Ladies and gentlemen, good afternoon, and welcome to Ayala Land's briefing on our first half results. Joining us on the line are more than 70 participants, and we'd like to remind everyone that copies of the presentation and the press release are available on our website, ayalaland.com.ph. Allow me to introduce our panel, led by our President and CEO, Ms. Meean Dy; our CFO, Mr. Toti Bengzon; Head of the Premium Residential Business Group and President and CEO of Ayala Land Premier and Alveo, Mr. Mike Jugo; Head of the Leasing and Hospitality Group, Ms. Mariana Zobel de Ayala. Thank you. I would also like to recognize the presence of some members of our management committee. We have Mr. Paul Birkett, Chief Operating Officer of Ayala Malls. Also Mr. George Aquino, President and CEO of Ayala Land Hotels and Resorts.
I don't see Mr. Robert Lao, Mr. Robert Lao, Head of our Estates Group. Ms. Isa Sagun, our Chief Human Resources Officer. Also Ms. Raquel Cruz, Head of our Core Residential Business Group and President and CEO of Avida and Amaia and BellaVita. To start our presentation, let me turn over the floor to Toti.
Thank you, Mike. Good afternoon. Welcome to the first half analyst briefing for Ayala Land. Allow me to present our financial and operational performance for the first half before I turn it over to our President and CEO for her key messages. Ayala Land achieved strong results in the first half of 2024, fueled by robust property demand and consumer activity. We posted total revenues of PHP 84.3 billion. This is 28% higher year-on-year. As a note, this is our highest level of first half revenues to date, surpassing our mark in 2019. [Non-English content ] It's a hard audience. Tough audience. Net income registered at PHP 13.1 billion, up 15% year-on-year.
Our CapEx came in at PHP 36.5 billion. We ended the first semester with a net gearing ratio of 0.73:1, which is an improvement from 0.75:1 last year as our operating cash flows increased and we continue to manage our debt funding requirements prudently. Turning to segment revenues, our property development revenues increased by 34% to PHP 51.9 billion, driven by higher residential and commercial lot bookings. Residential revenues surged by 40% to PHP 43.7 billion, while combined office and lots for sale revenues grew by 9% to PHP 8.2 billion, mainly from commercial and industrial lot sales.
The commercial leasing segment grew by 10% to PHP 22.1 billion, owing to the higher occupancy of Ayala Malls Manila Bay, the contribution of One Ayala Mall and offices, Ayala Triangle Tower Two, the contribution from Seda Manila Bay, as well as the higher occupancy of Seda Nuvali and Seda Lio. Our shopping center revenues grew by 8% to PHP 11.1 billion, while office leasing improved by 6% to PHP 6.1 billion. Furthermore, hotel and resort revenues accelerated by 19% to PHP 5 billion. Our services business, such as construction, property management, and our airlines, among others, grew by 51% to PHP 8.4 billion on account of higher bookings from external projects, airline sales, and stable property management fees.
Net construction revenues doubled to PHP 5.5 billion from the first half of 2023, while property management, AirSWIFT, and our retail electricity supply companies generated total revenues of PHP 3 billion, which is a 2% increase year-on-year. Turning over to the income statement, real estate revenues reached PHP 82.4 billion. This is a 28% increase from last year due to higher residential and commercial lot bookings, additional contracts from external construction projects, and healthy leasing operations. Interest and other income totaled PHP 1.8 billion, 23% higher year-on-year from higher management fees and interest income from short-term investments and cash deposits. Equity net earnings, breaking down the interest and other income line, equity net earnings of associates and JV companies grew by 9% to PHP 945 million, as FBDC companies as well as our ALI Eton Joint Venture and our Ortigas affiliate recorded higher earnings.
Interest and investment income increased by 66% to PHP 361 million, reflecting the higher yields generated from our short-term investments and cash deposits. Other income amounted to PHP 517 million. This is a 29% increase year-on-year due to higher management fees earned from our FBTC companies and the ALI Eton JV. Expenses grew by 29%, amounting to PHP 64.7 billion. With more business activity, our real estate expenses totaled PHP 52.7 billion, up 34%, while general and administrative costs increased by 10% to PHP 4.5 billion. Our GAE ratio settled at 5.4%, which is lower than the 6.3% level in the first half of last year. Our EBIT margins stood at 31.8%. This is lower than the 34.1% in the same period last year, as we recognized some expenses related to our businesses.
Interest expense, financing, and other charges totaled PHP 7.4 billion, 8% more than last year due to a higher average borrowing rate as well as an increase in our loan balances. Deducting expenses from revenues, income before tax grew by 24% to PHP 19.6 billion. This increase translated to an income tax provision of PHP 3.9 billion. Summing it up, income before non-controlling interests totaled PHP 15.7 billion, 20% more than last year. Netting out our non-controlling interest from our JVs, which grew by 55% to PHP 2.6 billion, net income attributable to ALI equity holders grew by 15% to PHP 13.1 billion. Breaking down revenue by business line. Higher residential bookings, commercial lot sales, additional external construction projects, and healthy leasing operations drove our top-line growth.
Property development revenues increased by 34% to PHP 51.9 billion. Residential revenues surged by 40% to PHP 43.7 billion, with higher bookings across all segments. Office for sale revenues, however, declined by 15% to PHP 1.8 billion, as the lower incremental percentage of completion offset the new bookings during that period. Revenues from commercial and industrial lots jumped by 19% to PHP 6.3 billion. The lot sales were primarily from our Laguindingan Technopark, Nuvali, and Broadfield estates. Commercial leasing revenues increased by 10% year-on-year to PHP 22.1 billion. Breaking this down, shopping center revenues amounted to PHP 11.1 billion, 8% better than last year due to higher rents as well as the contribution of Ayala Malls One Ayala.
Office leasing grew by 6% to PHP 6.1 billion from increased occupancy and rents, as well as the contribution of One Ayala Offices and Ayala Triangle Tower Two. Meanwhile, hotel and resort revenues accelerated by 19% to PHP 4.9 billion owing to higher room rates, the contribution of Seda Manila Bay, and the higher occupancy in Seda Nuvali and Seda Lio.
Service businesses composed mainly of construction, property management, and airlines registered a 51% growth to PHP 8.4 billion. Breaking this down, MDC posted net construction revenues of PHP 5.5 billion, double last year's figure on account of the additional contracts from the 50 MW ePLDT data center project in Santa Rosa, Laguna. APMC's property management revenues, combined with AirSWIFT and our retail electricity supply companies, generated revenues of PHP 2.9 billion. This is a 2% increase year-on-year, primarily from higher airline sales and property management fees. Summing up our top line, real estate revenues amounted to PHP 82.4 billion, 28% higher than last year. With interest and other income of PHP 1.8 billion, total revenues grew by 28% to PHP 84.3 billion. Pretty stable, all within our set target levels and quite healthy.
On the property development side, we've told you guys that we strive for gross profit margins for horizontal residential projects in the mid-40s and mid-30s for the vertical projects. As you can see, horizontal spot on of 45% and vertical margins, GP margins came in at 38%. Office for sale margins remained steady at 43%, while the margins of our commercial and industrial lots were at 68%. This was higher from the 52% we showed a year ago, primarily on account of high margin lot sales from Laguna Boulevard, Broadfield, and Evo City. For commercial leasing, our EBITDA margins are within target, shopping centers at 62%, office 20%, and hotels and resorts at 29%, slightly lower for hotels, factoring in the impact of the Lagen Resort closure due to renovations. Finally, the EBITDA margins for service businesses were steady at 8%.
Let's get some more color or put some more color into our residential sales figures. Residential reservation sales totaled PHP 68.4 billion. This is up 17% year-on-year. In the second quarter alone, we grew residential sales by 15% to PHP 35 billion. 61% of the reservation sales came from the premium segment brands, namely ALP, Ayala Land Premier, and Alveo, while 39% came from the core segment led by Avida. Of these projects, 62% were vertical projects and 38% were horizontal. The quarter's sales performance translated to a monthly sales average of PHP 11.4 billion, and this is an acceleration from the PHP 9.5 billion in 2023. Projects of note were Ayala Land Premier's Park Villas in Makati, The Courtyards at Vermosa, Alveo's Park East Place in BGC, Sereneo in Nuvali, and Avida's Verge Tower One in Mandaluyong. These drove the sales performance during the period.
In terms of our buyer profile, 72% still, majority of our sales were to local Filipinos. This is 26% higher year-on-year. Sales to overseas Filipinos were slightly down, given the limited launches at the core segment. Sales to our other nationalities grew by 5%. To overseas Filipinos and other nationalities, these two segments accounted for 17% and 11%, respectively, of the total. Just a side note, for other nationalities, 66% were sales to Americans. This is 15% higher year-on-year, while sales to overseas Chinese buyers comprise less than 1% of total sales. Expect us to launch more products in the second half of the year, in step with the demand that we're seeing on the ground and well within our internal inventory level targets.
On the leasing segment, for our malls, lease-out rate is at 89%, same level as last year, while total GLA under construction stands at 194,000 sq m. For offices, GLA of 1.4 million sq m. Occupancy rate stands at 91%, much better than the industry's vacancy rate of, I believe, it's about 20%. We're at 9% versus the industry's 20%. We do have a solid pipeline of offices to deliver 297,000 sq m of leasable space coming in the next three years. In terms of the occupants of our offices, primarily leased out to BPOs, 78%, 12% to headquarter locators, and there's just 1% remaining to one POGO locator. For our hotels and resorts, a total of 4,500 rooms. Occupancy continues to be quite healthy. The average occupancy for all hotels was 64% and 52% for our resorts.
Total number of hotel and resort rooms in the pipeline, close to 1,000 rooms. This is what we can look forward to the rest of the year. We will open Ayala Malls in Vermosa, Cavite, 38,000 sq m of GLA, as well as the initial phase of Ayala Malls Evo City, also in Cavite. For offices, we have the Park Triangle office tower in BGC with 35,000 sq m of leasable space, and we will be opening our new office Technohub formats at Nuvali and Atria Park District in Iloilo, both having 25,000 sq m of GLA. CapEx spend, PHP 36.5 billion. More than half, 51%, went to residential projects, 27% towards estate development, 11% to commercial leasing, and 11% on remaining land acquisition commitments. We've declared a PHP 100 billion CapEx budget for the year, expect faster spend in the second half of this year.
We have a well-managed and conservative debt portfolio, with 91% contracted into long-term tenors and 75% locked in fixed rates. Our average borrowing cost ticked up a bit to 5.2%, and the average maturities come down to 4.1 years. Just to note, in July, we raised PHP 20.5 billion of sustainability-linked financing tenors of between 8- 10 years. Both those facilities will further lengthen our average debt maturity profile. The PHP 6 billion sustainability-linked bond is listed on the PDEX, has a term of 10 years, and was well-received by the market, with demand reaching three times what we offered. It cleared that spread of 30 basis points over the benchmark. Quite a very tight credit spread for a first sustainability-linked bond issued by a local corporate.
The PHP 14.5 billion sustainability-linked loan with the IFC is ALI's first loan from a multilateral agency and the IFC's first sustainability-linked loan for a Philippine corporate. Combined, we expect that these two financings extended our debt portfolio back to five years. Our balance sheet remains strong. Net gearing ratio of 0.73:1. Total borrowings increased slightly by 3% to PHP 266 billion from year-end 2023, while stockholders' equity grew by 5% from the end of last year to PHP 335 billion. Our current ratio is 1.67 times, our interest coverage ratio is 4.7x , and our net debt to EBITDA multiple is now below four, 3.8x . All of these are within the Standard & Poor's prescribed limit for investment-grade property companies.
Just to summarize our performance for the first semester, top-line growth 28% higher year-on-year at PHP 84.3 billion, our highest level of first-half revenues to date. Net income of PHP 13.1 billion, up 15% year-on-year. CapEx at PHP 36.5 billion. Net gearing at 0.73:1. In terms of the breakdown of our segment revenues, property dev revenues up by 34%. Of this, residential revenues surged by 40% to PHP 43.7 billion. The commercial leasing segment grew by 10% to PHP 22.1 billion, while our service businesses grew by 51% to PHP 8.4 billion. With that, we'll do the Q&A later, but allow me to turn you over to our President and CEO for her key messages. Thank you.
Thank you, Toti, and good afternoon to everyone. I just have a few points to make, and then we can open this to a Q&A. We are hitting our growth targets across all our business lines. Sales reservations outperformed expectations. I will no longer go through the details of our performance because our CFO has already gone through it in detail. While rate cuts are expected in the coming months, we recognize that interest rates will not immediately be at the pre-pandemic levels. As such, we are prepared to grow our property development business using capital as efficiently as possible. We are pleased that our inventory levels are now at 19 months based on the last six months' sales, coming from 22 months this time last year. We feel there is still room to bring this down further to 16-18 months, roughly where we were pre-pandemic.
To achieve this, we need to continue with our strong sales performance and balance our launches. As such, we are strategically sequencing our launches to ensure that the organization, especially the sales organization, is selling inventory from existing projects. In the first half of the year, we launched PHP 34 billion worth of projects, about half of the PHP 66 billion reservation sales from the same period. For the full year, we are projecting about PHP 85 billion in launches, which translates to 12% increase versus 2023 launches. We also need to ensure that project launches are compelling and deliver healthy take-up from the get-go. Projects launched in the first half of the year had an average take-up of 25%, considering most of them were launched in the second quarter. These projects include the following.
Anvaya Searidge Residences, launched just last June, take-up 82% with an average per unit price of PHP 30 million. Caleia in Vermosa now has a take-up of 40% with an average price per unit of PHP 16.5 million. The take-up of Sereneo in Nuvali is now at 25%, with an average price per unit of PHP 17.8 million. Launched also in June was Orean Residences in Vertis North with a take-up of 15% and an average unit price of PHP 27.8 million. With a strong focus on moving existing inventory and strategically timing the launches of quality projects, we can use our capital efficiently to grow the business at our target of 2x GDP. We are on track with the reinvention of our key leasing assets and the continuous expansion of our leasing portfolio.
Four flagship malls are undergoing reinvention and are progressing well within the 10%-15% percentage of completion. In Glorietta, works on the facade, the park, cinemas, interior hallways are ongoing. In Greenbelt, demolition works have started. In Trinoma, the Mindanao Avenue lobby, cinemas, and rooftop gardens are being tackled first, while in Ayala Center Cebu, the activity center and the interior hallways are the focus. We have also decided to take a more aggressive approach to our merchant optimization program. We expect to partially mitigate the impact of this accelerated program with the growth of our overall mall portfolio and improving lease-out in our other malls. Meanwhile, in the hospitality segment, the renovation of Lagen Resort in El Nido is in full swing and will be completed in 12 months. Four hotels will follow suit within the year.
We are gearing up for the opening of 144,000 sq m of gross leasable area of malls and offices this year. All of these are well-situated within our estates, with 83% of the GLA located in NCR and Greater Metro Manila. This approach will enable us to grow the business as committed while providing our shareholders with improved returns. Our leverage is well within our comfort levels, with a net DE of 0.73 and an interest cover of 4.7x . We have a program to return capital to our shareholders through dividends and buyback, totaling PHP 8 billion as of the first half of 2024 or 32% of last year's NIAT. Our annualized ROE stands at 9.4%, up from 8.8% in the same period last year.
We are excited about the reinvention we are undertaking, both in our key leasing assets as well as in redefining the standards of our residential offerings. These investments position us best for the growth opportunities that we see from the rising affluence of the Filipino market. Thank you very much.
Thank you, Meean and Toti. Now let's open the floor for questions. We now have 126 participants on the line. Let's take the first question from Ms. Jelline Gaza of JP Morgan.
Hi, good afternoon, and thank you for the presentation. Hello. My first question is regarding inventory. Would you be able to share with the prioritizing selling of inventory, how much of that is currently coming from the premium versus core brands? In line with this one, do you think back to maintaining the mid-teens pre-sales growth for the second half as we prioritize inventory? How do you think the new launch pipeline can support that pre-sales growth? Thank you.
Good to see you in person. Let me answer the last question first. Yes, we believe we are on track to achieving our gross reservation sales or take-up targets in the mid-teens. We believe we're on track. In terms of Your question was on the take-up, how many percent was?
Unsold inventory.
Unsold. Inventory. How many percent? 68%-32%. 68% premium, 32% core.
Just as a housekeeping, how much of that is currently RFO, if you have the number?
Total RFO now is at two months.
Two months, approximately two over 19 months. That's how we get it. Okay, thank you.
About slightly over 10%.
Over 10%.
Slightly.
Okay, thank you.
Thank you, Jelline. Mr. RJ Aguirre from UBS, go ahead.
Since we're on the topic, I just want to follow up on inventory levels. Which are Metro Manila and which are ex-Metro Manila? What percentage?
We'll get that.
Back to you, RJ. Go ahead.
My next question is on cancellation. I saw that the slide, single digit. Any exact number or maybe mid to high single digit or?
We ended last year at about 9%, so we're now at 8.5%.
Thank you, Toti. My other question is on margin. I noticed that as you mentioned earlier, top line is all-time high. On the net income is nowhere near 2019 levels. Can you give us some color on the margin and the outlook for that in case you're trying to improve it?
We hope to improve our EBIT margins. As you know, we're in the mid-30s level. For this particular period, we recognized costs which were related to, number one, improving the overall customer experience, so there were higher OPEX that we recorded. Number two was in line with our quality's job number one initiative. We implemented certain enhancements to our projects, both on the residential and leasing side. Admittedly, on some of our slower moving residential inventory, we did give some discounts. This was very selective. Selective discounting on certain of our projects, residential projects. Those are the three major reasons why we show the margin decline from last year.
Thank you, Toti. That's it from me now.
Thanks, RJ.
60% Metro Manila, 40% outside Metro Manila.
Okay, thank you. Any questions from our call participants? I don't see anyone raising their hand. Okay, go ahead, XT. We have a question from Xuan Tan of Goldman Sachs. Go ahead.
I have a question on CapEx. Noticed that the year-to-date run rate a bit lower than the PHP 100 billion guidance. Can you provide more color on that and on the expectation for second half?
Yeah, the expectation is we will be spending a little bit faster in the second semester. Our guidance, our CapEx guidance of PHP 100 billion is still intact. A little slow off the blocks in terms of spending, which is for me a good thing, the project teams reassure me they are going to be spending what they budgeted for in this last semester of the year. The guidance for PHP 100 billion is still on.
Okay. Got it. My second question is a follow-up on the margin. Any color on when should we expect margins to improve, or is this a run rate that is sustainable for the rest of the year and going to next year as well?
I think this is the investment that we are making as far as getting our products to the quality where we would like our quality and our experience to be. For us, as long as we are in the 30%-35% level, which is what we have always said we were comfortable with, I think we would make the appropriate investments for so long as we are in that 30%-35% range.
Okay, got it. Thank you.
All right, thank you. The next question comes from Ms. Joy Wang of HSBC.
Thanks for taking my question. Two question from me. First of all, just a follow-up on margin, in particular on retail. There's a bit of fluctuation. Is this a reflection of ongoing asset enhancement, and when can we expect that margin to normalize?
Leasing margins, EBITDA margins have so far been steady at the 63% level. That's been our sort of our target for EBITDA margins as far as our malls are concerned. Potentially, we might see that dip a little bit on account of the reinvention. As you know, we're investing heavily to quite a bit of CapEx that we're putting to reinventing some of our assets. That will be below at the depreciation level. Also in terms of some of the OPEX that we might be spending to enhance that customer experience, that could have an impact on our leasing EBITDA margins. I think we'll try to keep it under 60% level.
Sure. The second question is on total shareholder return. You did PHP 8 billion return between dividend and share buyback. How should we think about the split going forward? Is there any target level that you will be looking at? Thank you.
In terms of the dividends, I think you can see us running at about a 30% payout ratio of prior year's net income. That's pretty much what we bake into our budgets. In terms of the buyback, I guess a little bit more opportunistic for us on that side. We do see our shares trading at a much lower than its intrinsic value, that's why we continue to buy back in the market. In terms of our approvals from the board, we have about PHP 12 billion remaining. This year, we bought back about PHP 6 billion worth, and we still have a PHP 12 billion allocation approved by the board.
Thank you.
Thank you, Joy. Any more questions from our call participants? [Carl] ?
Good afternoon. I'd like to ask about the outlook going forward. You actually performed quite well in the second quarter, but it was only in July when President Marcos announced a POGO ban. I acknowledge, of course, you have very limited direct exposure to mainland Chinese or POGO. Looking ahead, would you say you are more positive or more cautious on the sector now or relative to a few months or early this year?
[Carl], our office, we really don't have POGO, right? Only about 1%. I think just one tenant, in fact. Our direct exposure to the POGO is rather limited. I suppose what you're asking is how it would affect the residential business for us. One of the first things I did was I looked at all our buildings and how much POGOs live in our completed and turned over buildings. What we found is only less than 5% of our units are actually occupied by POGOs. I think in general, our products are not that exposed to the POGO market, either directly in the office or indirectly as tenants for our residential buildings.
Also on, earlier mentioned by Toti, the residential performance was quite good across all segments. I'm wondering if you're seeing better results from the core segment in particular. Is it better than you thought, or just about the same?
Our gross take-up grew 23% for the premium and 9% for the core. Clearly there's still a bias for premium. I think for the core, we will continue to focus our sales force and make sure that we are able to move our current inventory and, in fact, start launching some projects in our core segment. Clearly, we see the strength more in the premium than in the core as our numbers show.
Got it. Thank you.
Okay. Thank you, Carl. The next question comes from Ariz Marcelino of MBTC. Go ahead, Ariz. Okay, since we don't have him ready yet, maybe we can move to Mr. Chang. Okay, go ahead, Ariz.
I'm sorry. Thank you for the presentation. What are the efforts you're undertaking to improve cancellation levels? Do you expect your core to further improve by, say, next year, given the anticipated interest cycle?
I think our cancellation levels have improved drastically from maybe 18 months ago. In fact, as the CFO said, our cancellations are now 8.5% of our revenue. This started maybe more than 10%, in fact 18 months ago. For the most part, I think we have already passed the worst of times. We have also increased some of our reservation fees, particularly in our core segment, to try to weed out or to try to select those who are really serious in buying our projects. Internally, we're also much quicker now that we know what the market is like. We're also much quicker in deciding when to cancel a project and bring it back to the inventory and bring it back to selling. We've also had to adjust our internal processes because these are realities that we face.
As the interest rate improves, clearly the beneficiary of that would be the core segment, where, as we always say, 90% of our market get a mortgage. We're expecting some improvements in our core residential sales as interest rates go down.
Thank you.
Thank you very much. Do you have any follow-up questions, Ariz?
Thank you. That's all from me.
Okay, thank you. The next question comes from Mr. Chang Qi Ong of JP Morgan Asset Management. Go ahead, Chang Qi.
Yeah, hi. Thanks for the opportunity. Just a couple of questions, some on resi, some on malls. On the resi side, you are doing quite well, especially when compared to some of your peers. On the premium side, where you have been doing really well, so far, have there been any signs of so-called buyer exhaustion, where you might have pushed out too much inventory to the market, and are you feeling concerned that whether the market can absorb all these inventories? On a related note, right now sales are still 2% vertical, 38% horizontal. When do you think this will tilt the other way, which we start to see more sales coming from horizontal than vertical? Maybe you can get started first before I ask my questions on the malls business.
The question really goes to the strength or the resiliency of the premium market. As you know, our CEO announced last year that we would focus or lean on the premium segment for the next year or so. I think it's a strategy that has served us in good stead, as shown by the numbers. We always think about what or how big is that demand. I guess when we look at demand, some of the numbers we look at, and this is something we share with our overseas investors, is how many dollar millionaires are being minted in the Philippines. I think the number that HSBC put out was, they expect that to quadruple from 100,000 to 400,000 dollar millionaires through 2030.
Okay, that's a wealth manager's assessment and estimate. That's a quadrupling. We're talking of an additional 300,000 individuals. When we look at how many units we're launching in the premium segment.
Go ahead.
How many units we're launching, about 10,000. It seems to us like there's this demand that's out there that we will continue to service. It's hard to come up with any additional scientific data, but at least from what we're seeing on the ground, the actual sales, it continues to grow. Premium segment continues to grow. We think, going forward to the next five years, that demand will be there, and it's something, I guess, in many ways, we'd like to be the dominant player in that segment. We want to continue to be the dominant player.
Okay. Maybe just a quick one on the mall business. First half revenue grew about 8%. If we were to adjust for the impact of redevelopment, where you close quite a bit of space to do SRA as well, how much would have revenue increased by?
Actually right now, we've been managing the reinvention scheduling, I think only about 1% of our GLA has been closed as a result of the reinvention. I'd say it's quite minimal. We did bring two new malls online end of last year that are still stabilizing.
Okay, got it. Thank you. That's all.
Thank you, Chang Qi. The next question comes from Mr. Paolo Garcia of ATR Asset Management. Can you provide more color on the first half 2024 mall foot traffic, how it has been relative to last year? Can you also elaborate on average consumer spend or tenant sales? Are we seeing more strength in casual dining, F&B, or retail?
In terms of tenant sales, we've seen particular growth actually in services and specialty. Food continues to grow as well, but we saw a particular uptick in specialty and services. In terms of the exact growth of foot traffic year-on-year, let me get back to you. Oh, yeah.
For the month of June, foot traffic grew 9% year-on-year. Same-mall revenue growth, 7% year-on-year.
Okay, thank you, Toti. The next question comes from James Kenneth Godito. Following the recent issuance of sustainability-linked bonds and the IFC loan, are there any further plans to raise capital through debt or equity markets in the third and fourth quarters of 2024?
Our borrowing activity program for the year was about PHP 50 billion, of which PHP 20 billion would go to refinancing. We've completed that. In this last semester, we haven't triggered the borrowing for the PHP 30 billion of new debt, as the CapEx has not been spent just yet. We've actually seen some strength in our internally generated cash flows. The budget would be maybe PHP 20 billion-PHP 30 billion of debt to be raised in this last semester. That's what we've penciled in, but we have to finalize the actual funding program.
Okay, thank you. We have a follow-up question from Ms. Joy Wang. Go ahead, Joy.
Thanks. I just want to follow up on resi. Have you seen payment term change shorten?
It's still pretty much the same. For the core segment, it's still 12- 18 months longer versus pre-pandemic. For premium, in particular vertical, it's still 6- 12 months longer than pre-COVID.
I guess, just based on your experience in the past, how quickly do you think that the interest rate impact can translate to the return of demand in core segment? Also, any potential of this payment term to be shortened as a result of interest rate movement? Thanks.
On the first question, I don't think we have an empirical way of determining how quickly demand can snap back. My sense is, the market is just waiting for rates to have peaked, which I think the market's getting comfortable with that. When the BSP starts cutting, then directionally they know rates are coming down. I think that will be sufficient to keep those who have been on the sidelines excited about getting back into and buying property. This would be primarily for the core segment. In terms of payment terms further tightening, not sure, but I guess to a certain extent this might be the new normal, and we're prepared with these payment schemes.
We're prepared to make a good return given that even as payment terms have sort of lengthened, and that translates to more working capital. We've planned for that, and we budgeted it. We want to make sure we hit our target hurdle rates. We've pretty much baked in these longer than pre-COVID payment terms.
Maybe just to add on the pay terms, particularly on the core segment. One thing we have to take a look at is the overall industry supply because that actually affects how we can also tighten our own pay term, particularly in that segment where there are other players. We're quite realistic here, thinking that it will not be that immediate because there are other players who also have inventory.
Okay. Thank you, Meean and Toti. Let's take Mr. Daniela Picacho question. Go ahead, Daniela.
Hello, can you hear me okay?
Loud and clear.
Yeah. First question would be on malls. Can you provide some color on how you're managing current and potential new tenants for the malls under renovation? Are the affected tenants moved to your other malls? Are there discounts offered? Will there be a significant change in the tenant mix for these malls?
Yeah. In terms of managing malls that have ongoing construction, we actually factor in concessions for the period which they're affected so that can be between one and two months. In many cases such as in Makati where we have kind of four different assets we are moving some tenants to other locations. Sorry, was there another part of your question that I may have missed?
Yeah, the last point you said there will be a significant change in the tenant mix for these renovated malls.
Yes. I think so. I think we've shared in the past that we have identified in addition to the physical renovations, we've identified merchant spaces that we feel could be performing at a greater capacity. That'll be part of the shift. Generally speaking, there's been an increase in food tenants and also bringing in kind of newer global brands that'll bring in a new shopper into our centers.
Okay, guys, that's pretty clear. Second question is on residential. Just want to clarify if the 16-18 months inventory target is for end 2024.
Is it for end 2024?
Well, we're right now at 19 months. The target is to bring that down lower by the end of the year. We should be in the 16-18 months range by then.
Thank you. That's all. That's fine.
Okay. Thank you, Daniela. Let me just take this question from Mr. Raffy Mendoza about residential. Would you have a rough estimate of ALI's market share in the premium segment?
I'll take a stab. We track our market share. This is our KRA I'm going to share with you. We track our market share on the residential side in terms of share of revenues. We have a peer set of three other players. When we look, this is statutory numbers because that's the official record. We have the largest market share in terms of revenue, about 47% of total property development revenues booked. 47% of that is accounted for by ALI and the universe would be there's four of us in that set. On the premium side
I'm going to be more mayabang than Toti about this. In the premium segment because we track this quarter on quarter so it fluctuates. It depends on who launches. Honestly, that's what the market share will say. If you think about a cumulative period let's say the last whatever five years or three years I think only Ayala Land has consistently launched premium projects at scale at different formats, different geographies. If you take this on a total basis not on a quarter by quarter but say the last three years or the last five years I would suspect that we probably had had the most number of product units out there in the market. I think.
Okay. Thank you, Meean and Toti. The next question comes from Mr. Wilson Ng of Morgan Stanley.
Hi.
Go ahead, Wilson.
Just firstly a couple of housekeeping questions. Just to follow up on the unsold inventory of 19 months. How much is that in PHP?
Residential inventory is roughly about PHP 200 billion.
PHP 200 billion. In terms of your unbooked residential revenues, how much is that currently?
It increased from year-end. We're at about PHP 146 billion.
PHP 146 billion. Lastly, sorry, I missed this earlier, what's the reason for lowering your target launches for this year from PHP 100 billion to PHP 85 billion?
We really wanted to manage our inventory levels. That goes back to our move to be more efficient in terms of how we use our capital. We wanted to make sure that the sales and the organization is really focused on moving inventory in projects that are already launched before launching new projects. Well, these are obviously projects that we already have in terms of the land, in terms of the permits, and the plans. If the market picks up faster, whether it be in certain geographic areas or whether it be in total, we should be ready to increase that number of launches. For now, from what we're seeing and what we're projecting in terms of our sale, coupled with our desire to bring down our inventory level, we believe that the PHP 86 billion is where we would end up by year-end.
Thank you. In terms of housing demand, basically you're still seeing that going strong, no slowdown?
So far, yes.
Okay. Thank you.
All right. Thank you. Let's go back to our audience. I could see Jelline raising her hand earlier. Go ahead, Jelline.
Thank you. I'd just like to ask if you have an updated presold level for Park Villas and Park East Place. You still have around PHP 50 billion of future launches in the second half. Can we expect something of a similar profile of new launches in the second half, or would it be in next year already? Thank you.
Yeah. Thank you for that question. For Park East Place, we're around 40% sold. I'm sorry, for Park Villas. For Park East Place, we're closer to 60%. We do have a pipeline for launches. As our CEO mentioned, the focus really now is on sales efficiency and strategic phasing of the launches.
Thank you, sir Mike. Next question is, you said you were reflecting some selective discounts, and I think Ms. Meean put it correctly. There's a lot of inventory. Some of your peers are getting more aggressive in terms of discounting. How do you see this going forward as we see more turnovers of POGO-related optimism back in 2017 and 2019 getting turned over in the next two years? Should this be a concern on margins specifically for the core brand? Thank you.
Well, I think realistically there would need to be some adjustments that we will make for slow-moving projects, particularly in the core. We've started that this first half and it was just necessary. We believed it will probably continue till the end of the year. Fortunately for us, I think we've said that majority of our inventory is now in the premium segment. I think our exposure to that particular segment and the propensity to discounting is much less than perhaps some of our other peers.
Okay. Thank you very much. Unfortunately, we're running out of time. We have room for one more question. Okay, we don't have any more takers. I guess that concludes our briefing this afternoon. We'd like to thank everyone for joining us. If you have any additional questions, please feel free to send us an email at investorrelations@ayalaland.com.ph. Thank you for attending.