Okay, ladies and gentlemen, good afternoon and welcome to Ayala Land's briefing on our results for the full year of 2023. Let me start by recognizing our panel composed of our President and CEO, Miss Meean Dy, our CFO and Treasurer, Mr. Toti Bengzon, Mr. Mike Jugo, Head of the Premium Residential Business Group and President and CEO of Ayala Land Premier and Alveo Land, and Miss Mariana Zobel de Ayala, Head of the Leasing and Hospitality Group. We have 60 participants on the line, and we'd like to remind everyone that copies of the presentation, and the press release are available on our website, ir.ayalaland.com.ph. To start the presentation, let me turn over the floor to Mr. Bengzon.
Good afternoon to our analysts, and please take note, we have members of the press here today. Welcome to our full year analyst briefing. I have the great pleasure of presenting to you report card for 2023. I think you will all be pleased with our grades. Let me start off with our key messages. The company delivered strong results in 2023, fueled by robust property demand and heightened consumer activity.
We posted total revenues of PHP 148.9 billion. This is 18% higher year-on-year, while our net income registered at PHP 24.5 billion. This is up 32% year-on-year. Our CapEx for our various residential and commercial projects totaled PHP 86 billion. This exceeded our initial budget, which we communicated to you of PHP 85 billion. We sustained a net gearing ratio of 0.75:1 with the support of higher operating cash flows as we remain prudent in managing our debt funding requirements.
Property development revenues expanded by 14% to PHP 92 billion, driven by steady bookings and higher completion of residential projects and offices for sale. Residential revenues rose by 22% to PHP 77 billion, while the combined office and lots-for-sale revenues declined by 15% to PHP 15 billion, as slower commercial and industrial lot sales outweighed office sales and completion. Meanwhile, our commercial leasing segment accelerated by 25% year-on-year to PHP 41.7 billion due to improved occupancy and rents. Our shopping center revenues surged by 31% to PHP 21 billion, while office leasing grew by 6% to PHP 11.8 billion due to improved occupancy and higher rents.
Hotel and resort revenues increased by 42% to PHP 8.8 billion from last year as higher travel and tourism demand pushed up occupancy and room rates. Our service businesses composed primarily of construction property management and our airline registered a 36% growth to PHP 11.5 billion. Makati Development Corporation's net construction revenues from external projects scaled up by 56% to PHP 6.6 billion. Property management revenues ended 15% higher at PHP 1.8 billion owing to higher car park usage. Revenues from AirSWIFT as well as from our retail electricity supply companies reached PHP 3.1 billion. This is 18% more than in 2022, driven by strong airline ticket sales from El Nido tourists. Moving on to our income statement. Real estate revenues reached PHP 145.5 billion.
This is 18% higher from 2022 owing to property development bookings and completion, higher leasing occupancy and rates, and service business revenues. Interest and other income reached PHP 3.4 billion. This is 4% lower year-on-year, driven by lower other income, mainly due to the subsidiary consolidation and the higher base in 2022 due to a one-time land sale transaction. Equity net earnings from associates and joint ventures increased by 10% to PHP 1.6 billion, driven by our Fort Bonifacio companies and Ortigas Land. Interest and investment income amounted to PHP 690 million. This is 78% higher than the previous year due to higher yields from short-term investments and cash deposits. Other income amounted to PHP 1.1 billion. This is a 35% decline year-on-year as we consolidated the contribution of our JV with the Kuok Group. This is our joint venture in Carmona under AKL Properties.
The consolidation happened under real estate revenues beginning the fourth quarter of 2023. In terms of expenses, we managed our expenses to PHP 112 billion. This is 14% higher year-on-year. Real estate expenses reached PHP 88 billion, up 15%, while general and administrative costs increased by 23% to PHP 6.2 billion. Consequently, our GAE ratio settled at 6%, higher than the 5.7% we recognized during the previous year. Our EBIT margin improved. It stood at 34.2%, higher than the 33.1% EBIT margin we reflected in 2022, and it is now higher than our historical average of 33%. Interest expense, financing, and other charges totaled close to PHP 15 billion, 6% more than the previous year due to the higher average borrowing rate and our daily loan balance. Netting out expenses from revenues, income before tax grew by 29% to PHP 36.5 billion.
This translated to an income tax provision of PHP 7.5 billion or an effective tax rate of 20.5%. As a result, income before non-controlling interests totaled PHP 29 billion, 29% higher than the previous year. Netting off non-controlling interests, which grew by 15% to PHP 4.5 billion, net income attributable to ALI equity holders grew by 32% to PHP 24.5 billion. Breaking down our revenues by segment, our property development revenues expanded by 14% to PHP 92.3 billion, owing to healthy bookings and the completion of residential projects and offices for sale. Residential revenues reached PHP 77 billion. This is 22% higher. Office for sale revenues came in at PHP 4.2 billion. This is 31% growth. Revenues from commercial and industrial lots, totaled PHP 10.9 billion. This is 25% less than last year due to the product sales mix and a pushback of certain of our launches.
Meanwhile, the commercial leasing segment accelerated faster at 25% year-on-year to PHP 41.7 billion due to improved occupancy and rents. Our shopping center revenues surged by 31% to PHP 21 billion, while office leasing grew steadily 6% to PHP 11.8 billion, both due to improved occupancy and higher rents. Hotel and resort revenues increased by 42% to PHP 8.8 billion from the previous year as higher travel and tourism demand pushed up occupancy and room rates. Our service businesses, composed of construction, property management, and airlines, registered a 36% growth to PHP 11.5 billion. MDC posted net construction revenues of PHP 6.6 billion, 56% higher than last year due to the contribution from its external projects.
APNC revenues grew by 15% to PHP 1.8 billion due to higher parking usage and stable property management fees, while AirSWIFT and our retail electricity supply company's combined revenues grew by 18% to PHP 3.1 billion due to higher AirSWIFT patronage. Summing up our top line, real estate revenues amounted to PHP 145.5 billion. This is an 18% growth from last year. Coupled with interest and other income of PHP 3.4 billion, our total revenues grew by 18% to PHP 148.9 billion.
We've seen stable margins across our business segments despite the challenging macroeconomic scenario. Our horizontal residential margins stood steady at 45%. Vertical margins increased to 38% on the back of higher average selling prices of our high-demand projects. Our office for sale margins have declined by six basis points to 43% on account of the sell-out of our high-margin projects, while commercial and industrial lot margins were 4% lower to 66% due to the sales mix. Our commercial leasing margins remain steady and healthy. Shopping center margins improved to 68% from higher occupancy and rents, driven by Glorietta, Ayala Malls Manila Bay, Circuit Makati, and Capitol Central. Office margins were steady at 91%, while hotels and resort margins improved to 29% from 25% in the previous year on the back of higher occupancy and average rental rates. Our margins for our service businesses stood steady at 10%.
Turning over to the operating statistics of our various businesses, let's start with property development. Despite the prevailing higher interest rate environment, property demand remained resilient. Our full year 2023 reservation sales grew by 9% year-on-year to PHP 113.9 billion. Sales in the fourth quarter registered at PHP 28 billion, 2% higher than the third quarter and the same period a year ago. Our sales performance translated to average monthly sales of PHP 9.5 billion. 57% of our sales reservations came from the premium segment. This is made up of Ayala Land Premier and Alveo, while 43% was from our core segment of Avida, Amaia, and BellaVita. 65% of the projects were vertical, while 35% were horizontal. The in-demand projects during the year were Alveo's Park East Place in BGC, Ayala Land Premier's Ciela in Carmona, Cavite, our Park Villas, our signature line in Makati CBD.
Arcillo in Nuvali, Laguna, and The Parklinks South Tower in Quezon City. In terms of our buyer profile, 67% were sales to local Filipinos, 10% higher than the previous year. Sales to overseas Filipinos were up 2% to PHP 23.5 billion, while sales to other nationalities grew by 11% to PHP 14 billion. These account for 21% and 12% of the total respectively. In terms of other nationalities, 57% were sales to Americans, 1% higher year-on-year, while sales to Chinese buyers only comprise 1% now of total sales. We launched 14 projects in the fourth quarter with a combined value of close to PHP 40 billion. Our launches last year were clearly backended. This included ALP's first signature line project, Park Villas in Makati, and additional phases of its existing projects such as The Courtyards in Vermosa, Cavite, Arcillo in Nuvali, and Anvaya Cove in Bataan.
These developments bring Ayala Land's total launch to 25 projects valued at PHP 76 billion, of which 65% were vertical projects and 35% were horizontal. 88% were dedicated to the premium segment and 12% for our core segment. We launched four new estates in 2023, bringing our total estate count to 52 across the country. In April, our real estate logistics subsidiary, AyalaLand Logistics Holdings Corp., launched the Batangas Techno Park, which spans 55 hectares in Padre Garcia, Batangas. The industrial estate will become a mixed-use development featuring Ayala Logistics dry warehouse and cold storage facilities, along with a transport terminal, gas station, an agricultural wholesale market, and restaurants, and it will host light, medium, and non-polluting industries. In September, we launched the 32-hectare Centrala located in Angeles City, Pampanga.
Centrala is the first estate development in the city and is envisioned to be a dynamic business district in Central Luzon, accessible via NLEX, MacArthur Highway, and the proposed Eastern Circumferential Road. It is also only 18 minutes away from the Clark International Airport. Just as a note, this mixed-use development will have 135 commercial lots with a model size of 770 sq m selling at about PHP 70,000 per sq m. It will also host a two-and-a-half-hectare signature central park as well as a community retail center. In that same month of September, we also launched Southmont. This is in partnership with Cathay Land. Southmont is an 800-hectare mixed-use master plan development in Silang, Cavite. Currently, Southmont offers residential developments such as Alveo's Hillside Ridge and Verdea and Ayala Land Premier's Lanewood Hills.
Just as a note, we're looking at an initial development cost of PHP 12 billion for this estate with commercial lots of about 1,000 sq m being sold at PHP 75,000 per sq m. In December, we launched Ayala Land's first mountainside leisure estate, Arillo, located in Nasugbu, Batangas. This 62-hectare estate is positioned to be the premier ecotourism and nature hub for life and leisure in Batulao. It will host premium overnight facilities, a nature sanctuary and canyon trails, an events venue, a restaurant district, and a town center. About 20% of the estate will be used or allocated for residential developments and mid-rise buildings, 20% for commercial use, and 15% for resort-type development. The balance will be allocated for leisure activities, common areas, and flex lots. Moving on to the operating statistics of our leasing and hospitality business group.
For malls, total malls GLA stands at 2.1 million sq m, and the average occupancy rate for all malls is 84%, higher than the 81% we registered in the previous year. Drivers of higher occupancy are now Ayala Malls Manila Bay, Circuit Makati, as well as Capitol Central. The lease-out rate of our portfolio is 90%, 3 percentage points higher than the previous year, and total GLA under construction stands at 194,000 sq m. It's also interesting to note that the average lease rate we've basically been able to increase it by about 22% from the previous year. Our total GLA for offices stands at 1.4 million. This is more than double what we had in 2014. We only had 610,000 sq m. Our average occupancy rate for all offices is 87%, higher by 6 percentage points from the previous year, while the lease-out rate is now at 92%.
This is a significant improvement from the 88% in the previous year. Drivers for higher occupancy would be the Circuit Corporate Center One, 6750, and ATG, Ayala Triangle Gardens Tower Two. Our total office pipeline stands at 297,000 sq m. Just recently, we added to the pipeline Vertis Corporate Center Towers Four and Five. This is the fourth and fifth tower in Vertis, our estate in Quezon City, that will add another 82,000 sq m to our office portfolio. In terms of tenant mix, 80% of the portfolio is leased to BPOs, 11% to corporates, and about less than 2% to POGO back offices and others. Our vacancy rate stands at 8%. This is lower than the previous year's 11%. Our average lease rate continues to improve. It's higher by about 5% year-on-year. For hotels and resorts, we have a total of 4,452 rooms in our portfolio.
Occupancy and room rates have improved. The average occupancy for all hotels was 67% and 42% for all resorts, up 8 and 13 percentage points respectively. Total hotel and resort rooms in the pipeline stands at 1,068 rooms. We opened two malls with a gross leasable area of 49,000 sq m and 420 hotel rooms during the year to strengthen our commercial leasing portfolio. We opened Ayala Malls, One Ayala, with a total of 44,000 sq m. This is where the old Intercon site was located. We opened an initial 5,000 sq m at Ayala Malls Vermosa in Cavite. We also opened the first 306 rooms at Seda Manila Bay and completed the second tower of Seda Nuvali with 114 new rooms. Our total CapEx spend came in at PHP 86.2 billion, higher than our PHP 85 billion guidance.
We spent 49% on residential projects, 11% on commercial leasing projects, 6% for malls, 3% for offices, and 2% for hotels and resorts. 21% went to continuing payments on land acquisitions, 16% for estate development, and 3% for other general uses. We have a well-managed debt position with 93% of the debt contracted in long-term tenors, 77% locked in in fixed rates, an average borrowing cost of 5%, and an average maturity of five years. Our balance sheet stands strong with a net gearing ratio of 0.75:1. Cash stood at PHP 17.8 billion. It is about PHP 5 billion higher than the previous year. Total borrowings of PHP 258 billion, an increase of PHP 22 billion or 9% from the end of December 2022. Stockholders' equity also grew by 9% to close to PHP 320 billion.
Our current ratio stands at 1.76:1, our total debt to equity ratio or gross debt to equity ratio is at 0.81. Our interest coverage ratio has improved to 5.2 times, which is well within the prescribed range by S&P for investment-grade property companies of three to six times. Just to summarize our performance for the full year of 2023, we delivered strong results in 2023. Total revenues of PHP 148.9 billion, 18% higher year-over-year. Net income at PHP 24.5 billion, up 32% year-over-year. CapEx exceeded guidance of PHP 85 billion, coming in at PHP 86.2 billion. Net gearing ratio, 0.75:1, with the support of higher operating cash flows and prudence in managing our debt funding requirements. In terms of segment revenues, property development revenues increased by 14% to PHP 92.3 billion.
Commercial leasing segment, the revenues accelerated by 25% year-over-year to PHP 41.7 billion, while our service businesses grew 36% to PHP 11.5 billion. Allow me now to talk about our 2024 plans. I guess this is the guidance that most of you will be asking us, so I might as well put it out there. For this year, we are budgeting PHP 100 billion in CapEx. This is going to be 16% more than our total spend in 2023. The CapEx will be allocated as follows: 34% to residential, 23% for the completion of our leasing assets, 24% to estate development, and 19% for continuing payments on land acquisition. This budget is reflective of our push to grow our leasing portfolio and to unlock our estates. This year, we intend to launch PHP 115 billion worth of property development products.
This will be broken down to PHP 100 billion worth of residential products and PHP 15 billion of commercial and industrial lots sold by our estates group and AyalaLand Logistics Holdings Corp. 80% of the residential launches will come from the premium segment, while 20% will be for the core segment. By product type, you can see where the preference of the market is. We will launch 52% as horizontal projects and 48% as vertical. By location, we are clearly overweight in Mega Manila, the Calabarzon, and Central Luzon areas, 44% in Metro Manila, 38% in Southern Luzon, 7% in Central Luzon, and 11% in the Visayas and Mindanao region. On our commercial leasing assets, we will complete 68,000 sq m of malls GLA coming from Ayala Malls Vermosa, Evo City, and Park Triangle.
We will also open close to 100,000 sq m of office leasing GLA with the completion of One Ayala South Tower and Park Triangle in Makati and BGC, respectively. We will also complete a campus-type techno hubs in our Atria and Nuvali estates in the provinces of Iloilo and Laguna. This ends my presentation. Before we go into Q&A, allow me to turn over the floor to our President and CEO for her key messages.
Thank you very much, Toti. Can we just go to the slides? I have five key messages for today. Let's just go through this one by one. 2023 was a good year for Ayala Land, with all our business lines hitting their stride. The residential business grew 22% to PHP 77.2 billion. Ayala Malls grew 31% to PHP 21.1 billion. Hotels and resorts grew 42% to PHP 8.8 billion. Offices grew 6% to PHP 11.8 billion, ending the year with a 92% occupancy. Residential reservation sales totaled PHP 113.9 billion, up 9% versus 2022. This year, we also began our program to take advantage of high-value market opportunities and drive for quality. Park Villas, an ALP signature project in Makati, was launched in December 2023 at $9 million per unit. 20% sold.
Park East Place, our first Alveo development in BGC in seven years, ended the year with 45% sold eight months after launch. PHP 13 billion of CapEx is allotted for the renewal of our flagship malls, starting with the closure of Greenbelt II, which will be repositioned as a luxury mall. We will soon start work in Trinoma, Glorietta, and Ayala Center Cebu. This is envisioned to bring out the unique value proposition for each of our malls and bring them to their full potential. Greenbelt I is a total rebuild and will have its own budget. Works will start by the second quarter. A bold renovation plan for our resorts and hotels is also in the works, with two resorts in El Nido and four hotels scheduled this year to bring the customer experience to the world-class levels that we aspire for.
We broke ground for two new office towers in Vertis North, one of our most robust office sites. The first three office buildings in Vertis have been fully occupied since opening; these two new office towers will add 82,000 sq m of new GLA to our office portfolio. Number three, we are optimistic about opportunities for 2024, but pragmatic in addressing the potential challenges of a higher-for-longer interest regime. Based on its latest monetary policy report, the BSP expects the economy to remain intact over the medium term but could operate slightly below its potential. GDP could settle below the Cabinet Level Development Budget Coordination Committee's target of 6.5%-7.5% this year and even until 2025. With that, for 2024, we have a budget of PHP 100 billion for CapEx and PHP 115 billion for property development launches.
This is 26% higher versus 2022, 80% of our launches will be premium residential and commercial lots. Number five, we will continue to grow the business by doing the following. Leaning on our premium residential brands and horizontal projects, utilizing our existing land bank. Getting our leasing assets to operate at their full potential. Expanding our leasing footprint with an additional 800,000 sq m of mall GLA, 500,000 sq m of office GLA, and 4,000 hotel rooms by 2028. That ends the CEO message.
Okay. Thank you, Meean, and thank you, Toti. We can now open the floor for questions. We now have 141 participants on the line. Maybe we can start entertaining questions from our live audience. Okay, the first question comes from Mr. Carl Sy of Regis. Go ahead, Carl.
Good afternoon. I have a number of questions. I'll start off with the residential business. On launches for first 2023, I don't recall the exact number, but maybe 80% of the launches were in the premium, then that's going to be the case as well in 2024. I believe on pre-sales, maybe 45% last year was from core. Going forward, do you still even have the product to match last year's sales on the core segment?
The answer, Carl, is yes. We have baked in, into our budgets, both a more aggressive launch and at the same time, we do want to continue taking down our inventory levels. In the case of core, we also have inventory there that we can sell, so it's not just the launches. Ultimately, our target is to launch about 15% more this year and to bring down our inventory levels. We ended last year at about 21, 22 months, so we want to be between 18-20 months in 2024.
Maybe to add to that, since we have the land bank, we have a couple of projects in the core that we have proceeded with planning and even permit acquisition. Should there be an opportunity, these projects are on push button mode.
Got it. Looking ahead, let's say up over the next five years, I understand there will be more focus on premium, is the idea, in fact, that the core will even shrink in an absolute basis? Is that your plan or not?
Our desire would be for the core market to come back. I think this year, we are still not certain as to how robust that core market will be, which is why we are ready with our premium segment. For a market like us, we really would like to see that core market come back. Otherwise, not so much the near-term effects, but the medium-term effects it will be felt if it doesn't come back. We're hoping that it would come back. I would say that we have the projects and the land bank ready for when this market returns.
Got it. With respect to the fourth quarter launches, you actually launched a lot of projects. From the reservation sales, they were flat for the fourth quarter. I just want to check, did most of the launches come very tail end of the fourth quarter?
Thank you, Carl. Extremely. In fact, the flagship project we did private selling mid-December, so in effectively the inventory was there, sales did not follow relative to the timing. Even some of the launches that we mentioned on the estates will be recognized at this January.
Okay. More recognition in January. Got it. Then I'll ask about the mall business this time. I guess in three stages of timing. Looking back, in the fourth quarter, mall revenue was flat quarter-on-quarter. Normally, you would expect some strength during the holiday season. Could you give us why that was the case when it was flat?
Yeah. We actually had some delays in terms of the cutoffs, so there'll be some carryover to this year.
Sorry, please. You mean openings. Opening of some kind?
No, in terms of the cutoff to be able to recognize our billings.
Okay. Got it. Then during this period, this three-year period of renovations, I want to check. Does Ayala Land expect, on a system-wide basis, mall revenue to be coming down?
No. We've actually particularly managed the redevelopment in phases to be able to manage the effect to our overall revenues.
Okay. Looking further ahead, when, let's say, the transformation of these flagship malls are complete, again, we're expecting a higher level of experience and look. Does that mean, at least on average, will the clientele be much more high-end? Is that the plan, or will the tenant mix change substantially?
It'll differ from mall to mall. I think our view is that each of our malls have a different identity, and I think the clarity with which we are able to develop that identity should be relative to the catchment and the opportunity. That being said. A number of our flagship malls happen to be in areas where the ABC 1 market are more prevalent. In all cases, to be able to justify the investment on the redevelopment, the investment case requires a return similar to a new mall. We would necessarily need to increase our sales rather than just increase our rent. Increase foot traffic and sales to be able to justify that investment. We do see that sales will increase.
I think our CEO in the past has made reference to a 15%-20% increase in rental rates as a function of sales increase again.
Got it. Those are all of my questions. Thank you.
Okay. Thank you, Carl. In line with that question on the malls, we received a question from Chanki of JP Morgan Asset Management. He's asking what is the occupancy rate for Ayala Malls, Manila Bay, and One Ayala.
Yeah. I will pull that up and get right back to you.
Okay. Thanks, Mariana. The One Ayala. The next question comes from Xuan Tan of Goldman Sachs. Go ahead, Xuan.
Can you walk us through the residential cancellation in 2023, and also the expectation for 2024?
The question was about cancellation in-
2023, and what's the expectation for 2024.
In terms of effect of cancellation on our revenue, in 2022, it was about 10%. By 2023, we're now down to 9%. If you take away the impact of office for sale, which as you know, has been a more challenged segment, that would've been 7% of revenue.
Maybe to follow up on Manila Bay and One Ayala. At Manila Bay, we're at 65% occupancy, which is quite a jump from the previous year. One Ayala's at 55%.
Okay, thank you.
To follow up on, yeah.
Yeah, go ahead.
Can you give us guidance for cancellation as well?
The guidance for cancellation in 2024.
We don't really give a guidance for that. I think, given the trend, it's probably in that vicinity, high single digits as a percent of revenue.
Okay, got it. Following up on residential, can you talk a bit more about inventory level?
Given the back-ended launches, some of which were launched literally towards the last weeks of the year. We ended the year at 22 months inventory.
For 2024, what would be your expectation on residential margins?
Our margins have actually been stable, as presented earlier. We don't expect any major deviations from that.
Got it. Thank you. That's all for me.
Okay, thank you, XT. The next question comes from Mr. Richard Laniado of COL. Can you talk about the quarter-on-quarter increase in residential development revenues in fourth quarter 2023?
Property development revenues quarter-on-quarter grew by 55%. This is really coming from bookings that we recognize as well as percentage of completion. For this business, I wouldn't really look at quarter-on-quarter because there are a lot of things that go on during the year. If you want, it's 55%, but as we had shown, our real estate revenues for the full year grew by 18%. I wouldn't put too much meaning into a quarter-on-quarter number.
Okay. The next question, we have a follow-up question from Chanki regarding Ayala Malls, Manila Bay. The current occupancy is 65%. What is the leased-out rate as of now? Maybe we could get back to you there. Let's tackle the question first from-
Yeah.
James Kenneth-
It's at over 80% at this point. We were working with the tenants to make sure that we can follow up on opening.
Okay. Thanks, Mariana. The next question comes from Mr. James Kenneth Gudito. Regarding the recently approved board resolution to raise up to PHP 50 billion in debt capital, could you provide insight into the anticipated timing for this capital-raising endeavor?
Yes, PHP 50 billion is what we got approval for this morning. We intend to access both our bank lines as well as the debt capital markets, roughly maybe 50/50. Of the total of PHP 50 billion, PHP 25 billion will be to finance our CapEx this year, and the other PHP 25 billion is for refinancing of maturing debt. Fortunately, most of that, if not all of the maturities, will happen in the second half. We will be able to finance our new requirements in the first half of the year by drawing down on our short-term lines. The strategy is to access our long-term bank lines, as well as the debt capital markets in the second half of the year, as we anticipate that by that time, rates should start trending downwards.
We have that flexibility to trigger a major part of our financing program in the second half of the year when, hopefully, rates would have moderated. As you know, we want to borrow long-term fixed rate. It's important for us to try to time it or to get the financing at the opportune time.
Thank you. We have a question from Jelline Gaza.
Thank you. I have three questions. First is on the residential. Sir Mike, can you give us some idea as to how the profile of the PHP 80 billion new launches that you would want to bring to market next year? What are you looking at in terms of ASP price trajectory as well on a per sq m basis? That's the first one. Second is on the unsold inventory. Would you be able to provide more clarity as to how much of the total peso value is located in Metro Manila and outside, and the distribution across the brands? Third is on the residential CapEx. I noticed that for the budget for this year, it's around PHP 34 billion, whereas you have spent around PHP 41 billion last year.
What drove the decline, and how should we think about it in relation to percentage of completion progress on construction? Thank you.
Thank you, Jelline. For the first question related to the 80% of prospective launches for 2024. As shown in the presentation, a bulk of the horizontal launches will still be in the south, where our estates are. Selling prices would be pretty much where we're at or maybe just a slight increase. There will be some condo launches, hopefully latter part of this year, within the BGC Makati area. There will be a big launch in Davao. That's what we're preparing for.
In terms of the You're talking of the inventory for Ayala Land Premier and Alveo? Total.
Total.
Okay. Total would be it's a little bit In terms of value, about, because we're saying we're looking at, we ended last year with about 20, 21-22 months. We're running at about PHP 10 billion a month. Close to about PHP 200 billion of inventory, of which 25% horizontal, so it's quite tight, and about PHP 150 billion would be residential. The balance would be commercial lots for sale and office for sale. To your question on CapEx, Jelline, I'm pulling out some data on our allocation of CapEx over the past decade. Yes, you're correct, the CapEx this year is a bit lower for residential. Let me just pull out that data.
Okay. We received the same question from Mr. Mike Bengson about the inventory, so I hope you were able to address that earlier. Let's move on to Mr. Joseph Allan Sinay of T. Rowe Price. Thank you for the good 2023 results. Can you share with us some of the metrics or signs that you see in South Luzon that gives you more confidence in launching more products here?
No, I think as you can see, a lot of our land bank is actually in the Calabarzon area. This is really an area where we see a lot of benefit coming from infrastructure that is coming to fruition. This is also where we have our estates Nuvali, Aéra, Southmont and traditionally, the performance of our projects in these estates have been very strong. In terms of our sales this year, we can get you what % of the sales is actually coming from that area.
Okay, thank you. To move on, we have a question from Mr. Nick Yumul. Anecdotally, we are hearing concerns regarding delays on deliveries, particularly for high-end segment. What is causing this, if this is true? What is the rationale behind renovating the key mall assets at the same time instead of phasing? How disruptive will these renovations be to the adjacent leasing spaces and any sizable potential impact on the total revenues during our renovations? I think Meean and Mariana addressed it earlier, but go ahead, please.
Let me answer the first question, which has to do with the delays, and I'll pass this on to Mariana to answer the question on the renovations. On the delays, I think coming out of the pandemic, it's really been a challenge for the industry to catch up in terms of construction. There has been a slowdown for everyone during the three years of the pandemic and all the different lockdowns during that time. I think everyone in the industry have tried their best to make up and ensure that deliveries are on time. Developers also given an extension of time because of the pandemic. I think for the most part, we are living within the allowed extension of time.
There might be a couple of projects that would extend beyond that, but for the most part, I think we are living within the allowed extensions of time.
Let me close out the question of Jelline on CapEx allocation. For this year, we are allocating only 33% to our residential businesses. I'll just do as a comparison 2019 and earlier. That time, we were doing about 42%, close to 50% to residential development. What's happened since is we are focusing on utilization of our land bank. You will see that over the next couple of years, our allocation for land bank will be declining. What we are putting focus on is unlocking our estates. Pre-pandemic, we were allocating about 15% to estate development. This year it's up to 24%. On the leasing side, this year we're allocating 22%. A little bit decrease in the residential side, stable to going lower on the land acquisition side. We're redeploying more towards leasing and estate development.
Maybe to close the loop on the rationale behind the four renovations at once. We noticed a lot had changed even prior to the pandemic in terms of customer behaviors, preferences, tastes. In all honesty, a lot of these renovations were due prior to the pandemic. It's kind of pent-up need, and therefore, we see no choice to be able to compete and bring our assets to their true value to do them together. That being said, we mentioned earlier that for each of the assets, the renovations will be done in phases over the next 2 years. We'll work to minimize any disruption, and it'll also allow us to continue to deliver on the rental revenues.
Maybe just to add to that, the company is really focusing on differentiating itself based on the quality. I think the best place to start with that is through the malls, which is how most Filipinos experience us. Even if maybe it would've been easier to do this 1 at a time, we thought that we should do this across all our flagship malls, really to drive the message that the company is focused on quality.
Thank you. We have a question from Mr. Raffy Mendoza.
Thank you for the presentation. I just want to go back to reservation sales. There's been a slowdown quarter-on-quarter or in the past few quarters. Would you think that would be attributed to the lag effect of the interest rate hikes from the previous years? I guess in relation to that, I also just want to clarify your buyers' profile between, this is for residential, buyers profile between cash and mortgage buyers. Thank you.
That's really dependent on the product. On the core product, close to 90% get the mortgage. For the premium product in ALP, hardly anyone. In Alveo, maybe about 20%-30% would get a mortgage. It really depends on the brand that we're talking about. In terms of the take-up quarter-on-quarter, Okay.
Again, I don't think looking at it quarter-on-quarter gives us a good picture. In terms of gross reservation sales or take-up, we've been increasing ever since the pandemic started. If you will recall, in 2022, we had PHP 82 billion of gross reservation sales. In 2021, it was PHP 10 billion more at PHP 92 billion. Then in 2022, PHP 105 billion. Last year we came in at PHP 114 billion. Throughout the pandemic, it's been growing year-on-year.
Maybe the other thing to note is our buyers think about what the mortgage rate will be in five years' time when it's time for the takeout, because that's really when they will need to get a bank loan. If the expectation and the sentiment is that it will become lower, that would give them more confidence to proceed with the purchase.
Okay. Yeah, that's it for me. Thank you.
Okay. Thank you, Raffy. In line with that, we did receive a question from Felicia Barrows of Citi. She is asking, do you still provide stretch payment options for your products? How long is the stretch payment at the moment for each brand or product type?
Yes, the payment terms are still longer than pre-pandemic, about two years longer for our core, maybe about one year longer for premium. Our expectation is that this is how it will be for a while. We are preparing ourselves and all our business plans along these lines.
Okay, thank you. We have a question from Brian Ui. What is your expectation for pre-sales in 2024? I guess we're all excited.
The aspiration of the company is to grow by 15%, I think, or to double in five years. Roughly, that's about 15% year on year. The business is not linear, as we've always said. There will be years that it'll be more than 15. There might be years that it'll be less. The target remains to double in five years.
Okay, great. We have Mr. Wilson Nang on the line. Go ahead, Wilson.
Hi, good afternoon. Two questions, please. First one, just following up on what was earlier said on land bank. Could you remind us how big is your current land bank? How much of that land bank was utilized last year? How much do you plan to utilize this year? That is my first question.
For 2020, first 17A.
How many?
Seven three.
And then?
Now it became 11,400.
That's for the-
2030.
How much was it? Can you read the last?
We're just pulling out our calculator because I think there is quite a bit of utilization.
Sure. Maybe you can go on with the second question.
Yeah.
Over the next five years, we're looking at using about 4,000 hectares of our land bank. Roughly about 800 hectares a year. Just last year, we utilized about 1,000 hectares. You're going to see that in our 17A, which we'll be filing soon. 1,000 hectares was utilized last year. In the next five years, roughly about, on the average, about 800 hectares a year.
Just to clarify, the current stock of land bank is around 11,000 last year?
That's correct.
Yes.
That's correct.
We will end the 2023 at 11,000.
Around 11,400.
11.4.
Yeah.
Okay. About 11.4, Wilson.
Thank you. Just one last question from me. On average borrowing cost, which I know increased a little bit to 5%. How do you expect that to trend this year?
Borrowing cost. Well, we're managing it carefully, and we're quite fortunate that most of our, close to all of our debt is long-term, and about 80% is fixed rate. We're able to forecast that our borrowing costs will move incrementally. Last year, it moved up by about 30 basis points from the previous year. We estimate roughly maybe about another 30 basis points this year. Yeah.
Okay. Just to follow that one up. Thank you.
Just to be specific on the land bank, we ended 2023 with 11,240 hectares.
Thank you.
Thank you, Wilson. Let's move on to Ms. Joy Wang. She has several questions. The first one is: What's your expectation of the timing of return of core residential markets? If this segment doesn't recover, would that affect your target to double your earnings?
Expectation on return of the core, I guess it's really very difficult to pinpoint the exact time for that. We're hoping it will come back in two to three years. Yes, if it doesn't come back, it will impact our medium-term forecasts.
Thank you. The next question is, could you share the expected return on investment for the PHP 13 billion CapEx you plan to spend on the renovation of the retail malls, including Greenbelt and the others?
As Mariana has explained, it is assessed based on as we assess a new building or a new mall. It should give us the same returns as a new mall would, using the incremental revenue that we will earn because of the renovations.
The next one is, what's the guidance for debt funding cost for 2024?
30- 40 basis points higher than where we ended.
Thank you.
We ended 2023 at 5%. We're modeling a scenario where we're probably going to be about 30- 40 basis points higher.
We're down to two last questions on the call. Maybe one last from Mr. RJ Aguirre. The first two questions come from Mr. Paulo Gabriel Garcia. In terms of launches, PHP 53 billion in property development launches was guided for fourth quarter 2023 during the last nine months of 2023 briefing. Fourth quarter 2023 residential launches was PHP 37.7 billion. Were the other launches in the office for sale commercial lots or others tempered overall? Can you provide more color on this?
It was a slide on some permit acquisitions, which we should see latter part of this quarter.
Thank you, Mike. Can we have the last question from Mr. RJ Aguirre?
Hi, good afternoon. Thank you, everyone. My first question was actually addressed earlier about land usage. The second one is on launches. 80% premium, 20% core for this year on residential. Can you give us a bit of color on how many units, if you separate both premium versus core, if that's possible? Also, the pricing on which these projects would be compared to last year, if it's increasing or not. Lastly, if you have some changes on payment terms that are being given in the market currently.
Thank you, RJ. In terms of units, we're programming around maybe around 3,500 for premium and a little more, almost 6,000 for core. Right. Pricing, I think we've been managing price increases because we do understand affordability for this market is very important. As our president has mentioned, I think on payment schemes, I think we'll be holding it, but the terms have increased are longer by a year for premium and as much as two years for core.
Thank you. Thank you, sir. My last question is actually on the offices. Because last week, we've had reports that the market is at 20% vacancy. How do you reconcile investing more, opening 100,000 square meters currently, versus what's in the market as vacancy?
Sure. I think generally for our office portfolio, it's extremely healthy given the locations that we're located in. We mentioned earlier that we're at a 92% occupancy, which is very high for the industry. In terms of our renewal rates, it's still been relatively managed. We see about 7% of our current portfolio up for renewal this year, and we expect that 85%-90% will be renewed. That being said, we're cautious in terms of our future developments. We're working hard to ensure pre-leasing, and we are very selective in terms of the location. Hope that answers your question.
Yes. Thank you.
Okay. Thank you very much. Unfortunately, we've run out of time, so if there are any additional questions that you have, please do feel free to send us an email at ir.ayalaland.com.ph. We really thank the level of engagement and participation that we have this afternoon. Allow me to conclude our briefing. We have snacks on the back. Please do enjoy and enjoy the rest of the day. Thank you