Ayala Land sets capex at a record P33-B

By Neil Jerome C. Morales, BusinessWorld

Posted at Feb 14 2011 05:47 AM | Updated as of Feb 14 2011 04:14 PM

MANILA, Philippines - Property giant Ayala Land, Inc. has earmarked a record P33 billion for capital expenditures this year to bankroll aggressive expansion, executives said last week.

New projects will be launched and completed across all business segments -- residential, retail and office space, and hotel -- amid positive economic prospects.

“[Capital expenditures] will be at P33 billion, about 70% of which will be spent to fund ongoing [projects]. The balance is for land acquisition as well as new projects,” Jaime E. Ysmael, senior vice-president and chief finance officer of Ayala Land, said.

Around 46% or P15.18 billion will be used for residential development, 27% or P8.91 billion for office and mall leasing space, 21% or P6.93 billion for land banking and other acquisitions, and 6% or P1.98 billion for hotels.

Last year, Ayala Land spent around P20 billion.

Due to continued demand for residential products, Ayala Land will launch more than 20,000 units across all residential brands -- double from last year -- at an estimated sales value of P57 billion. The figure is 17% higher than the P49 billion worth of units launched last year.

Ayala Land operates under four major brands -- Ayala Land Premier for the high-end segment, Alveo Land or the middle-income segment, Avida Land for the “affordable” market, and Amaia Land for economic housing.

“The bulk [of launches] will be for Amaia, at 50%, and the rest are ... spread across the three brands,” Mr. Ysmael said.

Ayala Land President Antonino T. Aquino told reporters: “[Avida and Amaia] are the more resilient markets because they are catering to the end-user market...that is why we would like to be there.”

For the business process outsourcing (BPO) office space segment, the property giant will begin the construction of an additional 200,000 square meters (sq. m.) of office spaces and start the operation of five new BPO buildings in Baguio, Laguna, Iloilo, Bacolod, and Cebu.

Ayala Land’s venture into new locations will depend on studies to be conducted by industry group Business Processing Association of the Philippines, Mr. Aquino said.

Last year, the firm launched 103,000 sq. m. of new BPO office spaces.

A four-tower office building will also be built at the Bonifacio High Street in Taguig.

In the tourism segment, Ayala Land will beef up its resorts in Palawan, which targets foreign tourists. “We have plans of putting up an additional [resort] in the Palawan mainland,” Mr. Aquino said, adding that Ayala Land was also interested in beach properties outside the island.

To finance record spending this year, Mr. Ysmael said borrowings will be made at the subsidiary level as bulk of the requirements of the parent firm has already been secured.

Last month, Ayala Land announced it had obtained P10 billion from the sale of corporate notes in what the listed property giant said was its largest fund-raising exercise in the capital markets so far.

Cost-control measures like locking in supply of steel in ongoing projects will allow the company to cut operating costs, Mr. Aquino said.

In terms of expansion abroad, the company wants to break ground in the first half for its $220-million residential project at the 3,000-hectare Tianjin Eco-City project in China. The China project will allow the company to learn the “best practices” of property developers in the region, Mr. Aquino said.

Meanwhile, Mr. Aquino said the company was also looking at public-private partnerships with “business-enhancing elements” like bus rapid transit systems.

Robust sales and cost-cutting schemes allowed the Ayala Land to hike profits by a third to P5.46 billion last year. Higher revenues across all major businesses, specifically real estate and hotels, boosted consolidated revenues to P37.81 billion, up by 24% from the year before.

The property developer has set aside P3 billion to fund its second office and retail project on a lot owned by the University of the Philippines in Quezon City.