In terms of funding, how does the company intend to fund the PHP 55 billion plant CapEx?

I think largely 80%, 90% would still be funded through internally generated cash. We had the same amount of CapEx spent in 2023 and we've only added very few debt, which I think is just 20% of the PHP 55 billion, I think, we added PHP 10 billion in 2023 on gross debt. But yes, very, very few. So largely internally generated cash and the remaining would be through bank borrowings if possible, yes.

And I think that will be the last question for this session because we ran out of time already. So we would like to extend our heartfelt gratitude to all of you for attending. If any of you have any queries that 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 this connect -- of connecting with you all again soon. Once again, thank you for the participation. You may now disconnect.

Thank you, everyone.

Thank you.

Thank you.