Ayala Land Adr

Good afternoon, everyone. Thank you for joining us today, and welcome to Ayala Land's first quarter 2026 briefing. Let me begin by introducing our panel. Me and Dee, President and CEO. Jed Kimpo, CFO and Treasurer. Mariana Isabel de Ayala, Group Head for Leasing and Hospitality. We're also joined today by members of our Management Committee. Mike Hugo, Head of the Premium Residential Business Group. Robert Lau, Head of Strategic Growth and New Ventures and Central Land Acquisition, Darwin Silipsip, Group Head of Construction Management, Raquel Cruz, Head of the Core Residential Business Group, and Isis Agun, Chief Human Resource 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 at ir.ayalaland.com.ph. For any questions you may not be able to address during the briefing, we will respond via email at the soonest possible time. At this point, I'd like to turn it over to our CFO, Jed, for his presentation. Thank you.

Thank you, Joe. Good afternoon, everyone. I will be presenting Ayala Land's first quarter 2026 performance to be followed by key messages from our president and CEO. First, on the headline numbers. Ayala Land registered total revenue of 37.5 billion for the first quarter of 2026 and generated net income of 5.4 billion, down 14 and 23% respectively versus same period in 2025 as a result of continuing headwinds faced by our property development business, which was partially mitigated by the strong performance of our leasing and the hospitality business. We invested a total of 23 billion on capital expenditures in line with our original 2026 plans, with a notable increase in investments in leasing assets as we continue to execute our pivot to leasing to balance the business profile. Net gearing remains strong at 0.81 is to 1, well within our debt guardrails and debt covenants. In terms of revenue breakdown, Revenues from our property development business registered 20.3 billion, down 27% versus prior year, as our residential business segment, which registered total revenues of 17.4 billion, continued to face market sentiment headwinds and uncertainties. Similarly, our estate lot segments composed of commercial and industrial lots for sale, which registered $2.9 billion in revenues, is also down versus same period last year, wherein we saw strong commercial lot bookings in Q1 2025. On the other hand, our portfolio of leasing and hospitality businesses was solid, growing by 9% versus the same period last year. Excluding the impact of our sale of our 50% share in Alabang Commercial Center, our leasing and hospitality business on a like-for-like basis grew by 12%. Shopping centers registered revenues of 5.8 billion, up 2% versus prior year, on the back of the reinvention of our flagship malls and improved merchant sales. Our office business delivered flat revenues of 3 billion, as contractual escalations was offset slightly by higher vacancy and the resulting sale of the office space owned by Alabang Commercial Center. Our hospitality business grew by 30%, registering 3.4 billion in revenues, driven by both increased capacity from our newly renovated assets and the recently acquired New World Hotel. Finally, our industrial real estate business grew by 23% at 0.4 billion, with significant improvements in occupancies versus prior year. We've also seen growth in our services businesses as a whole, While our net construction or construction revenues from non-Ayala Land clients was slightly down at 2.4 billion, we saw an increase in our property management and retail electricity sales to third parties, which was up 21% to 0.9 billion. Interest and other income likewise increased to 1.2 billion, up 34% from increases in interest income and marketing and management fees. To our income statement, As mentioned, the company registered a total of 37.5 billion in revenues for the first quarter of 2026. Total expenses amounted to 29.2 billion, minus 12% versus prior year. This is on the back of lower real estate expenses, which was down 16%, but was partially offset by increase in general administrative expenses. Interests, financing, and other charges were stable, up by just 1%. Earnings before tax amounted to 8.2 billion, down 21% versus prior year. After provision for income tax and taking out non-controlling interests, net income attributable to ALI equity holders amounted to 5.4 billion. Our GAE ratio stood at 7%, slightly up versus same period last year. But our EBIT margin was stable at 35% as we saw increased contribution of leasing business to our overall revenue mix. Let me now move on to our operating results. Notwithstanding market environment, our sales team delivered a total of 28.2 billion of property development sales for the first quarter of 2026. This is just 8% lower versus prior quarter and equivalent to monthly sales of 9.4 billion. Notable as well was that this was delivered despite having no new launches in the quarter. Our sales mix was fairly similar versus prior periods. when close to 60% was for premium residential, just under 30% in core residential, and the balance in estate lots. Deep diving on our residential business, residential sales take up in the first quarter registered at 24.4 billion, down 22% versus prior year, but steady on a quarter-on-quarter basis. Sales mix between premium and core segment is broadly similar to prior periods at a ratio of two-thirds to one-third, respectively. Within our product offerings, we have seen a notable quarter-on-quarter improvement in sale of horizontal products. And by location, our regional products now account for more than half of our quarterly sales. Buyer profile is likewise broadly the same, with over 70% being sold to local Filipinos, over 15% to overseas Filipinos, and the balance to other nationalities. The decline versus same period last year is broadly the same across all three segments. Moving on to our leasing business, first starting with our shopping centers. As mentioned, our shopping centers delivered a 2% revenue increase versus same period last year. On a like-for-like basis, however, meaning excluding our 50% stake in Alabang Commercial Corporation, the portfolio grew by 8%. Our shopping center's business continued to demonstrate improving lease-out. This, plus the delivery of additional gross leaseable area this 2026, marks a banner year for the business. In the first quarter of 2026, we opened Phase 1 of Ayala Mall's ARCA South. We are on track to deliver an additional 190,000 square meters of GLA this year, as well as complete the reinventions of our flagship malls by the middle of the year. Our office business continues to have healthy occupancy versus industry, with a pipeline focused on areas with low vacancy. Lease-out rate was slightly down at 88% versus 90% same period last year due to the additional capacity which opened late 2025. This year, we will open another 70,000 square meters of office GLA, all of which will be located within our estates, which is our key differentiator. Beyond 2026, we have a pipeline of 250,000 square meters of GLA which will be located in major CBDs such as Makati, BGC, Quezon City, and Cebu. Our hospitality business of hotels and resorts delivered improved occupancy across all our formats. In addition, newly renovated assets are driving both higher capacity and higher room rates. Occupancy for hotels registered at 72%, while resorts' occupancy was at 71%, a significant improvement from a year ago. We are likewise on track for the completion of Mandarin Oriental for Q4 2026. Finally, our industrial real estate business saw improvements in lease-out rates. Both dry and cold storage facilities are at mid to high 80%. For 2026, we look to bring on board additional 9,000 pallet positions of cold storage in Cebu. We invested a total of 23 billion for the first quarter in line with our original CAPEX plan, with notable increase in our investments in leasing and hospitality, which increased by 53% versus same period last year. Investments in leasing and hospitality now account for more than a quarter of our total capital expenditure. We expect this share to continue to increase for the rest of the year. In terms of our debt profile, we maintained over 80% of our debt contracted long-term, and we've managed to keep our borrowing cost stable at 5.5%. Of our 25 billion of debt maturities this year, we've already refinanced over 15 billion in the first quarter, and with a balance of just under 10 billion to be refinanced this second quarter as planned. We continue to prudently manage our yearly maturity levels, ensuring that maturities are at 10% of our total debt on the average. The weighted average maturity of our debt portfolio as of end of first quarter is 4.1 years. This we expect to lengthen by end of 2026 as we convert short-term debt into long-term debt for the remainder of the year. Our balance sheet remains solid with net gearing ratio of 0.81 is to 1, well within our guardrails and debt covenants. Given current conditions, we have increased our cash and cash equivalents position to 21 billion. We ended the first quarter with over trillion pesos in assets, 17.5 billion more than the end December 2025 levels. While our net debt increase in Q1, we view this as temporary, and we continue to aspire for minimal incremental increase in debt for the full year 2026, with cash generated from operations and proceeds from our portfolio management. Our debt service coverage ratio continues to be more than adequate, with current ratio more than 1.5 times and our interest rate coverage ratio comfortably way above 4 times. In summary, despite market headwinds in property development, Ayala Land delivered $37.5 billion in revenues and net income of $5.4 billion. We continue to invest in the business, totaling $23 billion of capex with a notable increase in leasing assets. Balance sheet remains strong with net gearing of 0.81 is to 1. This ends my presentation. Thank you for listening. And let me turn over the floor now to Mian.

Thank you, Jed, and good afternoon to everyone. Our strategy for 2026 is clear and deliberate. To ensure that capital discipline and balance sheet strength are maintained, to expand our leasing and hospitality platform, and to maintain stability in our property development business. We are growing by strengthening our recurring income base while pacing our residential business to ensure we can deliver with certainty. The Middle East conflict is an external shock that is challenging the domestic macro environment. But this context also makes Ayala Land's strengths clearer. High quality assets, balance sheet discipline, the ability to keep executing where demand and conviction remain strong, and a leasing and hospitality platform that is becoming a larger contributor to earnings and cash flow. We are becoming a more balanced Ayala land with greater resilience and flexibility to manage the cycles. For 2026, we are targeting minimal incremental debt with capital expenditures largely funded through internally generated cash. In the first quarter, net debt increased by 16 billion pesos, but we expect this to moderate by year-end as residential unit turnovers progress and our leasing assets continue to stabilize and generate steady cash flow. We have recalibrated our capex to approximately 50 billion pesos from our original guidance of 70 to 80 billion pesos. Our balance sheet remains robust with an asset base of approximately 1 trillion pesos, or around three times our debt level, and our interest coverage ratio remains above four times, giving us flexibility to manage the cycle while preserving capacity for long-term growth. Three years ago, we made a deliberate strategic decision to increase the contribution of our leasing and hospitality businesses. That strategy is now beginning to show in our results, at a time when resilience matters most. Leasing revenue grew 9% for the quarter, and excluding the effect of Alabang Town Center's sale, Growth would have been 12%. This reflects the strength of a diversified recurring income platform across malls, hotels, offices, industrial leasing, and estate-based assets. Of note, these activities are meaningfully shifting Ayala Land's earnings profile. Leasing and hospitality now account for 34% of Ayala Land's revenues, up from 23% in 2019, and it is on track to grow at double-digit rates and to account for a majority of our EBITDA over the medium term. In malls, we are encouraged that growth is not coming only from new space. Foot traffic and same mall sales are up 6% year-on-year and 10% year-on-year, respectively. Supported by our renovations and merchant replacement programs across both flagship and core malls. These improvements illustrate how we are making our existing assets more relevant, more productive, and positioning them to capture a larger share of the consumer wallet. We expect this momentum to continue. 2026 will be a banner year for our retail platform with 200,000 square meters of additional mall GLA. This is the largest expansion of leasing assets in Ayala Land's history, with additional GLA at Ayala Mall's Arca South, New Valley, and Evo City, as well as the opening of Ayala Mall's Gatewalk in Mandawi, Cebu. Hospitality is becoming a more material contributor to Ayala Land. In the first quarter, the portfolio posted 30% year-on-year revenue growth and is now comparable in size to our office business. This growth reflects improved REVPAR across both hotels and resorts, supported by renovations across five hotels and Lagen Island Resort, as well as the addition of New World Makati Hotel. We also look forward to the opening of Mandarin Oriental in the fourth quarter of this year. Our office business remains stable while industrial leasing continues to show good progress with healthy occupancy levels and lease rates. These businesses give us additional stability within the recurring income portfolio and help balance the consumer-facing elements of leasing and hospitality. Between 2026 and 2030, we expect to grow our leasing portfolio by 1.2 million square meters of GLA, representing 35% increase from our current portfolio. We are excited not only by the footprint expansion, but by the quality of the assets, the strength of their locations, and their relevance to the markets they will serve. substantially all of these assets will be located within our very own estates. In property development, residential pre-sales for Q1 were down 22% and revenue were down 27%, reflecting weaker buyer sentiment and macroeconomic uncertainty. We started the year with a launch target of 30 billion pesos. Given current conditions, we are reviewing launches carefully. As the operating environment becomes clearer, we remain optimistic that we can proceed with selected horizontal launches by the second half of the year. The uncertainties around cost and execution drove us to cancel our Avida Katipunan Heights and pause our Lorien project. These were well-received projects in such strong locations, but because construction had not yet begun, we had the ability to act early, minimize disruption, and we will revisit opportunities when cost visibility and market conditions improve. We have a busy year ahead in property development. First, we have 130 billion pesos worth of inventory that we will monetize. This gives us the depth to maintain market leadership while being more selective on new launches. Proceeds will be used prudently to preserve balance sheet strength, fund priority investments, and return capital to shareholders where appropriate. Second, we will deliver 13,000 residential units in 40 projects to our buyers this year. These are in the final stages of completion and are being turned over in tranches. This supports cash flow, fulfills commitments to buyers, and demonstrates that Ayala Land remains very much in execution mode. Our P28 billion stock buyback program ended in early 2026, and the Board has approved a new P10 billion buyback program. This gives us the flexibility to act when there is a meaningful disconnect between the market price and Ayala Land's underlying asset base, earnings profile, and long-term growth prospects. And as we monetize assets and generate cash, we will continue to balance reinvestment in priority growth opportunities with returning capital to shareholders, either through special dividends or share buybacks. Our plans for leasing and hospitality remain firmly on track. If anything, the current environment reinforces why this strategy matters. In property development, we are taking a prudent stance in the near term, but the long-term fundamentals remain intact. The Philippines remains a young, urbanizing, consumption-led market, supporting long-term demand for homes, workplaces, retail hospitality, logistics, and mixed-use estates. Precisely the areas where Ayala Land has built its strongest capabilities. We will continue to manage capital and cash flow carefully, supported by a strong balance sheet and a diversified portfolio of assets. At the same time, Ayala Land remains very much in execution mode, delivering homes, opening new malls, reinvesting in existing assets, welcoming new hotel guests, and supporting the communities where we operate. With our estates as our platform, we are positioning the company to be a stronger, more balanced, and more resilient business. Thank you.