Ayala Land (PSE:ALI) Q1 2026 Earnings Call

0:00 Good afternoon, everyone. Thank you for joining us today and welcome to Ayala Land's First Quarter twenty twenty six Briefing. Let me begin by introducing our panel, Me and Dee, President and CEO Jed Kimpo, CFO and Treasurer Mariana Zobel 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, 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.

0:54 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 twenty twenty six performance to be followed by key messages from our President and CEO. First on the headline numbers, Ayala Land registered total revenue of 37,500,000,000 for the first quarter of twenty twenty six and generated net income of 5,400,000,000, down 1423% 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 hospitality business.

1:49 We invested a total of CHF23 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 one, well within our debt guardrails and debt covenants. In terms of revenue breakdown, revenues from our property development business registered 20,300,000,000, down 27% versus prior year as our residential business segment which registered total revenues of 17,400,000,000 continued to face market sentiment headwinds and uncertainties. Similarly, our estate lot segments composed of commercial and industrial lots for sale, which registered 2,900,000,000 in revenues is also down versus same period last year wherein we saw strong commercial lot bookings in quarter one twenty twenty five.

2:51 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 a Labang Commercial Centre, our leasing and hospitality business on a like for like basis grew by 12%. Shopping centers registered revenues of 5,800,000,000, 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 3,000,000,000 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 3,400,000,000 in revenues, driven by both increased capacity from our newly renovated assets and the recently acquired New World Hotel.

3:51 Finally, our industrial real estate business grew by 23% at 400,000,000 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 2,400,000,000, we saw an increase in our property management and retail electricity sales to third parties which was up 21% to 900,000,000. Interest and other income likewise increased to 1,200,000,000, up 34% from increases in interest income and marketing and management fees. To our income statement, as mentioned, the company registered a total of 37,500,000,000 in revenues for the first quarter of twenty twenty six.

4:42 Total expenses amounted to 29,200,000,000 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. Interest, financing and other charges were stable up by just 1%. Earnings before tax amounted to 8,200,000,000, down 21% versus prior year. After provision for income tax and taking out non controlling interest, net income attributable to AYAAY equity holders amounted to 5,400,000,000. 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.

5:37 Let me now move on to our operating results. Notwithstanding market environment, our sales team delivered a total of 28,200,000,000 of property development sales for the first quarter of twenty twenty six. This is just 8% lower versus prior quarter and equivalent to monthly sales of 9,400,000,000. 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, wherein 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 24,400,000,000, down 22% versus prior year but steady on a quarter on quarter basis.

6:31 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.

7:22 On a like for like basis, however, meaning excluding our 50% stake in Alabang Commercial Corporation, the portfolio grew by 8%. Our shopping centers business continued to demonstrate improving lease out. This plus the delivery of additional gross leasable area this 2026 marks a banner year for the business. In the first quarter of twenty twenty six, we opened Phase one of Ayala Malls 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.

8:10 Lease out rate was slightly down at 88% versus 90% same period last year due to the additional capacity which opened late twenty twenty five. 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.

8:58 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 quarter four twenty twenty six. Finally, our industrial real estate business saw improvements in lease out rates, both dry and cold storage facilities 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 23,000,000,000 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.

9:50 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 25,000,000,000 of debt maturities this year, we've already refinanced over 15,000,000,000 in the first quarter and with the balance of just under 10,000,000,000 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.

10:37 The weighted average maturity of our debt portfolio as of end of first quarter is four point one years. This we expect to lengthen by end of twenty twenty six as we convert short term debt into long term debt for the remainder of the year. Our balance sheet remains solid with debt gearing ratio of 0.81 is to one, well within our guardrails and debt covenants. Given current conditions, we have increased our cash and cash equivalents position to 21,000,000,000. We ended the first quarter with over PHP12 in assets, PHP17.5 billion more than the end December twenty twenty five levels. While our net debt increased 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.

11:31 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 four times. In summary, despite market headwinds in property development, Ayala Land delivered billion in revenues and net income of AY5.4 billion. We continue to invest in the business totaling AY23 billion of CapEx with a notable increase in leasing asset. Balance sheet remains strong with net gearing of 0.81 is to one. 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.

12:17 To ensure that capital discipline and balance sheets 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 remains strong, and a leasing and hospitality platform that is becoming a larger contributor to earnings and cash flow.

13:06 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 16,000,000,000 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 P50 billion from our original guidance of P70 billion to P80 billion. Our balance sheet remains robust with an asset base of approximately P1 trillion 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.

14:08 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 event effect of Alabang Town Center 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.

14:56 And it is on track to grow at double digit rates and to account for 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.

15:42 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 Lagin Island Resort, as well as the addition of New World Makati Hotel.

16:34 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 1,200,000 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 the relevance to the markets they will serve.

17:26 Substantially, all of these assets will be located within our very own estates. In property development, residential presales 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 30,000,000,000 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 Lorian project.

18:17 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 130,000,000,000 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.

19:10 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 28,000,000,000 pesos stock buyback program ended in early twenty twenty six 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.

20:07 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.

20:53 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. Thank you, Mee Anne. We'll now begin our Q and A session. For our virtual attendees, please submit your questions using the chat box on your screen. Kindly include your name and organization so we can recognize you. Alternatively, you may use the raise hand function and you will unmute your line when it's your turn. Thank you.

21:43 The first question is from Rafi of Maybank. Go ahead Rafi. Adr. Yes. Joe.

22:31 Thanks for the presentation and the message Ian. I'd like to ask a question on residential. The revenues were down I believe 21% specifically for residential. Can you provide more color on why this is? Are these cancellations or maybe part of unbooked revenues because I believe you still have like $151,160,000,000,000 worth of unbooked revenues. How much of these are non completions? Hi RJ, Jed here. Thanks for the question. If I was to look at the revenue profile on the residential for first quarter twenty twenty six, the primary driver of the decline is on new bookings. So it's really a sales driven decline.

23:26 As you know, there are two aspects of revenue bookings. The first one is from sales and the other one is from POC. The POC is fairly predictable because that's to a certain extent driven by our ability to deliver. So primary drivers in new bookings. In terms of your question on cancellation, cancellations as impact to overall revenues is less than 8%. So we're still tracking at least for the first quarter, very similar numbers in terms of cancellation impact as the full year 2025. On the malls. The same mall revenue growth or same mall sales growth is about 10% and I think the malls grew rental revenues slightly below that. Can you give us an idea on how is that possible?

24:24 Is it because of the lower rent on the new malls? Correct. So you mentioned that the sales is 10% and the revenues are 8%. We have a large number of our merchants also on fixed revenue. So the tracking of sales to revenue doesn't always follow as cleanly as we'd like. That being said, we had we saw incredible growth across particularly some of our maturing assets as we call them, specifically One Ayala, we saw grew 33% year on year Manila Bay over 20% year on year, Vermosa over 100%. So we're really happy with how those newer malls are maturing. Thank you for the detail Mariana.

25:12 Sorry, just one last question on residential. So based on the CapEx targets for this year, is it safe to assume that there are minimal or no launches on residential to be expected this year? I think like I mentioned, what we're looking at our horizontal launches on the second half of the year. That's maybe one segment that we will review, but we'd like to have the second quarter, I guess to assess that. Thank you, Ian. Thanks, Joe. That's it for me. RJ. Go ahead, Jeff. Okay. Can you hear me now? Yes, we can hear you.

26:01 We you. Can hear you. My question is on it was mentioned by me earlier on the canceling the Katipunan project, Anita. Does that mean that you are pursuing and for Lurian it's just a pause, a Is that your first question? Yes. For Katipunan, we canceled the project. So the difference is Katipunan was launched just a few weeks before the war actually erupted. So we were in a much earlier phase of the selling period. So that we canceled. For Lorian, we launched this sometime September last year.

26:46 And we said that we would pause that project. And by pause we mean that we're putting all selling and development on hold for now. And we will revisit it at maybe at some point in time when the environment is clearer. We're thinking maybe middle of next year is when we will take a look at it again. Okay. Can you provide us with clarity on whether you're going to see the same trend in the coming quarters or does this seem like it's part of the is it going to be lumpy in the succeeding quarters or So just to clarify, the first the decline in the revenue was I think as Jed explained, it's really because of the lower sales and not so much because of any slowdown in completion.

28:04 So it's really driven by slower take up in the first quarter. Now as to what we're seeing for the rest of the year, again, I think it's very difficult to make that call right now. I think we'll need the next quarter to see how things will pan out with this disruption that we're facing ahead of us. Okay. I guess my last question will be on the progress of the leasing assets that are going to come in the second half. How is it looking so far? Any updates on that would be appreciated. Thank you. Yeah. So we have about 216,000 square meters of mall assets to come online and they are in full swing. Actually in the case of ARCA, we opened the first phase, so just about 18,000 square meters in February.

29:02 And we're really looking forward to a number of expansion openings in Greenbelt and Trinoma and then towards the end of the year in Evo City, Nuvali and then finally in Gatewalk, is in Mandao and Cebu. So we are on track. Okay. Thank you. Thank you, Rafi. We have several questions here from Jigine of JPMorgan. First is how much of the 200 currently leased out? I don't have that exact number for you. Let me get it. But basically our rule of thumb is six months before opening, we should be at 80% leased out to be able to ensure we can hit healthy occupancy at opening.

29:50 And then for offices, she has two questions. The first is what's the level of pre leasing commitment? And what drove the considerable depth in office revenues on a quarter on quarter basis considering the low G and A contribution of ACC? Yes. So we actually had 6,000 square meters of Teleperformance, which is a building we have here in Makati. And that contract ended. We've actually since leased it out, but unfortunately, there's a dip for this particular quarter, but we expect for that to pick up by the end of the year. In terms of our new openings for EVO City, we have about 40% of our GLA has warm and active prospects. And for Gatewalk, which is later on in the year, about 20% of our GLA has warm and active prospects.

30:40 Thank you, Mariana. We also have question on RESI. Can you please comment on RESI GPM trend in the first quarter of twenty twenty six? How do you expect costs to trend for the rest of the year? First question was what? The new question was cost. Yes. The first question is can you please comment on the resi GPM trends in the first quarter? I think so far we've been holding the margins for all our projects. So the projects that we have are in later stages of completion. So we're not we're a little bit insulated from cost effects because of this Middle East crisis. The second one is on cost. How do we expect that to trend for the rest of the year?

31:26 As far as construction costs, I think we're more or less still within our budgeted contingency. So we should be okay. Again, it's because we are in the later stages of construction. I think where we would see more significant or meaningful impact are in projects that we are about to start. So we see different numbers. I think the Philippine Construction PCA saying anything from 10% to 30% at this point. So those are for brand new starts. But for now, we're really focused on the delivery of 40 projects which are in later stages of development. So for now, I think we are managing the effects. Thank you.

32:13 Our next question is from Wendy of Uni Capital. Go ahead. Good afternoon. Can you hear me? Yes. For my first question, I might have missed it but on the reported sales from DeLorean, how much has been recognized or booked or remaining as reservations as of the first The booking is very small because there's hardly any percentage of completion.

33:01 You wouldn't see it actually in our P and L. How about in the total sales reservation for the first quarter? It's been taken out. Okay. When it comes to the buyers behavior, are there buyers that have opted for refunds or reallocating within the portfolio or have you seen any signs of them failing to lower tier brands for example? Many discussions are going on so far with the buyers of Laureate those that have done sales take up. So as you know we provided them various options, options ranging from staying with the project and discussing with us when we look at it again on or before April 2027, moving to an Ayala Land product to another Ayala Land product or to those that want their money back that's also available. So those are evolving discussions at this stage. I don't have the specifics in terms of where they're trading to or all of that.

34:06 As you might appreciate, it's an important discussion that we need to take with them and it's something that is still ongoing. Our objective is to make sure that the relationship with the buyers continue to remain strong and we have seed to whichever of these three choices they want. Might be too early right now to say. I think these are we'll need to give the buyers time to decide on this. I think for my last question on the input cost, I know in consolidated figures a lot of cost pressures from raw materials have been pricing. But do you see any or can you pinpoint which construction or raw material is like putting the most pressure on the OpEx mix yield, important raw materials or whatsoever?

35:12 I think you'll those are probably not in the OpEx line. You'll probably see it more as a part of our cost of goods. So diesel for example will affect costs of anything that's excavation or land development. Anything important. Anything important because shipping costs would also have been elevated. But you'll probably see that more in the cost of goods sold. All right. That's all my questions. Thank you. Thank you. Our next question is from Elhamil of Adr. Go ahead, El. We'll move on to Sean.

36:16 Hello? We'll get back to you Sean. We'll proceed first with Carlsea of Regis. Good afternoon. Let me just check if you can hear me. Yes we can hear you, Karla. Thank you. So I'll start off with some items related to the first quarter performance. So among them of course ACC was sold in 2025 and in order to get a better gauge of the profit cost in first quarter 'twenty six, can you tell us how much ACC contributed in the first quarter twenty five? I can get that view Carl.

37:06 But basically that would be the differential between the plus 2% and the plus 8% on the shopping center. Now the important thing there, Karl, is as you know, ACC is a consolidated entity. So while you recognize it at the full line at the top, at the bottom part when you compute the non controlling interest, that's when you take out the other 50%. So I think it has two different impacts both from a top line and ultimately at the bottom line. About 98,000,000,000 right? About $98,000,000,000 Got it. And then I'll ask about the mall business a little bit this time. So same mall sales growth is 10% and you did mention that some of the malls actually showed very strong performance like One Ayala and Filipe but I'm quite curious about the malls that were actually redeveloped, how were they performing relative to previous year and relative to your own expectations?

38:26 Yes. So our flagship malls are up 12% year on year. So we're quite happy with how that's progressing, especially considering that we've only really completed construction for Ayala Center Symbol and Trinoma. We're still closing out on Glorieta And Greenbelt. Redevelopment yet? Yes. Got it. And then regarding the Iran conflict, you mentioned that CapEx will come down to $50,000,000,000 from your previous target of 70,000,000,000 to 80,000,000,000 So may I ask what projects or what spending are you cutting? Are you getting strong?

39:12 So we will need to prioritize projects that are going to be turned over this year and next year and malls that are opening this year and next year. Okay. So this is going to change the you're cutting land back in public works? Well, we've been cutting that back for a few years now so that will continue, yes Carl. And then you mentioned also about construction cost rising by some estimates and the 30%. In addition to that cost, I'm not curious if there are other disruptions like supply chain disruptions such as it's taking longer to get particular materials, is it harder to get labor or any other construction?

40:02 Yes. I think that's something that we anticipated particularly for projects that are in very early stages of construction, which is partly why largely why we decided to put Lorian on pause. But the projects that we are really focusing on now are in later stages of construction or later stages of completion. And we should have less impact from supply chain disturbances for those projects. But for projects that we would start, yes, we would anticipate such disruption. I'll take it. Those are all my questions. Karl? Karl maybe to just close out your earlier question.

40:48 For the first quarter of twenty twenty five, Alabang Town Center had $298,000,000 in revenues That's the retail side and the office had $43,000,000 in revenues. Thank you, Carl. So our next question is from Sean. I'll just read it out loud. The first one is, can you share the breakdown of inventory between premium and core now that Katipunin is canceled and Lorin has been paused? So total inventory is $150,300,000,000 that's sales value. That still includes the paused project of Lorien.

41:35 If I was to break down the $150,300,000,000 about just under 80% is in the premium category and just over 20% is in the core category. He's also asking about our FFO level. Our FFO as of end of first quarter twenty twenty six is about $18,000,000,000 just a bit over $18,000,000,000 Thank you, Jed. Our next question is from Elle. Will the cost of Lorien have a P and L impact or just cash flow? As mentioned by our CEO, it's a very minimal P and L impact for us because it's a project that has barely started. So yes, there will be some cash flow impact. But as you know in terms of pay terms, only a percentage of the sales value is actually on hand with Ayala Land.

42:27 And as I mentioned earlier, we're offering buyers three options. So cash flow impact will ultimately be managed because of the quantum. And then the second one of course is if they choose another Ayala Land product that clearly cash flow impact is negligible for us. In relation to that question, we also have a question from Russ Toribio of Bank of America. Any update on the treatment of the commissions we paid or have been paid in relation to Lorian? REPRESENTATIVE:] So we will expense that. Our next question is from Liam of FFYAAY Securities. Go ahead please, Liam.

43:19 Hello. Good afternoon to all of you. So my question is more on forward looking. First is the PSPC reset key policy rate hike to 4.5%. I just want to hear from you how this might impact your safe stake of this year. And if possible, can you share with us the buyer's profile in terms of investors over end users both for horizontal and vertical projects? That's my next question. So impact on sales take up. So typically, well, clearly increasing in interest rates is discouraged particularly in the core segment where 90% I would say of our buyers would be taking up a mortgage.

44:15 Premium segment, that's a much smaller number. So there's a little less, guess, sensitivity to mortgage rates. As to the split of investors and end users, I would say maybe fifty-fifty on the premium premium segment. But particularly on the premium segment, investors here are probably ones who are looking for capital appreciation more than yield. So it's a different profile of buyer of an investor buyer particularly in the premium segment. I think your answer was choppy during the RFO question. Just to repeat what Jed said, it's at 18,800,000 I would like to revert first back to my first question because the context of that is the VSP has been instituting interest rate easing since 2024, yet mortgage rates didn't really reflect that.

45:16 So will there be a change in mortgage rates do you think? We should think that things have recently increased the PBOB's rate to 4.5%. Liam. I think the real better person or the real better part is to answer that would be the banks. From a property developer perspective, you are absolutely correct. We went through a period of an easing cycle. It was over 200 basis points in reduction in policy rates and that did not have a perfect transmission to the mortgage rates. Best mortgage rates and I was just tracking it is at 6.5% for five years. So clearly the transmission on the policy rate reduction did not rebound to mortgage rates.

46:06 Now that we seem to be on a path towards increasing policy rates, it's also I suppose hard to say that it will be a perfect transmission on the way up. So far as of our last recording, the 6.5% good rate for five year mortgage is still holding. I understand there's an ex policy meeting around middle of the year and so we'll see how that goes. My only last comment to that Liam is I suppose it also depends on what the risk the banks are seeing in terms of their credit quality. I think those two play key aspects for us. Any other questions? I think we have a question here from Paul Adr. Please go ahead.

46:56 Thanks, Joe. First of all, am I audible? Yes, you can hear you. Thanks Joe. So I have two questions. So first on the margins, I understood that the residential margins were already based earlier. Can you provide us the percentage of margins on the residential segment particularly between horizontal and vertical as of end first quarter? Horizontal 45%, vertical 38%. Sorry, how much is vertical? 3.8%. Okay, got it. And my last question is on lap sales.

47:43 So what's your outlook on what's the management's plan on lapses because I understood that it is down by 53%. This is coming from a 90% if I'm not mistaken increase during the fourth quarter. Hello, can you hear me? So lot sales are really lumpy because these are some of these lot sales are large in terms of value. Think similarly to the residential, we'll really have to wait and see in the second quarter as to how the market for the lot sales will be. There are a couple of deals that we are currently working on. We have a good pipeline, but I would think that we would need to see how things are in the second quarter before we can make a call on that.

48:44 Hi, Liam. Did you have any additional questions? Okay. Here are Liam's questions. Is a 21% drop in your SE sales indicative of full year trend? How has much foot traffic changed between January, February versus March with the onset of the ME conflict? Yeah, maybe I'll take the question on the RESI one. So as our CEO mentioned, it's just a bit too early to make a full year call. The Middle East crisis is what forty something days old.

49:33 Clearly to give guidance today would be an erroneous or likely an uninformed guidance. So what I would say is that we continue to observe the market. We believe we can have a better call at this as we see how it impacts our second quarter. We look to continue to deliver sales. The quantum targeting, think that's something that we're trying to look at. Onward? March was actually a strong month from a foot traffic standpoint. January and February are generally seasonally lower time. So I don't think yet we've kind of seen the impact through March. Thank you, Mariana. The next question is from Diane from Papa Securities. Are there cancellations or more projects that will be canceled other than what has already been disclosed?

50:24 So the answer is no. The reason is both these projects Lorien and Katipunin have not yet started construction. All our other projects are in flight. Any additional questions from the floor or from the chat box, please feel free to type it in. Hi Liam, did you have any additional questions? Go ahead, Jeline. Jeline, can you hear us? Can you hear me? We can hear you. Can you hear me? Okay. Yes, just have a clarification on a comment made earlier wherein it was mentioned that the L'Oreal presales have been reflected in the first quarter presales.

51:20 Can I confirm that the entirety of the 9,000,000,000 to $10,000,000,000 has been reversed and reflected in the $24,000,000,000 And in such case, could you disclose the like for like movement in pre sales without Dorian? Gillian. Thanks for the question. So as mentioned in the presentation earlier, we are talking about two projects Katipunan which we canceled And by virtue of the canceling, we took that out on the sales take up number. The second one is Lorian which is on pause. A project on pause is still part of the sales take up. Lorian is also sales of Lorian are still part of first quarter twenty twenty six numbers. We have a question here from Rasmus Mercado from China Bank regarding development.

52:17 What drove the core market take up growth on a quarter on quarter basis? How has FFO take up progressed? I guess I suppose the key answer on core market take up growth is concentrated sales. As you know, we haven't really been launching anything significant on the core market for quite a while now. So our sales teams are continuing to focus to move inventory. As I mentioned earlier, our core inventory is now just less than 20% or just about 20% of our remaining inventory. So that seems to be at a good bright spot for us in terms of very early indications of what could be something that we could bring out to the market. In terms of our FFO progress, again, that's something we've extremely shown discipline on.

53:09 You've seen us actually being able to bring down our FFO to less than 10% of our total inventory. That is still and will continue to be the game plan. Our sales teams are focusing on likewise on RFO sales to ensure that from a capital management basis, these units are appropriately remonetized so that we can get back into the game. Thank you, Jeb. We have a question here from Doreen. Hi, back in February before the Iran war, the launches this year was announced to be at $30,000,000,000 roughly half of what it was in 2025. May we know what the figure is now? Just to reiterate what our CEO said earlier, we did not provide a specific absolute amount, but we did say that in the second half of this year, we will be revisiting the potential or the possibility of launching horizontal projects.

54:15 We have here a question from Eunice Dudatria from Security Bank. I just want to understand the sales trends and reservation sales. Would you have any monthly trend on this? How are the take up trends since February to April given the onset of the Middle East Conflict? And what's the current strategy to push more sales over the short term? So typically the way sales work is the third month of the quarter is the strongest. That's just the way sales works for various reasons. And in the first quarter because that's also the time where we had the crisis I guess happen March didn't pull it through for the first quarter. So I don't think we can tell you what it is on a quarter on quarter basis because sales behaves differently.

55:13 It's usually the third month of the quarter where release is typically the strongest month. But because of the crisis last quarter March did not pull it through for us. Thank you. One last question from El Hamil. Is your group planning to be more aggressive in monetizing Land Bank to help cash flow? I think we've been quite aggressive in using our Land Bank in the past I think in the past two years, we've been used or three years almost we've been using about 800 hectares for our own use. So we've been quite aggressive in terms of launching our horizontal projects. So that's usually the biggest user of our land bank.

56:00 We will be we will continue to be very active in managing our portfolio that includes land bank as well as some of our other assets. And this is really to, I guess ensure that we are repositioning our asset base to something that is more I guess near term versus longer term moving away from non core and going into more core assets. Thank you, Mee Ann. That is the last question. We apologize again for the quality of the audio. We will be sharing a transcript of the call this afternoon. Okay. So that concludes our briefing on Ayala Land's performance for the first quarter of twenty twenty six. Again, if you have any further questions, please feel free to reach out to the team directly.

56:46 And again, a recording of the briefing will be made available on our website at ayalaland.com.ph. Once again, thank you everyone and have a good rest of the afternoon.