Robinsons Land Corporation (RLC) Earnings Call Transcript & Summary

Welcome to Robinsons Land Corporation's First Half Calendar Year 2020 Investors Briefing. Joining us today from RLC are Mr. Frederick B. Go, President and Chief Executive Officer; and the rest of the IR team. RLC will give you a presentation on the company's unaudited results for the first half of 2020.[Operator Instructions] We will now proceed with the presentation.

Thank you for joining Robinsons Land's earnings call. RLC continues to have a solid, diversified and dynamic portfolio with presence in 5 major sectors that drive the Philippine economy. First, in the retail segments, we are able to capture domestic consumption in our 52 malls across the country. Second, in the growing IT business process management sector, we continue to be a leading office space provider through our 23 office developments and 3 work.able centers. Third, we take part in the tourism industry through our diversified hospitality portfolio that consists of 20 properties. Fourth, we service the demand for homes with over 100 residential projects. And lastly, we are now part of the emerging logistics industry through our industrial facilities. Our well-diversified business model has provided resilient cash flow amid the challenging business environment. With high-quality recurring revenue stream for our malls, offices, hotels and industrial leasing business, our investment portfolio generated 49% of total revenues, 57% of EBITDA, 52% of EBIT and 51% of net income. The balance was from the sale of residential properties under our development portfolio. RLC continued to have a robust balance sheet with total assets of PHP 200.1 billion and sound capitalization with total shareholders' equity of PHP 101.4 billion. On the other hand, earnings per share for the first 6 months posted at PHP 0.71 per share. We have a strong liquidity position with approximately PHP 18 billion of cash and cash equivalents as of June, mainly arising from the fund-raising initiatives we have actively pursued in the second quarter, together with the cash generated from our China project. Equally important to note is that all of our business units managed to be cash positive in the midst of the most challenging times. We expect to remain well within our debt covenants and our low net gearing ratio of 33% provides us flexibility to navigate the short-term headwinds brought about by the pandemic. We also do not have any remaining maturities for the balance of the year. And to date, we no longer have any outstanding short-term loans. Furthermore, as a solid demonstration of our commitment to consistently deliver value to our investors, we will be returning PHP 2.6 billion to our shareholders in the form of cash dividends into equal tranches. The first tranche was distributed last July 7, while the second tranche will be on October 27. We had a strong momentum coming into the year, which continued through the first quarter. We began to see the impacts of the pandemic in the second quarter as a result of the temporary closure of some of our properties, and the pandemic induced economic disruptions as well. The disruption was more pronounced in our mall and hotel operations. But despite this, the steady performance of our office and industrial businesses and the adoption of a new accounting treatment for residential sales tempered the potential significant decline in RLC's profitability. First half revenues saw a gentle growth of 3% to PHP 15.4 billion, lifting EBIT up by 1% to PHP 8.2 billion. Additional depreciation from properties opened in the second half of last year caused a 2% drag in EBIT to PHP 5.6 billion. Meanwhile, additional interest expense from new loans resulted to an 8% decrease in net income to PHP 3.7 billion. Without the new residential accounting treatment, EBITDA would have been down by negative 30%. Let's take a closer look at each of our business units, starting with the malls division. At the beginning of the year, we saw solid trends in retail sales, footfall and pent-up demand across our mall portfolio until the community quarantine protocol was implemented in March. In full cooperation with the government, we have temporarily closed our malls during the period, except those areas that are occupied by tenants providing essential services, such as the supermarkets, banks, pharmacies and spaces occupied by BPOs. We have also temporarily suspended our cinema operations, waived rents for nonoperational tenants and granted rental discounts. As a result, mall revenues dropped negative 42% to PHP 3.8 billion in the first half. We took immediate actions to reduce operating expenses, which helped EBITDA to decline at a slower pace than revenues by negative 37% to PHP 2.7 billion. Meanwhile, additional depreciation from new malls opened in 2019 jogged EBIT by negative 66% to PHP 851 million. As of June, with no new mall openings, we stood with 52 months nationwide. Our mall footprint spanned across 3 million square meters of gross floor area, about half of which is leasable space. System-wide occupancy rate remained strong at 94%. Our malls were undoubtedly heavily impacted by the pandemic, especially in the second quarter. However, as shown in the slide, we have seen improved trends in operating GLA, number of operational tenants and footfall from April to June. We remain optimistic that this recovery will continue as the government eases government or movement restrictions. Furthermore, we took this time to strengthen our online and e-commerce platforms in support of tenants' operations. Our personal shopper and our delivery on in-apps were created, bringing our malls closer to customers' doorsteps. Moreover, we developed a last-mile strategy for customer convenience by assigning pickup stations, which allow customers to place orders online and have items delivered straight to their vehicles at an arranged time and pick up station within the mall. Our office business went into the pandemic very well positioned with high-quality assets, good tenant mix and a strong system-wide occupancy. We continue to deliver sustained financial performance during the period, highlighting the resilience of the portfolio. Accounting for 19% of total company revenues, the Office Buildings Division recorded a significant 23% hike in its revenues to PHP 2.9 billion, owing to the successful leasing activities for developments namely Cyber Sigma, Cyberscape Gamma, Zeta Tower and Giga Tower as well as rental installations in existing office buildings. As all operational sites remained open, there were no rental abatements granted during the quarantine period. Meanwhile, EBITDA accelerated by 30% to PHP 2.6 billion, whereas EBIT surged by 34% to PHP 2.2 billion. We remain to be a major office space provider to IT-BPM firms and a dominant landlord in the Ortigas CBD with our 23 office buildings. Out of our 592,000 square meters of office inventory as of June, lease percentage was healthy at 95%. As planned, all office completions are slated in the second half of the year. With its customer-first approach, our office buildings division recognize the need to address the growing demand for flexible workspaces. Hence, in 2018, we launched our very own flexible office-based brand called work.able. Derived from the words work and enabler, work.able offers flexible workspace solutions, such as service private offices, hot desks, meeting rooms and the best spaces to clients with office space requirements. Our maiden branch situated in Ortigas CBD was launched in 2018 with 55 seats. Last year, we opened our third branch in the Exxa Zeta Towers in Bridgetowne with 277 seats. Occupancy rates posted at 94% and 82%, respectively. The hospitality and leisure industry is suffering the most immediate repercussions of the pandemic, and most of our profit -- properties had to close down temporarily. Only 10 to 12 of our hotel properties were operational during the community quarantine period. Demand mainly came from overseas Filipino workers and BPO clients. With massive contraction in overall demand and limited operations, our hotel revenues fell by negative 39% to PHP 660 million. EBITDA plunged by 68% to PHP 95 million on the back of fixed overhead costs, while additional depreciation from hotels opened in 2019 resulted to a negative EBIT of PHP 113 million. For our residential division, on the financial side the adoption of the new accounting treatment this year, cost realized revenues to grow by 66% to PHP 7.9 billion, while EBITDA and EBIT doubled to PHP 2.7 billion each. On the business side, with a negative 52% dip in net presales ending at PHP 4.7 billion, we see challenging times ahead for our residential business in the short term. When the situation improves, we are ready to make strategic changes to better respond to customer needs and market dynamics, including the launch of the new residential RLC brand. This single brand is a merger of our 3 existing vertical residential groupings, namely Luxuria, Residences & Communities. We believe it will allow us to optimize our resources and give us greater market recognition to become a bigger player in the residential space. We shall also provide internal focus on the value proposition of our residential business to build well-designed homes that all stakeholders will be proud of. The next 2 slides will show condominium projects we launched in the first half. First is the Sapphire Bloc South Tower located in Ortigas CBD. And secondly, the Sierra Valley Gardens 1 and 2 located in our Sierra Valley estate in Cainta, Rizal. The combined sales value of these projects is approximately PHP 10 billion, which is already equivalent to the level of project launches we initially set out at the beginning of the year. Our industrial business remains largely insulated from the impacts of the pandemic. We continue to operate all our industrial facilities and charge full rent. In the first half, lease revenues improved by 97% to PHP 112 million due to the additional revenues from our new Calamba warehouse. EBITDA was PHP 52 million, while EBIT ended at PHP 25 million. To date, we have 77,000 square meters of warehouse space with locations in Sucat, Muntinlupa and Calamba, Laguna, and we continue to build more warehouses to expand our portfolio. System-wide occupancy rate is 100%. On the other hand, under its development portfolio, IID recognized PHP 74 million for payment of a portion of the deferred gain on the sale of land to Shang Robinsons Properties, Inc. EBITDA and EBIT amounted to PHP 64 million each. Overseas, our Chengdu project is doing remarkably well. We are pleased to share that out of our initial investment, USD 75 million has already been repatriated back to RLC. Furthermore, during the first 6 months of the year, RLC was able to secure the sales permits for the second batch of condominium units and townhouses and all such residential units were sold out. In line with our cash conservation measures, we kept our CapEx spending at a minimum during the second quarter and have spent only PHP 7.4 billion of our planned PHP 24 billion CapEx budget for the development of malls, offices, hotels, warehouse facilities, construction of residential projects and land bank. We shall continue to monitor recent developments, recalibrate our plans and adjust our CapEx budget accordingly in the coming months. On the other hand, we have about 788 hectares of land bank in the Philippines with an estimated value of PHP 48 billion. There were no new land acquisitions in the second quarter, but we continue to be on the lookout for land bank opportunities nationwide, and we are also open to engage with property owners and developers to do joint venture projects. Moving on to our future plans and strategies for each business unit. For our malls division, we have deferred the opening of our La Union Mall and the expansion of Robinsons Place Dumaguete and Robinsons Place Antipolo to next year. Together with a new mall in Gapan in Nueva Ecija, we are looking at a 4% increase in gross leasable space to 1.64 million square meters by end of 2021. For our office buildings division, we have a robust pipeline in 2020, comprising of 4 new office developments, namely Delta Tower Two in Davao, Luisita 3 in Tarlac, Bridgetowne East Campus and Cyber Omega in Ortigas. These new offices will expand net leasable area by 14% this year to approximately 676,000 square meters. In 2021, we target to complete Cybergate Iloilo 1, Cybergate Galleria Cebu and Cybergate Bacolod 2. These new office projects will grow in net leasable space by 7% to 721 square meters. Despite the pandemic's unprecedented blow to the tourism ecosystem, we believe that domestic tourism is expected to recover more quickly in the coming months as movement restrictions were lifted and the economy reopens. And so we are taking this opportunity to plan ahead and make our preparations for the anticipated resurgence of the hospitality and leisure industry. This year, we plan to open the remaining rooms of Dusit Thani Mactan Cebu Resort to end with over 3,100 rooms. Meanwhile, the opening of Summit Naga, Go Hotels Naga and Go Hotels Tuguegarao shall be deferred to next year to add to the opening of Western Sonata and Summit GenSan. These new 5 hotels will boost hotel room count by 17% to more than 3,700 rooms. The evolution story of our Hotels and Resorts division goes beyond the buildup of our existing hotel chains. We are focused on growing the pie and we aspire to create the country's first ever Filipino 5-star hotel brand called [ Fili ] Urban Resort. The maiden site shall rise in Cebu City as a major component of a new and exciting integrated development. We plan to open the hotel in 2022. For our Residential division, after the successful launch of PHP 10 billion worth of projects, we do not plan to launch any more projects in the second half. The Industrial Integrated Developments division will reach 94,000 square meters in leasable space with the new Calamba warehouse this year. Next year, we plan to tap new territories and develop industrial properties in Sucat and within the province of Pampanga. We shall boost our hotel -- our warehouse portfolio by 78% to 167,000 square meters by 2021. On top of this, we continue to work on our destination estates, namely Bridgetowne located near Ortigas CBD, Sierra Valley in Cainta and Montclair in Pampanga. IID will likewise continue to focus on the exploration of innovative real estate formats, new business ventures and strategic partnerships in our [ midyear ] developments to further strengthen our earnings. We are pleased to share that we have successfully raised PHP 13.2 billion from our bond offer last July 17. The bonds are classified into 2 series with maturity periods of 3 years and 5 years and interest rate per annum of 3.683% and 3.8%, respectively. We are very grateful of the market's positive reception of our bond offering, resulting to it being oversubscribed. It underscores the investor's vote of confidence in the company's strength and growth prospects. Furthermore, the issue credit rating of PRS Aaa with stable outlook assigned by PhilRatings is an affirmation of the company's strong fundamentals. This concludes our presentation. We are now ready to take your questions. Thank you very much.

[Operator Instructions] Our first question comes from the line of Mr. Carl Sy.

Can you hear me?

Yes, Carl.

I have a number of questions. I'll start off with -- if not for the accounting -- or how much did the accounting change impact the net profit for the first half?

Net income after tax -- for EBITDA, we would have been minus 28%. And for NIAT, we would be minus 50%.

Let me clarify. If not for the accounting change, these would be the numbers minus...

Sorry, sorry, sorry. For revenue, it -- Kerwin Tan, who's our CFO, please correct me if I say anything wrong.

Yes, please.

But for the first half, yes, revenue would be minus 34%. EBITDA would be minus 30%. EBIT would be minus 46%, and NIAT would be minus 53%.

That is correct.

Okay. And then I guess, sticking with the residential business for now. Can I get the unsold inventory number? And the -- and for the first half, could you tell me how much of the sales were to foreigners? And remind me what the first half '19 number was on sales to foreigners?

Carl, unsold inventory for the first half is approximately PHP 19 billion. And out of the PHP 4.7 billion we sold in the first half, approximately 23% of that came from foreigners.

And what was the -- could you remind me the first half '19 number sold to foreigners or the percentage? I apologize, I'm not sure if...

It was about -- yes, it was about 30%, Carl.

30%? Okay. And then are you seeing any increase in defaults for the residential business?

Actually, no. For the defaults, no.

Okay. And then on the Office division this time, even the margins went up quite a bit for the first half. Do you -- yes, do you account that to anything?

I think it's just revenues went up, no? And obviously, it becomes more -- it's more profit, yes. It's more gravy on the top.

Okay. And then for the pipeline in 2020 and '21, or at least 2020, I don't know about '21, but do you have the pre-leasing numbers for both years?

For the malls? Sorry.

Carl...

For the Office division.

Okay. [indiscernible] with that.

For the office, Delta Tower 2 is 41% leased. Bridgetowne East Campus is 100% as well as Luisita 3 build-to-suit project. That's 100% as well. And then for our Cyber Omega project, that's about 10% leased. And then for projects that we'll be completing in 2021, we are aggressively marketing these projects.

Understand. Yes. And for the mall -- well, I guess, for the mall business, have any of your tenants decided to just close -- to terminate and say, you know what, we give up or something along those lines?

Yes. I'm sure there are a few of those, but still insignificant at this point.

[Operator Instructions] Our next question is from the line of Mr. RJ Aguirre.

Can you hear me?

Yes.

Actually, just a short question from me on the mall side. I don't know if this is discussed earlier, but how much have you given to your tenants in terms of waivers for the mall tenants? And if ever, do you have an idea on how much of them have already closed down? And what segments?

I -- Cat or Ron, you have the answer to the question?

We have granted close to about PHP 2.5 billion to PHP 3 billion in terms of rental concession for the first half. And then in terms of tenants who will be terminating their leases, we are not seeing any significant inquiries or requests to terminate their leases. Majority would still continue with their leases with us.

Okay. And your offices, remind me, do you have -- well, most of those are PEZA, right? Can you confirm?

About 80% of our clients are PEZA-registered companies.

And your incoming office buildings?

In terms of client sign-ups, the majority BPO clients also.

Sorry, let me clarify.

On the PEZA-accredited yes. Yes, yes. That answers it now? All right. Yes. There's a question from K. Guidote. Just to confirm, base the presentation, all 52 malls are already open. As of end June 2020, average occupancy is at 94%. I think the average occupancy is not at 94%. At the end of June, it was 68%. You'll find that on Slide #7. And as of end of June, I think as of end of June, I think 3 of our malls are located in Cebu, which was still under ECQ, so they vacillate between being open and not open depending on the IATF regulations and LGU regulations, no? For example, all 51 malls actually were already opened, and then when Cebu went back to ECQ, we basically had to close 3 of our malls. When we say close, that means they are open, but only open for essential services, no, like supermarkets, banks and BPOs. So if your definition is open for essential business, yes, all our malls are always open for essential business. There's another question from Abigail Chiw. For malls, may we know the operational GLA tenants and footfall level for the month of July? I'm sorry, I think we're not prepared for the July data right now. But what we have is the June data. Question from Christina Vega. How are we with the [ COVID ] efforts? Is there a plan for creating testing centers for RLC employees same as SMC? I'm probably not the best person to answer this. The HR department is a very -- we have a very active HR department at RLC that works in very close coordination with the rest of the JG Summit Group. We have our own health care system. I believe anybody on the call here is familiar with it. But personally, I'm not very familiar with it. But basically, if you have any symptom or if you are related or have worked closely -- or live closely with anybody with the symptom, we have a lot of protocol procedures that we undertake for this. There's also a question from Marc Espino. Just a clarification on the impact of the lowering of equity threshold, the revenue decline of 34% and NIAT of 50% is against the business. Yes, that's right. The reduction of the revenue for the first half of 34% is the entire Robinsons Land Company. With no -- We have a question from Wilson Ng. With no more new launches, what is your outlook for sales take-up this year? How is sales data tracking for the JV projects? Yes. This is a very difficult question to answer. Almost never given guidance on residential sales only because it's really hard to predict business, no? Previous performance does not give any guidance on future sales. So I think for the next few months, I think sales -- our residential sales will be quite minimal. I don't see buyers rushing in to buy units during this pandemic. However, having said that, we remain optimistic that when this quarantine process is over, people will go back to buying homes or buying residential products for investment. The sales take-up for the JV projects actually is quite positive. I don't have the exact numbers for each project. But each of them continue to still have some sales. And as I discussed earlier regarding all our projects, we've seen -- we've not seen an increase in defaults. Yes.

We have a question from Jelline Gaza.

I have 3 questions. The first is on the mall rental reliefs. We just wanted -- I just wanted to understand what are the key [ levels ] that the management is looking at in terms of deciding as to how long to extend the rent relief currently? And could you walk us through the process of the decision? Do you -- I understand that the current rental structure is effective until August. But given the MECQ, what's the status currently? And then my second question is on the OpEx, the nondepreciation OpEx of malls. What's the nature of the decline quarter-on-quarter? And then third relates to the occupancy levels of hotels. What was it in first half '20 for office? What's the reason for the 3 percentage point quarter-on-quarter drop? That's it.

Sorry, I think you spoke too fast. I'll try to answer your first 2 questions. I already lost you on the third, fourth and fifth.

Sure. Sorry, I'll just repeat.

Yes. For rent relief, the way it works is like any business partnership. You have to try to find a win-win situation for both the landlord and the tenant. And I think we just have to be understanding of the situation of what the tenants are undergoing. It's -- we just have to negotiate with each tenant on a case-to-case basis, taking into account their situation, their sales and the actual customer traffic to their stores. So it's really on a case-to-case, mall-by-mall basis. Second, on your second question about the operating expense decline outside of depreciation, they would mostly be power reductions, utility cost reductions as well as manpower cost reductions. As you know, the malls are also operating on a shorter operating schedule, so that also helps reduce power and other utilities costs. You care to repeat your...

Yes. The last set of questions relates to occupancy. I'd like to know what the occupancy level for the towns in first half '20? And then on the office, what's the reason behind the 3-percentage-point quarter-on-quarter drop in occupancy?

Okay. I'll answer the -- I'll have Erica Lim answer your hotels question. For the offices, the 3% would be the retail tenants on the ground floor. We do have some ground floor food and beverage tenants, for example, like coffee shops or quick service food outlets. So they had to close during the ECQ and MECQ periods, so that's the 3% drop. Erica?

For the hotels, first half is 40% occupancy.

Our next question comes from the chat box, from Wendy Estacio. The question is, how much was the total waived rent for mall segment year-to-date?

I think that one we have already answered earlier.

Okay. So we shall proceed...

Yes, there's a question -- sorry, I just want to answer a question from Jason Escartin, asking about the friction cost of repatriating capital. The answer is there is no friction cost for repatriating capital from China. So what we received, we received in full.

Our next question comes again from Carl Sy.

I want to ask about the residential business again. Did you offer any -- well, either looser payment schemes or rent -- or price discounts in -- yes, for your residential projects?

Yes. Thank you for the question. The answer to that is that the government supervising bodies have regulated that we were -- that all developers or all property owners have to give buyers reprieve during this period. So we had to allow payments during the ECQ period to be extended for 6 months if the buyer chooses to do so.

I think you're referring here to previous buyers or buyers from, let's say, previous periods.

Yes.

I'm referring to, let's say, fairly new buyers, did you again perhaps offer discounts or -- yes.

We have not -- for the -- yes, okay. For the new buyers, we have not particularly done anything to change our payment terms or discounted our products.

Okay. And on your China business this time, I think you've sold RMB 2.5 billion. But how much was launched?

This is essentially it, Carl. Sorry, you mean launched, meaning, even those that we are not yet selling?

Sorry, I should qualify a little bit. I -- so basically, from your presentation, I think there's a small amount of parking slots or shophouses that haven't been sold.

Yes. Right.

So yes, so basically, the RMB 2.5 billion, is that out of RMB 2.6 billion or RMB 3 billion? It's not -- actually, it's not RMB 3 billion. But yes, so how does it compare?

I don't have the exact answer to that now, but I think it will be around RMB 2.9 billion, maybe?

Our next question comes from German de la Paz. The question is, may I ask your plans for APVI?

Yes. Unfortunately, this is a Robinsons Land quarterly investors call, no? And APVI is already a separate corporate entity. But since you asked, I think right now, APVI is just focusing on the business it has on hand, which is to run the Robinsons Place Ilocos mall to the best it can, considering the current circumstances. And management continues to evaluate a few opportunities and strategies that are being put on the table for APVI to pursue. But there's nothing concrete that we can talk about at this point in time. Thank you.

Our next question from the Q&A box is from Jason Escartin. The question is, out of your 8,000 mall tenants, how much are SME? And any flavor on their revenue size and mall area take up?

Sorry, I don't think we have that kind of data of how many percent are SMEs.

Our next question is from Kervin Siyasan (sic) [ Sisayan ]. The question is, did we give additional price discounts on residential or any form of better payments? And the next -- the follow-up question is, can you also share with us if all resi sites resumed construction?

Okay. First question, no, discounts. I think Carl asked it earlier, not -- none in particular. Payments, as discussed also earlier, government has mandated us to give a 6 months reprieve for buyers' payments that fell during the quarantine period. And lastly, on construction, most of our projects have resumed, but not all of them. A lot of the regulations surrounding construction may seem like it's coming from the IATF, but in reality, on the ground, the LGU has a lot of say on this. And a lot of LGUs have their own protocols or processes to approve resumption of construction. So if I had to give you a rough estimate, I think a majority of our projects have resumed construction. Unfortunately, when NCR declared an MECQ, I think most of them also had to stop. So I think they will all resume construction when MECQ is brought down to a GCQ level. Thank you.

The next question is from [ Eli Hamill ]. The question is with relatively more provincial mall presence, can you give more details on the disparity, if any, of mall footprint in NCR and the provinces?

Yes. That's a correct observation. We have a lot more malls in the provinces than in NCR. And actually, that has served us very well during the second quarter, and it continues to serve us well now when NCR was declared again as an MECQ area. In general, the footfalls of our provincial mall will probably double that of our NCR malls. But we do have 51 malls. It's very hard to make a generalization. But our provincial malls, I think we can use that data, have 2x more footfall and much better business in the malls than here in the NCR. Thank you.

The next question is from [ Ricardo Uy ]. Will you be extending price discounts or longer payment terms for new buyers just to move unsold residential inventory?

That's a good question. We haven't had a very serious discussion on that matter. We are still, at this point, just following the IATF guidelines and think that when the market -- hoping that the market will come back sooner than later when the quarantine process is over. It was looking quite optimistic already before the government declared an MECQ, no, in NCR. So I guess we have to go back up to the drawing board and see if there is a need to extend discounts or payment terms to buyers. But if you're asking for the past, there's been no such move to do that in particular.

The next question comes from Wilson Ng. What are your current thoughts on launching a REIT?

Okay. We are very, very keen to do our own REIT. I think it's pretty obvious what kind of REIT we need to do, no? It would have to be an office REIT at this point in time simply because a mall REIT probably doesn't have too much -- it's not in favor right now. So we are looking at our office portfolio to see which assets can be REITable. We think that Ayala Land's AREIT, which went out on a 4.9% dividend yield and a forward-looking 5.86% dividend yield for 2021 are -- is within the range of what we are looking at. And the good news is that our office portfolio based on that kind of EBITDA levels would -- if all our entire office portfolio were REITed, we could be looking at close to PHP 100 billion office REIT, no? But it's something we're very keenly looking at, at this point. Thank you.

The next question comes from Abigail Chiw. On residentials, can we expect construction activity to ramp-up in the second half of 2020?

We are only guided by government regulation. As I mentioned earlier, as recent -- a week ago, we were very optimistic about that. And then the government declared MECQ. So everything's back to almost square one, no? So it's hard for us to answer the question. We have to be guided by regulation. Thank you.

The next question is from [ Eli Hamill ]. Are you starting to see cancellations on your residential sales?

I think we answered that question earlier. The answer was nothing unusual.

[Operator Instructions] The next question is from [ Eli Hamill ]. What's the average -- current average office lease tenor? And what are the provisions for a lease contract to be renegotiated?

I don't know. Somebody else want to answer that question? It's like it's always been. Generally, every tenant signs up for 5- to 10-year lease contract. So generally, every year, maybe 10% to 20% of the portfolio would be up for renewal. I think the basis of your question is you're trying to see if people are going to cancel leases. I think we mentioned earlier that we're not seeing that in our portfolio. But of course, you cannot discount the fact that there might be a company or 2 that might go under or cannot sustain its operations and close down. But if your question is if are people canceling leases? I think we answered that earlier that we don't -- we're not seeing that on this portfolio. In fact, we said our revenues are up 23%. Our EBITDA is up 30% in our office buildings division. Thank you.

Our next question comes from Jelline Gaza.

In relation to that, can you give us an idea on the office rental reversion trends?

I don't think we have had any negotiations since the ECQ started, no? we haven't had any renewals. So I wouldn't know the -- I wouldn't know what it would be like at this point in time. But if you're talking about our previous contracts, most of them have imputed, I think, average of 5% annual escalations in their -- in the contracts.

Okay. And can I confirm that you have implemented all the scheduled escalations even during the ECQ?

Yes. Yes, I would think so. There's nothing that has been brought to my attention, otherwise. Thank you.

We have a question from an anonymous attendee. When is RLC recognizing the cash from Chengdu phase 1?

The cash is already in. It's already in our balance sheet. The money that was sent [indiscernible] is repatriated. It's already in our balance sheet now, $75 million. Thank you.

[Operator Instructions]

Yes. If there are no other questions, if I can just sort of summarize. I think our debt-to-equity ratio remains at very healthy levels. I think at 33%, we have an improved net debt-to-equity ratio, which is probably the lowest in the entire industry, reflecting a very healthy balance sheet. And we just came off a PHP 13 billion 3-year, 5-year bond offering, which again reflects the strength of the company in the financial markets and how investors look at Robinsons Land Corporation as a borrower. In terms of our business, 3 of our businesses are challenged: malls, the hotels and the residential. On the other hand, 3 of our businesses are flourishing: that is our offices, our warehouses and our China business. In fact, for our China business and, of course, our Office Buildings business and our warehouse business, all of them are at record levels. We have been very prudent in managing our cash. CapEx was controlled to only PHP 1.5 billion in the second quarter. It probably will also be under controlled levels for the third quarter, especially during this ECQ-MECQ period. So we'd just like to stress that the company is in a very healthy position, with an EBITDA level of plus 1%. And even without the residential accounting recognition, it would be down 30%, which in the today's market, would already be quite reasonable. So we're also looking forward to possibly reaping some of our assets, which I think will crystallize shareholder value and will crystallize the inherent net asset value of Robinsons Land Corporation or some of its parts. So with that, I think we're looking forward to a very exciting next year. So with that, thank you very much again for joining us on this first half calendar year 2020 earnings call. We appreciate you taking out the time and the effort to join us and to ask questions and to understand the company better. Stay safe and stay well, everyone. Thank you, and good afternoon.

Thank you, everyone, for your participation. You may all disconnect.