Ayala Land: Real estate

THE COMPANY: Ayala Land, Incorporated (ALI) is the real estate arm of Ayala Corporation, one of the Philippines’ biggest and oldest business conglomerates. With over eight decades of experience in real estate, ALI has earned a reputation as the country’s premier real estate developer. Its projects include the following: development of residential subdivisions and condominiums; construction of high-rise commercial and office buildings; conversion of vast tracks of land into industrial business parks; and development and management of shopping centres, hotels, leisure resorts and entertainment operations. As of the end of 2012, the company had about 5700 ha in its land bank, which it believes is sufficient to sustain development projects for the next 25 years.

FIRST-HALF 2013: ALI continues to enjoy strong growth in both its residential and leasing segments. For the first half of 2013, the company’s net income surged by 30% to P5.6bn ($134.96m), fuelled by the robust growth of its property development, commercial leasing and construction business lines. The property development segment accounted for the bulk of revenues, at some 65% of the total.

GROWTH DRIVERS: Higher income levels, the robust growth of remittances from overseas Filipino workers, and expansion of the business process outsourcing industry are expected to continue to fuel demand for housing, office and retail spaces. The low interest rate environment of the country is also a boon to the real estate sector, as this makes the buyers’ monthly amortisations more affordable. In addition, the housing backlog in the Philippines stood at 3.9m units in 2013 and is expected to swell to 7m by 2030, according to a report from the Subdivision and Housing Developers Association.

Most of the demand for housing is coming from lower-income markets and from people moving to urban areas. Housing backlogs in the social and low-income segments are seen to be one of the highest and ALI has begun venturing into these segments to capture the growing demand. Similarly, the level of rural-to-urban migration has become quite rampant, given the job opportunities presented by the BPO industry in key urban centres. ALI has positioned itself by constructing high-rise condominiums within and near business districts to cater to the growing demand of young professionals.

DEVELOPMENT: ALI has an extensive pipeline of massive mixed-use projects. The real estate firm shared plans for several of its land assets, which will be transformed into thriving mixed-use enclaves or new central business districts over the next 10 to 20 years. Some of these include the 29-ha Vertis North in Quezon City, the 74-ha Arca South in Taguig (the former FTI complex), the 21-ha Circuit Makati (the former Sta. Ana racetrack) and the 17-ha Gatchalian Plastic City in Valenzuela.

Such large-scale projects provide investors with the assurance that ALI has sufficient land bank ammunition to support earnings growth for the long term. Capital expenditures for 2013 alone are projected at P65.7bn ($1.58bn). Most of the firm’s capital expenditure – P45.6bn ($1.1bn) – is earmarked for the completion of existing and new projects, with the balance set aside for land acquisition.

STRATEGY: In order to maintain its sales momentum, ALI is signing more joint ventures with existing groups across the country. So far in 2013, the property firm has tied up with: 1) the Alcantara group for a 25-ha Davao property; 2) Aboitiz Land for various developments in Cebu; 3) the Metro Gaisano group for a 12-ha Mactan plot; and 4) is firming up talks with Palilio-led Boulevard Holdings for assets in Cavite, including the 3000-ha Puerto Azul Complex. ALI is also expanding its portfolio by establishing a chain of affordable hotels with a price point of $60 per night and developing new IT parks in the Calabarzon and Pampanga areas. The strong brand recognition enjoyed by the company is expected to continue to support its projects going forward.