Good afternoon, everyone. Thank you for joining us today and welcome to Ayala Land's third quarter briefing. Let me begin by introducing our panel: Meean Dy, President and CEO; Jed Quimpo, CFO and Treasurer; Mike Jugo , Head of Premium Residential Business Group; Mariana Zobel de Ayala, Group Head for Leasing and Hospitality. We are also joined today by members of our management committee: Robert Lao, Head of Strategic Growth, New Ventures, and Central Land Acquisition; Darwin Salipsip, Group Head of Construction Management; Raquel Cruz, Head of the Core Residential Business Group, and Issa Sagun, Chief Human Resources Officer. We likewise acknowledge the presence of our broader management team. Please note that the press release and presentation materials are available on our investor relations website. For any questions we may not be able to address during the briefing, we will respond via email as soon as possible time.
At this point, I'd like to turn it over to our CFO, Jed Quimpo, for his presentation.
Hi, good afternoon, everyone. To those that are joining us here at the venue, thank you for coming here. Good thing the weather cooperated, so we welcome you here. To those joining us online, we're so happy you joined us this afternoon. First, good afternoon. I will be presenting our financial and operating performance for the first nine months of 2025, and then it will be followed by our CEO's message. Ayala Land posted net income of PHP 21.4 billion for the first nine months of the year, 1% higher year-on-year, driven by stable contribution of property development and expanding leasing and hospitality portfolio, offsetting a reduction in our services business. Netting out the impact of AirSWIFT's sale in the fourth quarter of 2024, revenues would have been nearly flat and net income would have grown by 2% year-on-year.
Total capital expenditures stood at PHP 65.5 billion, with a notable increase in the share of leasing, earning about 26% of total CapEx versus 19% same period last year. Meanwhile, our net gearing remains within our guardrails at 0.77:1. In terms of revenues, despite market headwinds, property development held steady for us at PHP 75.9 billion, just 1% down year-on-year. Residential revenues reached PHP 63.1 billion on the back of quarter-on-quarter growth by the core segment, narrowing the 5% decline from the prior year, which we showed you at the first half of 2025. Leasing and hospitality revenues accelerated 6% to PHP 35.1 billion, lifted by top-line growth across all our asset classes, despite ongoing reinventions in malls and hotels.
Our service businesses, composed of construction, property development, and other ancillary services, declined by 37% to PHP 8.1 billion due to the absence of airline revenues and the completion of third-party construction contracts. On our income statement, real estate revenues reached PHP 119 billion, a 3% decline year-on-year as stable property development and growing leasing revenues were tempered by lower service revenues. Interest and other income increased by 7% to PHP 2.8 billion, lifted by higher equity earnings from associates and joint ventures, as well as higher yields from our short-term deposits. Meanwhile, total expenses decelerated by 4% to PHP 90.1 billion. This was driven by lower real estate expenses of PHP 69.4 billion, 8% lower year-on-year due to the absence of airline operating expenses and as a result of the sales mix with higher contributions of our leasing projects.
Our general and administrative expenses were managed, increasing only by 5% to PHP 7 billion, equivalent to 6% of revenues. We maintained our EBIT margin at 37%, the same level as of the first half of 2025, which is also 3 percentage points better than last year. The improvement is a result of our revenue mix with some more sales coming from horizontal and commercial and industrial products, as well as the higher contribution of our leasing and hospitality assets. Interest expense, financing, and other charges reached PHP 13.7 billion, up 19% year-on-year due to a larger accounts receivable portfolio sold this year versus same period last year, where we executed a good amount of our AR sale in the fourth quarter of 2024. Deducting expenses from revenues, income before tax grew by 2% to PHP 31.7 billion.
This translated to income tax provision of PHP 6 billion with an average tax rate of 18.9%. Income before non-controlling interest stood at PHP 25.7 billion, also 2% same level last year. Non-controlling interest deductions were up 6% to PHP 4.4 billion, owing to higher earnings of our consolidated subsidiaries and joint ventures led by AREIT and our estate companies. In total, net income attributable to ALI equity holders grew by 1% to PHP 21.4 billion. Let me now turn to a detailed breakdown of our revenues by business segment. The property development business achieved revenues of PHP 75.9 billion, steady versus last year despite market headwinds. Residential revenues for the period amounted to PHP 63.1 billion. Reflecting continued quarter-on-quarter improvements in the core segment, which helped narrow the gap versus a 5% decline registered in the first half.
Meanwhile, revenues from commercial and industrial lots dipped 7% to PHP 9.7 billion as a result of lower industrial lot bookings tempering strong sales of our commercial lots. Office for sale revenues jumped 53% year-on-year to PHP 3 billion due to new bookings from our projects at Makati CBD, Arca South, and Vertis North. Revenues from our growing leasing and hospitality portfolio rose 6% to PHP 35.1 billion, lifted by top-line growth across all our asset classes. Notwithstanding the full swing reinvention works, shopping center revenues increased by 4% to PHP 17.4 billion from increasing contributions of new malls and higher portfolio-wide average rental rates. On office leasing, revenues expanded by 6% to PHP 9 billion, supported by better than industry occupancy and lease escalations. Hospitality revenues posted a 4% growth to PHP 7.4 billion on the back of higher room rates and the contributions of the recently acquired New World Makati Hotel.
All of this despite temporary closure of selected assets under renovation. Industrial real estate revenues jumped 39% to PHP 1.2 billion, boosted by AREIT's industrial land holdings and revenues from our new dry and cold warehousing facilities. Our service businesses declined by 37% to PHP 8.1 billion. MDC's net construction revenues dipped by 30% to PHP 5.9 billion with the completion of our third-party data center project. Property management revenues and other ancillary service revenues declined by 50% to PHP 2.1 billion due to the absence of airline revenues. Next, let me walk you through our operating performance of our business units, starting with property development. Total sales reservations grew 3% year-on-year to PHP 111.7 billion. This was driven by the steady take-up of premium projects, coupled with growing sales from both core and commercial and industrial lots, which grew 8% and 4% year-on-year respectively.
This nine-month performance translates to monthly sales of PHP 12.4 billion per month, 5% better than the monthly sales average for the full year 2024. On the residential brands, total residential sales reached PHP 100.8 billion, the same level as last year, lifted by robust third-quarter sales by the core segment. Despite dampened sentiment in the current market, the premium segment still managed to sustain PHP 60.9 billion in sales reservations. For the core segment, our strategic selling initiatives have held momentum for three consecutive quarters now, resulting in an 8% increase year-on-year to PHP 39.9 billion. By product type, sales take-up of vertical projects improved by 2% to PHP 65.3 billion on strong reception for both premium and core offerings. Meanwhile, horizontal sales slightly dipped to PHP 35.5 billion from fewer horizontal launches in the high-demand Southern Luzon corridor versus the same period last year.
Moreover, d emand for our Metro Manila developments remained positive at PHP 55.2 billion, up 3% year-on-year, while sales outside NCR was slightly lower at PHP 45.6 billion, also due to fewer project launches. For the nine-month period ending September, we launched a total of PHP 46.6 billion worth of projects. Of this, PHP 6.1 billion were launched in the third quarter, all of which were premium horizontal within our existing estates. Moving on to o ur leasing and hospitality, improving rental rates and healthy occupancy lifted our commercial leasing revenues. For malls, our total malls GLA now stands at 2.2 million square meters. In the third quarter, we opened the first phase of Ayala Malls Evo City , bringing our new GLA for the year to 20,000 sq m.
Our portfolio lease-out rate improved by a percent, now standing at 91%, and we have a pipeline of over 600,000 sq m of GLA under construction and under planning, which we look to deliver in the coming years. Our office portfolio is composed of 1.4 million square meters of gross leasable area. The lease-out rate across our office portfolio was at 90%, notably significantly better than industry occupancy at 80%. We have a total pipeline of over 300,000 sq m under constructions and in planning. On our hospitality portfolio, we now have a total of 4,833 rooms, this following our acquisition of New World Makati Hotel last July. Occupancy rates continue to be healthy. The average occupancy for our hotels was at 67%, 3 percentage points better than last year, and 41% for our resorts.
On our industrial real estate, our dry warehouse GLA stands at just under 380,000 sq m, while our cold storage position is at over 31,000 pallet positions. The lease-out rates are at 87% and 75%, respectively. Our total capital expenditures as of year-to-date September stood at PHP 65.5 billion. We spent 40% on residential projects, 26% on leasing and hospitality assets, 26% on estate development, and the remaining 13% on our land acquisition commitments. On our debt profile, we continue to have a well-managed debt position with 83% contracted into long tenors. Our debt levels stood at PHP 304.5 billion, with more than 2/3 locked in at fixed rates. Total portfolio carries an average borrowing of 5.5%, stable from what we reported in the first half, with an average maturity of 4.1 years.
Last October, we completed the listing of our PHP 15 billion sustainability-linked bonds with PDEx, the second listing under our sustainability-linked financing program. Following this issuance and a PHP 5 billion bilateral that we secured in October, our loan maturity will extend to 4.5 years, with close to 70% fixed and just under 90% in long-term. Finally, our balance sheet continues to stand strong with net gearing at 0.77:1 . We have PHP 20.6 billion in cash and cash equivalents. Our borrowings increased by 8% versus period end December 2024. We have PHP 370 billion in stockholders' equity. Our current ratio stands at over 1.5x , and our interest coverage ratio is healthy at 4.9x .
To re-summarize our performance for the first nine months of 2025, Ayala Land posted net income of PHP 21.4 billion, 1% higher year-on-year, driven by stable contribution of property development, our expanding leasing and hospitality portfolio offsetting reductions in our services business. Netting out the impact of AirSWIFT's sale, net income would have grown by 2% year-on-year. CapEx at PHP 65.5 billion as of end of September and net gearing at 0.77:1 . Thank you. I will now turn over the floor to our President and CEO.
Thank you, Jed. Good afternoon, and thank you for joining our nine-month 2025 analyst briefing. Today, I want to talk about our performance, the deliberate strategic journey we are on, and our clear path ahead. We ended the first nine months, as Jed said, with revenues down 3% and net income up 1% year-on-year. Excluding AirSWIFT, NIAT would have grown 2% versus the same period last year. Our diversified portfolio and strong asset base continue to provide resilience in a challenging market environment, and we are confident in the strength and adaptability of our business lines. Let me share some highlights across our major segments. Let's start with property development. Despite market headwinds, property development has held firm across all our market segments.
Overall nine-month property development sales take-up is up 3% versus last year, with an average year-to-date monthly take-up 5% higher than the full year 2024 average. The premium segment, including commercial and industrial lots, was steady despite recent market noise, and premium projects continue to show strong market acceptance. Laurean Residences, 30% take-up. Park Villas, 42% take-up. Parklinks Residences, 68% take-up. Gardencourt Residences, 67% take-up. Park East Place, 77% take-up. The core residential segment shows sustained recovery, marking its third consecutive quarter of growth. Year-to-date sales are up 8%, with the third quarter sales at nearly PHP 15 billion, the highest since the pandemic. Moving on to inventory levels. Overall resi inventory now stands at PHP 189 billion and is at 20 months of sales. Core residential inventory is at 12.9 months.
Premium inventory is at 25.5 months, but this reflects the recent launch of Laurean and includes Park Villas, which both have higher than average unit values. RFOs now account for 8% of total inventory value, an improvement from 9% in the second quarter and 12% in the first quarter. Cancellations at 7.6% of revenues continues its downward trend. Moving on to leasing and hospitality. Our leasing business delivered 6% year-on-year revenue growth. Excluding the reinvention-related disruptions, growth would have been 11%. On the malls, TriNoma and Ayala Center Cebu will be fully operational by December, with the impact of the reinvention starting to be felt by the second half of 2026. We continue to guide for a 15%-20% rent uplift from the combined impact of the reinvention, in line with the performance of leases signed under the merchant replacement programs.
Our office portfolio remains resilient with stable lease out. While we are mindful of market headwinds, we see strong demand for high quality and well-located office spaces. We remain confident that our premium locations and integrated estate developments will continue to attract top-tier locators. On the hotel front, renovated properties are gradually coming back online. Seda BGC and Abreeza reopened in July, Seda Centrio reopened in August, and Holiday Inn is expected to be fully operational by December. Post-renovation room rates have increased by an average of 23%. We believe that current momentum of our operating metrics will continue into the last quarter of the year. As such, we are recalibrating our guidance and targets for the year. We continue to be prudent in deploying capital while investing in growth areas.
The share of leasing assets in total CapEx is rising from 18% in 2024 to 29% by 2025, or from PHP 15 billion last year to PHP 26 billion this year. The shift supports our strategy of leasing-led growth, and we expect this will help us achieve our desired EBITDA mix sooner than anticipated. We are committed to living within our means as we grow our leasing portfolio. Margins across product lines are stable, and the shift to more leasing revenues and more profitable commercial lots are increasing our overall margins. This disciplined approach translates directly into our revised guidance for the year. With sufficient inventory on hand, we are confident in achieving our full-year property development sales take-up outlook of PHP 135 billion-PHP 145 billion. As such, our total property development launches for the year will be a disciplined PHP 65 billion-PHP 68 billion.
This will allow our end 2025 residential inventory to ease to a healthy 18-20 months. We are conscious of RFOs that remain in the market. As such, our launch decisions are guided by a careful analysis of market conditions in each trade area, with a particular eye on the prevalence of RFOs. Our full-year CapEx is targeted at PHP 85 billion-PHP 90 billion, while bottom line will be supported by the on-track completion of renovations of our key leasing assets. Ayala Land continues to navigate market challenges with discipline and focus. We remain committed to expanding our leasing portfolio, to enhancing property development fundamentals, and driving disciplined execution and capital efficiency. These, together with our quality improvements, are the key ingredients that will enable Ayala Land to sustain our long-term growth. Thank you very much.
Thank you, Jed and Meean. We'll now begin our Q&A session. For our virtual attendees, please submit your questions using the chat box on your screen. Kindly include your name and organization so we can recognize you. Alternatively, you may use the raise hand function, you will unmute your time when it's your turn. For in-house or in-person participants, please raise your hand if you have a question. Thank you. Carl?
Thank you. Good afternoon. Residential launch plans are lower now than earlier this year. Clearly, your views on residential are for more tempered growth and you're managing inventory. I'd like to ask if this is true for both core and premium and maybe for horizontal versus vertical or Metro Manila versus provincial. How are they different, or do you think it's all the same?
Well, maybe let's look at two numbers, Carl. Let's look at the sales take-up targets, which is really the sales, and then let's look at the launch forecasts for the year. As I mentioned, the sales take-ups are still in the range of PHP 135 billion-PHP 145 billion. This is equal, if not slightly higher than last year's performance and still quite a lot of product that we feel we will be able to sell this year. That we will push through the PHP 189 billion of inventory that we currently have. The launches, you're right, is about 2/3 of what we said in the beginning of the year, and that's a conscious decision for us to focus on the inventory that we have on hand, on launches that we have already made rather than putting more new projects on the table.
In terms of what we are holding back on or what we are not launching, mostly the verticals in Metro Manila. The horizontals, which are largely ex-Metro Manila, we will proceed. It's the Metro Manila verticals that we'll be more conscious about.
Understood. Your plans have changed. Is this largely because of the flood control corruption scandal or something else?
I think it's really about capital discipline for us. Maybe just to share with you some of how we're thinking about this. I mean I mentioned earlier that core has 12.9 months of inventory. That's actually a number that's already slightly below where we were pre-pandemic, particularly for the core. I think what we do take note of now very closely is because these are fresh launches. We have to really study the different trade areas where we intend to do the launch. If there are a lot of available RFOs, then we would rather that maybe we hold back, or we make sure we focus on areas where we believe we can get the right pricing and the right terms that those projects deserve.
For the core business, it looks like residential sales in the third quarter were approximately the same as 2Q. I'd like to check if in the third quarter were most of the sales actually RFO or was there already a lot of contribution from the newly launched Avida project?
We can get you the exact number, but Raquel, would you give light on that?
It's mostly RFO. Mostly still the RFO and the verticals.
Understand. I guess looking ahead a few years, for the most part, are the views on the various segments roughly the same or have they changed?
I think ex Metro Manila horizontal, no change. We continue to be very bullish. In fact, our projects are almost 50/50 now, horizontal, vertical. In fact, if we include the estates, it's 60 horizontal, 40 vertical. We do have a lot of product being launched outside Metro Manila. This has largely been really the same for us. I think now that our core inventory is starting to go to really more manageable levels, we are taking a look at the number of core vertical launches. As I mentioned, we're also conscious of the RFOs in the market, and we don't want to compete against those if we are coming up with fresh launches.
For the leasing business, the medium-term outlook, would it be roughly the same as, let's say, earlier this year?
We expect to revert back to double-digit next year. I think this year, as you know, was a year of major reinvestment, especially across hotels and shopping centers. We're expecting to get back to double-digit growth next year. Low double-digit.
Actually, we're quite bullish about the leasing performance after all the reinventions that we've done. As you know, we made that move to do the reinvention of the four flagship malls and to accelerate it. I guess the initial results that we're getting from the new leases that we're able to close after the reinvention and some of the merchant optimization programs that we've done is that we're getting 15%-20% uplift. The hotels that we've also renovated, again, we made the bold move this year to renovate all the four hotels and one resort, and two were totally closed for six months, right?
Yeah. Actually, ex renovations, we would've grown 20% year-on-year. For the hotels.
For the hotels.
Post renovations, the RevPAR or the ARRs are about more than 20% higher. We're quite bullish with the performance of our leasing assets.
Got it. Finally, for the mall business. You mentioned for the hotels, excluding the renovations, revenue would have been up 20%. What would that number have been for the mall business?
7%.
7%. Okay. Thank you. Those are all of my questions.
Thank you. We have a question online from Jelline. Jelline, go ahead. Yeah, we can hear you, Jelline.
[audio distortion]
Sorry, Jelline. It's just a bit choppy. Could you repeat the question, please?
[audio distortion]
Jelline is clarifying if we're going to be seeing a bump up in 4Q resi revenue similar to what we've been seeing over the past few years?
I think what we can expect in the fourth quarter would be maybe just higher bookings from reservations made during the year. These would be sales that have happened the beginning part of the year that are now reaching a payment situation wherein they'd be ready for booking. Those could be some of the drivers for residential revenue increases in the fourth quarter.
Hello. Yeah. Hi, Jelline. Just to add to what our CEO mentioned, I think clearly there are some leading indicators in terms of how we look at revenues. As you probably saw in the leading indicators, our pre-sales are registering still growth. Once we are able to convert them into actual bookings, then they would naturally flow. From our financial planning perspective, we are expecting a stronger 4 Q, not just from a residential basis, but even more so from our leasing and hospitality portfolio, as we look to bring in more and more online assets that we've renovated. Our outlook is that our 4 Q, based on what we're seeing, is something that's going to be better than what we expected.
Jelline, your question was residential or total revenue? Sorry, I didn't get that.
Residential.
Residential only. Okay. Just to make a correction, I was just conferring with Mariana. The mall growth ex renovation would've been?
Sorry, 10% for what we see as our core market, so flagship and premium Ayala Malls.
It's 10%.
Hi, [inaudible], go ahead with your question, please.
Thank you. My question would be all about premium segment of the residential. Okay. On the premium segment, which particular products or geographic segments have you faced the largest headwinds on the third quarter in particular?
Yeah. Maybe to answer the question, I think Metro Manila is quite competitive for certain, not just for the premium segment, but even for the core segment.
Can you please share a particular product?
Maybe it's in areas where Parklinks, even though we've sold 67%, it's a very competitive market. Anything that's along the C5 corridor. There's many developments there that are essentially gunning after the same market.
Okay, thank you. A follow-up question is, can you share the percentage of sales from other nationalities, specifically for the premium segment?
We don't have a breakdown in terms of the premium segment, but s ales to the foreign market.
Sales to overseas Filipinos are up about 1%.
1%, yeah.
Sales to other nationalities are lower than last year, but that's mainly due to the absence of Chinese buyers.
Okay, thank you so much for that. If you could at least share with us a breakdown, that would be appreciated.
Sure. We'll send it to you after the briefing.
Thank you. Final question is, again, on the other nationalities, it can be premium and it can also be core. What are the behaviors have you observed? Are your sales down because they are being more cautious? Are they pausing the sales or are they pausing or deferring, rather, their decision to buy property? Or have you seen them buy properties on other territories instead?
I guess it's hard to answer that question very broadly when it comes to the international market because our sales teams do sell within North America, the Middle East. I think in general, buyers are very pragmatic. They do study their investment options. What I do know, relative to competition, we've gained a lot of ground in terms of international sales.
Maybe let me give you some flavor of what's going on in that market, because there are a couple of different themes going on. There's the U.S. theme, where in a way, some of the Filipinos abroad are looking for maybe a plan B. Investing back in the Philippines and finding a home in the Philippines is working in our favor, actually. At the same time, there's been a war going on in the Middle East that has also prevented maybe some of our marketing activities and has also made some Filipinos out there more cautious about making big investments. Those worked against us. I think there isn't one direct answer, which is probably why Mike was struggling with it. There are really opposing themes going on.
As Mike said, I think we've been quite aggressive in terms of establishing our presence, particularly in the North America market, which fortunately we did before, I guess it started getting much harder to move around in the U.S.
All right. That would be all for me. Thank you.
Thank you. Our next question is from [inaudible] of Citibank.
[audio distortion]
It's total property development, so it includes the commercial and industrial lots.
We also have a couple of questions here. [Daniela Picache] . Two questions. You've steadily reduced residential inventory since mid-year, but cancellations remain around 8% and pricing discounts were used to clear RFO units. How sustainable is current pricing power if rate cuts lag or buyer sentiment softens? What kind of residential GPM trend can we expect in the next 12 months?
Actually, I think every other quarter we show the margins per product line, and it hasn't really changed since the last quarter. We've been able to hold the margins on a per product line basis. We feel that going forward, this is still a discipline that we will want to make sure that we stick to.
Thank you. Her second question is, as you reopen TriNoma and Ayala Center Cebu and integrate New World Makati, what rent reversion uplift and occupancy normalization are you targeting by 2026, and how does that compare with pre-pandemic peak yields?
I think Meean mentioned that for TriNoma and Ayala Center Cebu, we're expecting at least a 15%-20% uplift on rental rates. For New World Makati, actually, we're retaining the brand as is, and it's doing quite well as is. It's already providing a lift to our portfolio. In terms of Ayala Center Cebu and TriNoma, that's 15%-20% off of today, or last year rather.
Just to clarify, those uplifts are not like one time we will feel it because replacing merchants is a process. It takes a while. You should start to feel it by the second half of next year for the flagship malls that will be opening in December.
Thank you, Meean. We also have a question from Raymond Franco of Abacus Securities. He has two questions. His first one is, just to clarify, if 9M 2025 ex reinvention mall revenues growth was 10%, what was it in the first half and 1Q? Sorry, just to clarify, that should really be 7%.
No. Sorry, allow me to. 10% is for the kind of core Ayala Malls product, which is what we refer to as our premium and flagship. That's ex renovation. I think for the overall portfolio, it's 7%. That being said, I'll have to pull those numbers because I don't have the cut apples to apples without the renovation for previous years.
Last quarter it's 14%.
14% ex renovation.
Jelline, did you have a follow-up question?
Yes, please.
Go ahead.
Thank you. [audio distortion] I have a follow-up question on the pricing behavior. I'm more curious about how competition has been so far and how management appetized with regards to maybe matching or further making it more enticing for buyers, specifically for the core.
Appetite to match pricing of competitors in the core market. Thank you. Am I right?
Yeah. I think Jelline, for our vertical projects, I think over the last two quarters, we've been able to make our products more affordable via payment schemes. Sometimes we do have programs where you pay a down payment and we provide a discount. That's one way for us to address price competitiveness.
Maybe let me shed a little light on this because we only have 8% RFO. That makes it actually quite low in the market to have such a low amount of RFO. That's why earlier we said that whenever we assess a project, whether we will launch or not, there are really two things that we look at. The first thing we look at is what is our own inventory level. The next thing that we look at is what is available, who will we be competing with in the trade area that we are going to enter. If we are competing with RFOs, then we may opt to hold back, frankly, because our fresh launches cannot compete with RFO pricing. We would have a different, I guess, decision criteria versus those competitors.
That's partly why we are also bringing down the total launches for this year. We will focus in markets where we believe we can command the pricing and the pay terms that will give us, I guess, the rightful return for the project. That is to go without saying that underlying assumption here is our projects have very strong value propositions and that they are already differentiated.
Just a follow-up. How about the payment terms and p ricing strategy for the premium market in terms. Do you see opportunity there in this given current sentiment of the market?
Maybe we've done that for a project like the one where it's highly competitive. By and large, our other vertical projects for the premium segment, we've maintained the payment schemes that we've had over the year. Thank you.
Jelline, horizontal, not really, no. Not really vertical. It really hasn't changed. Vertical's still one year longer than before for premium. For core, it's two years longer than before. Pay terms, I mean.
We also have another question from Raymond Franco. Interest financing and other charges increased by about 5% in the third quarter, slower than the 27% that we saw in the first half. What was the driver for this?
Yeah. Hi, Franco. Thank you. As I mentioned earlier, in terms of interest financing and other charges, the primary driver of the increase here is the acceleration of our more accounts receivable portfolio that we sold in the first nine months of the year versus previous month. Just some color, we sold about PHP 8+ billion of accounts receivable portfolio for the first nine months compared to about half of that same period last year. In 2024, we sold a good amount of our accounts receivable in the fourth quarter. We should be able to expect some normalization there, at least on the discounting cost for the receivables portfolio. Notwithstanding that, the second component of that is really the increased amount of debt. As I mentioned, debt increased by about 8% from same period last year, and that, of course, adds to the interest expense.
We've been able to hold our average debt cost fairly steady. As of end 2024, the average cost of our entire portfolio was at 5.3%. Right now, we're running at 5.4%, and we are 5.5%, and we are expecting to end in and around that particular area by end of 2025.
Thank you, Jed. Any other questions from the floor? Go ahead, Gilbert.
One clarification. What does the 12.9 months compare, say, a year ago or sequentially for the core?
Yeah. Gilbert, in 2024, for the core market, we had 21 months. In 2019, it was 13 months.
We're back to 2019.
We are back. We are just slightly below pre-pandemic levels.
Okay. Thank you. For the high end, how did it compare? 25 months.
We ended 2024 at 24 months. We are now at 23 months.
Thank you.
Same period, same segment in 2019, 19 months.
Last question from me. On your commercial and industrial lots, how come it's so lumpy? Could you smoothen that better? What's the reason for it? Is it really a function of completion, is it a function of buyers pulling out or something like that? Not pulling the trigger?
I think because commercial lots, there's a wide range. You get what we call our shop houses. The prices are very similar, in fact, to residential lots, maybe PHP 50 million, PHP 60 million, PHP 100 million lots. You also have big transactions, up to PHP 1 billion per lot in Circuit, for example, or in Arca South. I guess it's the lumpiness, whether they pull the trigger or not, and one deal can really make or break you, so to speak. There's a little element of that.
Thank you.
Last call for question. Go ahead, please.
Good afternoon. For my questions, first is about your cancellation rate. If I'm not mistaken, earlier you've mentioned that the cancellation rate is at around 7.6%. For that 7.6%, could you provide a breakdown how much is the cancellation rate between the core segment versus the premium segment, and how does it compare to previous periods? That's my first question.
Yeah, we can discuss with you after. We normally do not provide a breakdown of our cancellation rates across different segments. We take them as a whole and compare them to as a whole.
Thanks, Jed. For my second question about your RFO. You've mentioned earlier that 8% of your total inventory value is RFOs. In that 8%, how much is the premium compared to the core segment?
Of the 8%, 3% is premium, 5% is core.
Thank you, Jed. For my final question on your updates on the reinvention. Any changes on the timeline, and is the 2028 opening of Greenbelt 1 still the target?
Yes. Greenbelt 1 is still targeted for 2028. In terms of the openings for the malls, I think we mentioned that Ayala Center Cebu and TriNoma will be completed end of this year. That means the physical refresh. Of course, as our President and CEO mentioned, the merchant replacement program has been properly phased to ensure that we don't affect the revenues too much. That will continue to be felt, but we expect double-digit growth already for next year.
Thank you.
Hi, [inaudible]. You have another question? Please go ahead.
I have a general question, Meean. It's not perceived precisely about Ayala Land, but Investors often ask us, because I'm a stockbroker, and we cater to the high-net-worth individuals. With the attractive pricing of Ayala Land now, they always ask this question: Should I buy Ayala Land or should I buy AREIT? The first answer I give them is that if you are after a stream of income, AREIT will be the perfect candidate for you because you have a portfolio. You earn the rental income, lastly, without paying tax. This is very attractive for you. I don't know if you will be bothered later on that you're giving up on the development income on the Ayala Land side. If you can give us some guidance on how to answer that question.
I'll give it a go, then I'll ask my CFO to supplement what I say. I think it's a great time to buy Ayala Land. The discount, we're actually trading below book, right? If you want to look at the upside potential, clearly Ayala Land has it. The REITs, on the other hand, give you a steady rate of return of about 6%-6.5% year-on-year. If you want, I guess, a capital upside, it should be Ayala Land. If you are looking for a steady stream of income, it's AREIT.
The next question to that, related to that, is that if we buy AREIT, does the AREIT stockholder have any participation in the development income somehow? Does the value of development income flow into the AREIT portfolio?
Sir, no. Right now, the only assets that AREIT holds are mature leasing assets that Ayala Land, as a sponsor, infused in AREIT. The development income is housed at Ayala Land level. To the point of our CEO, if your investor is after getting yields of anywhere from 5.5%-6% on a recurring basis, but not so much looking for capital appreciation, AREIT is probably the investment. If you're looking for growth with capital appreciation, especially where the stock price is today, Ayala Land is the investment.
It is correct to say that the AREIT stockholder also participates in the low cost of financing of 5.5%, thereabouts?
Cost of financing of AREIT is now correct, sir, in the area of 5.5%. It barely has any debt. AREIT, as a vehicle in itself, only has $2 billion in debt of an equity value of about over $130 billion. Arguably, AREIT has capacity to lever, but because predominantly all of its transactions with its sponsor is via a tax-free exchange, property for shares, it hasn't been able to use any leverage.
Thank you very much. That will be helpful. All the points you brought up will be very helpful to the stockbrokers like myself. Thank you.
We have a couple of more questions online. I'll read them. First one is from [inaudible] . Number one, can you clarify if the recent rebound in core sales, especially in 2Q and 3Q, is largely due to RFOs for relatively new launches? We'll pass it on to Raquel.
It's primarily RFOs, existing projects, vertical projects.
If so, do you think the current pace of core sales is sustainable given RFOs are at a smaller level and launches remain tempered, as earlier mentioned?
I think we still have about 189 worth of inventory. What percent is core?
Core is 30%.
30% is core. We have no vertical launches this year, but horizontal launches are coming up for core. I think we should be able to sustain that growth.
Thank you, Meean. We also have questions from Raffy Mendoza of Maybank Securities. He has three questions, the first of which is, may we have unbooked revenues as of end September 2025?
About PHP 130 billion, right? It's trending up. About PHP 122 billion, I think, the last time we reported it. That's also partly something that's changing. This unbooked revenue has been going down the past few years as we were selling more of the RFOs. As we start to move towards pre-selling, we're seeing some increases in our unbooked revenues.
Thank you. Can we get your revised reservation sales target for the residential segment alone?
We gave guidance for property development, PHP 135 billion-PHP 145 billion.
Lastly, given your revised guidance and considering where earnings are as of 9M, will full-year earnings growth be in the low single digits?
Our current target still remains to deliver growth at higher than growth of GDP. As I mentioned earlier, we are expecting a stronger fourth quarter, and our guys are still aiming to deliver an increase in NIAT higher than full-year GDP.
Thank you, Jed. I think we have another question from [inaudible] of Citi. Go ahead, please.
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Overall portfolio, [inaudible] , is 20 months.
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Pre-pandemic, it was 13 months. We are at 12.9 months.
Okay. Thank you so much.
Thank you. We don't have any more pending questions. Last call for questions from the floor. Okay, if none, that concludes our briefing on Ayala Land's performance for the third quarter of 2025. If you have any further questions, please feel free to reach out. A recording of this briefing will also be made available on our website. Once again, thank you for joining us this afternoon