2003 Annual Report

For us, the only thing more exciting than building new communities and institutions for people is the day we see them move into one.
At Ayala Land, we believe that partnerships shouldn’t just be driven by the bottom line. For the last 15 years, we’ve forged
alliances that have helped us realize a vision for the property market. We’ve established our leadership in the industry on the
strength of upright principles and a focused strategy to constantly innovate new products and services. We believe that these
qualities continue to define us in the eyes of our stakeholders. These qualities have also earned us wide recognition for the
communities and institutions we’ve developed and, more importantly, the trust and respect of those who live and work in them.
TABLE OF CONTENTS
Message to Shareholders
6
Ayala Land at 15 Years
15
Review of Operations
23
Board of Directors
44
Management Committee
46
Financial Statements
48
Corporate Social Responsibility
76
Ayala Land, Inc.
2
Annual Report ‘03
SIGNIFICANT EVENTS – 2003
January
Makati
Development
Corporation
receives all three
certifications for
quality assurance
(ISO 9001, ISO
4001 and OHSAS
18001), making it
the first company
in the country with
this distinction
October
April
ALI and Evergreen
Holdings, Inc.
acquire controlling
stake in Fort
Bonifacio Global City
Securities and
Exchange
Commission
approves ALI’s P1B
STCP
July
LPHI inaugurates
Riego de Dios
Village
February
The second
phase of Laguna
Properties
Holdings, Inc.’s
Sta. Catalina
Village opens
March
The second tower
of Community
Innovations Inc.’s
(CII) The Columns
is launched
May
Tamarind Cove is
launched
June
The Laguna Tower
of The Residences
at Greenbelt is
launched
LPHI offers for sale
the first tower of
One Aeropolis
Ayala Greenfield
Estates opens
second phase
Paseo de
Magallanes opens
second phase
Finance Asia
names Ayala
Land as one of
the Best Managed
Companies in the
Philippines
The Reuters
Institutional Investor
Report names
ALI executives
as Best CEO and
Best CFO in the
Philippines; ALI
Investor Relations
Unit is cited as Best
in Company IR
in the Philippines
and among Asian
property companies
August
ALI declares P0.26
per share special
cash dividend
Soft opening of
Greenbelt 4
September
Ayala Land turns 15
CII launches third
tower of The
Columns
Ayala Westgrove
Heights opens
Ridgewood phase
LPHI opens
representative sales
office in Singapore
Ayala Hillside
Estates opens
second phase
LPHI launches
Sta. Arcadia Village
Bonifaco Ridge is
relaunched
Asiamoney
recognizes Ayala
Land as one of
the top property
companies in AsiaPacific in corporate
governance
practices
Greenbelt wins
Urban Land
Institute Award for
Excellence
Greenbelt receives
merit award from
International
Convention of
Shopping Centers
for Marketing
Excellence
November
ALI issues P2B
five-year bonds and
receives highest
possible rating
of PRS Aaa from
Philratings
Hong Kong-based
financial magazine
The Asset cites
Ayala Land as
among the best
in corporate
governance in the
Philippines
December
Ayala Land issues
new shares to
Ayala Corporation
in exchange for
former site of Ayala
Museum
LPHI receives
Outstanding
Technology
Provider citation
under the Low-Cost
Housing Category
of the Kabalikat sa
Pabahay Awards
Far Eastern
Economic Review
cites Ayala Land as
one of the leading
companies in the
Philippines
Asiamoney names
Ayala Land as
one of Philippines’
Best Managed
Companies
Ayala Land, Inc.
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Annual Report ‘03
FINANCIAL HIGHLIGHTS
Year Ended December 31
2003
2002
2001
2000
1999
For the Year (in thousand Pesos)
Revenues
Net Income
Cash Dividends
Stock Dividends
14,623,932
2,709,155
3,425,541
_
12,214,133
2,518,515
2,245,261
_
11,668,718
2,278,336
641,593
_
10,305,615
1,844,205
588,022
1,781,519
8,940,293
2,601,345
534,456
_
At Year-End (in thousand Pesos)
Total Assets
Cash and Cash Equivalents
Total Borrowings*
Stockholders’ Equity
67,012,052
4,854,920
14,381,294
35,273,271
61,767,216
5,713,495
10,874,498
35,407,001
61,612,495
6,737,331
10,920,028
35,122,458
57,954,467
4,108,929
8,312,638
33,559,705
56,030,870
5,316,131
7,870,863
32,297,942
0.25
0.32
3.29
0.24
0.21
3.31
0.21
0.06
3.28
0.17
0.06
3.14
0.24
0.06
3.02
1.78 : 1
0.41 : 1
0.27 : 1
2.00 : 1
0.31 : 1
0.15 : 1
1.50 : 1
0.31 : 1
0.12 : 1
2.50 : 1
0.25 : 1
0.13 : 1
2.74 : 1
0.24 : 1
0.08 : 1
Per Share (in Pesos)
Earnings**
Cash Dividends
Book Value **
Financial Ratios
Current Ratio
Bank Debt*-to-Equity Ratio
Net Debt***-to-Equity Ratio
*Interest-bearing payables, including commercial papers and bonds
**Adjusted to include retroactive effects of the 20% stock dividend in 2000
*** Total borrowings, net of cash and cash equivalents
Ayala Land, Inc.
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Annual Report ‘03
AT A GLANCE
Strategic Business Unit
Key Products
Commercial Centers Group
Retail space and land for lease, movie theaters,
food court and entertainment facilities
Land and Community Development Group
High-end residential lots, commercial lots
Corporate Business Group
Office space for sale/lease, industrial estate lots for
sale, ready-built factory units for lease
Residential Buildings Group
High-end residential condominium units and
townhouse units for sale/lease, single-detached
housing for sale
Mass Housing Group
Mass housing units and lots, farm and vacation lots
Core-Mid Residential Group
Middle-income residential condominium units,
single-detached housing, lots
Visayas-Mindanao Group
Within Visayas-Mindanao: retail space and
land for lease, movie theaters, food court and
entertainment facilities, residential and commercial
lots, office space for sale, residential condominium
and single- detached units for sale, city sports club
Leisure and Lifestyle Communities Group
Integrated leisure communities, city sports and golf
clubs, beach resorts, vacation homes
Ayala Land, Inc.
Highlights of 2003
Overall shopping center revenues grew by 6%
Weighted average occupancy of six malls at 98%
Greenbelt 2 and 3 fully operational
Greenbelt redevelopment won Urban Land Institute Award for Excellence and
International Council of Shopping Center (ICSC) Maxi Award for Marketing Excellence
Sales volume grew by 22% year-on-year to 338 lots
Company launched Tamarind Cove
Started development of golf course at Ayala Greenfield Estates
Launched new phases at Paseo de Magallanes, Ayala Westgrove Heights, Ayala
Greenfield Estates and Ayala Hillside Estates
Posted high average occupancy rate of 95% for its office buildings
Initiated marketing activities for People Support Center, its first E-services office building within the MCBD
Re-blocked remaining inventory at Laguna Technopark into smaller lot cuts
and sold 7 lots with a total area of 4.1 hectares.
Recorded sales of 392 units, 3% higher than 2002 and 67% higher than 2001
The Residences at Greenbelt, launched in June, reached 61% take-up by year-end
Near full sell-out of 369-unit One Legazpi Park, launched in March 2002
72% of 182 One Roxas Triangle units sold, 12 units leased
86% of 28 units at The Residences at Greenbelt Townhouses leased out
Sold 1,451 units, 29% higher year-on-year and highest since 1999
Affordable housing unit sales of 772 represented 53% of total sales bookings
New phases opened in ongoing projects in Dasmariñas, Antipolo and Sto. Tomas
Launched Sta. Arcadia Estates/Sta. Arcadia Town Center in Cabanatuan, north of Metro Manila
Launched first medium-rise development, One Aeropolis, in June; sold 197 out of 240 units
Near full sell-out of 468 lots and 88 house and lots at Verdana Homes
Successive launches of three 30-storey residential condominiums,
The Columns, within a 12-month period from November 2002 to October 2003
Plans finalized for Verdana Homes sequel in Biñan and an innovative residential
development in Bonifacio Global City
Ayala Center Cebu sales grew by 7%; occupancy high at 97%
One lot sold at Cebu Business Park; two Asiatown IT Park lots sold to locator companies
in December
Take-up of Plantazionne Verdana Homes increased to 71%
Finalized plans for maiden projects to be launched in 2004 and 2005
5
Annual Report ‘03
Ayala Land, Inc.
6
Annual Report ‘03
MESSAGE TO SHAREHOLDERS
Ayala Land, Inc.
Making dreams a reality
From September 2003 to August 2004, as
we celebrate the 15th fiscal year-anniversary
of your Company, the tagline “You keep
dreaming, Ayala Land keeps building”
appears as a recurring theme in all our
commemorative activities. Reflective of the
15 years since our spin-off from the Ayala
Corporation in September 1988, the tagline
evokes the vision and ideals that inspired us
to create a company committed to meeting
the shelter needs of the Filipino people while
remaining true to the values that distinguished
Ayala through the decades.
We turn 15 with the firm belief that your
Company has not only met early expectations
but exceeded them.
In the last 15 years, Ayala Land’s total assets
have grown from P300 million at the end
of 1988 to P67 billion at the end of 2003.
Stockholders’ equity, valued at P165 million
by year-end 1988, stood at P35 billion by
year-end 2003. Our workforce has grown
from 220 strong in 1988 to more than 1,000
employees today.
The anniversary tagline also calls to mind an
inspiration behind our common labors and
accomplishments in the last decade and a half.
While it clearly indicates that we all value our
roles as catalysts in the realization of people’s
dreams – specifically as they relate to shelter
and the enhancement of quality of life – it
also articulates our own belief that we can
best realize our own dreams by helping others
realize theirs.
We have had the good fortune to be engaged in work
that has helped a great many of our countrymen
make their dreams of a good life come true
– through the establishment of communities and
institutions where people can live, work, do business
and enjoy themselves in comfort and safety. But what
we now find extremely gratifying is the fact that,
as a consequence of pursuing this course, we have
been richly rewarded with Ayala Land’s remarkable
transformation and phenomenal growth.
Through the years, your Company has evolved into a
highly respected industry leader in virtually all sectors
of the property market. Through ups and downs
in the economy and through changes in market
conditions – from the boom of the ‘90s to the lean
years after the Asian economic crisis of 1997, the
company has continued to grow, thrive, and earn the
trust of its publics.
Even in difficult periods, we kept faith in our
people and our country; continuing to build and
invest, and in the process serving as a contributor
to national development.
As a company whose strength comes from the
creativity, commitment to quality and integrity of
its people, we take pride in ALI’s dominance and
success in the real estate industry. Much of this
success has come from the trust that we have built
among our various stakeholders. It is the biggest
source of competitive advantage we possess today,
producing numerous benefits: strong consumer
support, lower cost of financing, better terms when
negotiating with partners and suppliers, employee
loyalty, and much more.
7
Annual Report ‘03
Trust and success are two sides of the same
coin, and are renewed in a mutually reinforcing
manner over time. As ALI has grown and
benefited from the patronage of the Filipino
public, so have we recognized our broader
responsibility to contribute to the betterment
of society as a whole. Commitment to nationbuilding is one of our core values and, because
of this, we are commemorating our 15th
anniversary by launching a series of programs
intended to enhance quality of life among the
less fortunate in barangays near communities we
have set up over the years (may we refer you to
the brief on corporate social responsibility on
page 76).
The Company also owes much of its progress
to the dreamers and builders in its midst – those
who dared to be bold and imaginative. Indeed,
in not a few instances over the last 15 years, we
ventured as pioneers into new and exciting areas
for development.
In 1990, we were among the first to recognize
the economic potential of the Calabarzon
region. Addressing a pressing national need for
a world-class industrial estate, we established
Laguna Technopark in Sta. Rosa and Biñan.
Today, LTI’s more than 400 hectares are home to
105 major manufacturing plants employing over
55,000 workers.
In the early ‘90s, in what many at the time
felt was a risky adventure, we converted a
golf course in the middle of Cebu City into a
business center. The Cebu Business Park has
now become the commercial and financial hub
of the Central Visayas.
Ayala Land, Inc.
8
Annual Report ‘03
In the mid ‘90s, we fought to retain the
Philippine Stock Exchange in the Makati Central
Business District, and gave its trading floor a
home worthy of its stature.
Beginning in 1991, with relatively scant
experience in building skyscrapers, we put
up some of the most admired office and
residential buildings in Makati – including
Tower One, 6750 Ayala Avenue, The Salcedo
series, and One Roxas Triangle.
We ventured into mass housing and office
parks in 1992; townhomes in 1993; serviced
apartments, infrastructure development, and
wholesale distribution in 1996; and amusement
centers, food courts, sportsclubs, IT-related
ventures, core-mid residentials and farm lots
from 1997 to the present.
Even as we established new major commercial
hubs via the Alabang Town Center (1983)
and Ayala Center Cebu (1994), we vigorously
undertook the continuing redevelopment of the
Ayala Center in Makati and, today, as we put the
final touches on its completely new and much
admired Greenbelt component, another 25-year
trajectory for the redevelopment of the entire
Ayala Center is being set.
In a way, this never-ending process of
innovation, self-improvement, and growth
characterizes the very essence of our enterprise
– bringing us ever forward in development
cycles that touch and overlap from generation
to generation.
Your Company in 2003
We remained steadfast in the face of the volatile
political condition and the constant threat of
terrorism that put business and economy in the
doldrums. Despite the uncertainties and the weak
economy, our core strengths enabled your Company
to remain on track and perform admirably in a
lackluster environment.
Last year, your Company’s consolidated net income
reached P2.71 billion, 8% higher than the previous
year’s. Consolidated revenues totaled P14.62 billion,
up 20% year-on-year.
Innovative residential condominium projects for
discriminating markets
Remarkable among the projects we introduced
in 2003 are three residential condominium
developments earmarked for three distinct markets.
Enthusiastic market response to The Residences at
Greenbelt, One Aeropolis, and The Columns echoed
our experience with the highly successful Salcedo
series of condominiums launched in 1989.
In June, your Company put Laguna Tower, the first
of three structures making up The Residences at
Greenbelt, on the market. Ideally situated at the
edge of the Greenbelt commercial complex, the
Residences’ trio of 48-storey buildings will feature
a host of amenities such as a fifth-floor podium
with adults’ and children’s pools, a fully-equipped
gym, an entertainment center, a private bridgeway
connecting to Greenbelt 2, and six floors of parking.
As of end-2003, 151 units had already been taken up,
representing an average of more than 20 units
a month.
Also in June, Ayala Land’s mass-housing
subsidiary Laguna Properties Holdings, Inc.
(LPHI) introduced its first medium-rise
condominium project to an eager market.
Located on Sucat Road in Parañaque, just
in front of SM Sucat, One Aeropolis makes
quality condominium living affordable
through attractive financing schemes.
In March, Community Innovations, Inc., your
Company’s subsidiary serving the core-mid
market, launched the second tower of The
Columns residential condominium project
at the intersection of Ayala and Buendia
Avenues in Makati City. Owing to exceptional
market take-up, The Columns’ last tower was
launched shortly afterwards in October.
Unique, responsive developments
In May, we launched Tamarind Cove. A
joint project with the Bank of the Philippine
Islands, this exclusive 1.6-hectare enclave of
20 lots is situated on the last remaining parcel
of real estate in Ayala Alabang Village open
to subdivision development. Tamarind Cove
will feature a park, its own security, a children’s
playground, water features, and a motor court
with parking spaces for guests.
Through LPHI, your Company also marked
its first foray into housing for the military
personnel in July with Riego de Dios Village
– in line with our government’s effort to
Ayala Land, Inc.
provide more homes for the men and women
of the Armed Forces of the Philippines.
LPHI will design and build 1,004 house-andlot units on a 20-hectare parcel of land in
Camp Riego de Dios in Tanza, Cavite. The
packages are affordably priced from P281,000
to P676,000, and are available via Pag-Ibigfinanced schemes. Riego de Dios Village is a
pilot project of the AFP’s Off-Base Housing
program launched in 2000 by then AFP Chief
of Staff Angelo Reyes.
In October, LPHI ventured northwards to
develop Sta. Arcadia Estates in Cabanatuan
City – a Spanish-Mediterranean-flavored
community featuring first-rate amenities that
include an adjacent shopping mall that LPHI
will build.
Another golfing community, Ayala Hillside Estates
in Capitol Hills, Quezon City, opened its brisk-selling
second phase consisting of nine choice lots (called
the “Pinnacle”) and 20 regular lots with varying views
of the fairways.
Seventeen residential and six commercial lots
representing the second phase of Paseo de
Magallanes on EDSA and the South Luzon
Expressway were offered in May. By the end of
2003, 59% of the residential lots and 67% of the
commercial lots had been taken up.
In 2003, your Company sold a total of 211 lots in its
very successful Ayala Westgrove Heights residential
subdivision in Silang, Cavite. The strong demand was
met by the launch of 236 lots.
The vision of another Makati CBD
New phases in existing developments
In February, LPHI launched the second phase
of Sta. Catalina Village in Dasmariñas, Cavite.
Only 45 minutes from Makati, Sta. Catalina
features six types of Mediterranean-inspired,
affordable house-and-lot packages.
In March, Ayala Greenfield Estates opened
its second phase, with 95 lots, to heightened
buyer interest as construction began on a
magnificent 18-hole, 60-hectare golf course
designed by Robert Trent Jones II. Additional
amenities completed in 2003 include the ninehole putting green and riparian grove, outdoor
basketball court, tennis court, and tree groves.
In April, Ayala Land and Evergreen Holdings, Inc.
of the Unilab Group closed a US$90 milllion share
purchase that enabled the partnership to secure
controlling interest in Bonifacio Land Development
Corporation – and the prime landbank that is the Fort
Bonifacio Global City. We envision Fort Bonifacio
Global City as a natural extension of the Makati
Central Business District. Through our involvement
in Fort Bonifacio, your Company has ensured its role
in shaping the development of the country’s central
business district for decades to come.
Upon assumption of management, your Company’s
initial goals have been to re-establish its market
presence, create sustainable business lines and
stabilize its financial condition.
9
Annual Report ‘03
We envision
Fort Bonifacio
Global City
as a natural
extension of the
Makati Central
Business District.
Ayala Land, Inc.
10
Annual Report ‘03
Without prejudice
to our unique
position at the high
end of the real
estate market, we
would like to see the
day when a bigger
percentage of sales
will come
from a range of
products that more
and more people at
all levels of society
can afford.
To this end, the two-hectare McKinley Business Park
at the southern end of the Bonifacio Global City
was launched in September. Market take-up was very
encouraging; all the 17 lots – with an average area
of 1,100 square meters – were sold in three weeks.
Also in September, Bonifacio Ridge, FBDC’s sole
residential building project, was re-launched.
Internally, the new management was able to take
advantage of the credibility provided by your
Company’s entry and renegotiated FBDC’s debts,
much of which were past due and in default.
Maturing debt was restructured and extended to be
more consistent with the company’s cash flow. New
loans were negotiated to pay off high interest debt.
Overhead has been reduced and the Company is
now able to cover its regular expenses from existing
cash flow.
Citations
Your Company was the proud recipient of a number
of citations last year.
The Reuters Institutional Investor Research Group
adjudged Francisco H. Licuanan III and Jaime E.
Ysmael as the best CEO and CFO, respectively,
in the Philippines. The two were lauded for their
effectiveness in meeting the information needs of the
investment community. ALI was also cited by sellside analysts for having the best and most improved
company investor relations among real estate
companies in Asia, and the best investor relations
among all Philippine companies.
In January, Makati Development Corporation was
given three certifications for quality assurance (ISO
9001, ISO 4001, and OHSAS 18001) – the first
construction company in the country to
receive such a recognition.
In September, financial magazine Asiamoney
recognized Ayala Land as among the top
companies in the area of corporate governance
practices. Among property companies in AsiaPacific, Ayala Land ranked a close second in
the Asia-Pacific region to Malaysian-based
SP Septia. A total of 120 leading companies
in the region were given marks in three areas
of corporate governance: shareholders’
rights, disclosure and transparency, board and
management discipline.
In November, our vision in the redevelopment
of Greenbelt received international acclaim as
Greenbelt 3 was included in a distinguished
circle of 10 winners of the Urban Land
Institute’s (ULI) Awards for Excellence
competition. Aside from stringent criteria such
as financial viability, substantial completion,
relevance to contemporary and future needs
of the communities where the projects are
located, winners were chosen for standing
out from the rest in their category and for
being models for similar undertakings. ULI
chose Greenbelt (one of only three shopping
centers awarded in the world) for embodying
the ULI principle of promoting responsible
leadership in the use of land to enhance the
total environment. The international award is
widely recognized as the land-use industry’s
most prestigious recognition program, and
we are extremely proud to note that your
Company was the only winner from the entire
Southeast Asian region.
Ayala Land, Inc.
Our redevelopment of Greenbelt has indeed
been well received. Its grand launch earned
praises from an appreciative public, and a
laurel from the International Council of
Shopping Centers (ICSC). At its awarding
ceremonies in Las Vegas last October, ICSC
bestowed Ayala Land the Maxi Award for
Marketing Excellence for the successful
introduction and promotion of Greenbelt.
In December, Laguna Properties Holdings,
Inc. was named Outstanding Technology
Provider Under the Low-Cost Housing
Category at the inauguration of President
Arroyo’s Kabalikat Sa Pabahay Awards.
Your Company’s mass housing arm was
chosen for its “excellent achievement
and contribution to housing” based on
the stringent criteria prepared by the
Accreditation of Innovative Technology for
Housing Inter-Agency Committee.
We were able to fund P5.2 billion in project and
capital expenditures.
Ayala Land’s cash reserves stood at P4.85
billion and it achieved a current ratio of 1.78:1.
Bank debt-to-equity ratio was 0.41:1 while net
debt-to-equity was at 0.27:1. Operating cash
flows totaled P5.14 billion.
Annual Report ‘03
Looking forward
Middle-Income Housing
In April, the Securities and Exchange Commission
approved P1 billion worth of short-term commercial
papers (STCPs). An initial tranche of P500
million was offered via a Dutch auction, and was
oversubscribed despite very tight pricing. Ayala Land
issued a total of P740 million STCPs priced at 25
bps over three-month MART 1 for the floating rate
tranche and one-year MART 1 flat for the fixedrate tranche. The STCPs, issued last May 21, are
set to mature on May 14, 2004. The issuance, your
Company’s first SEC-registered STCP in recent years,
was distributed directly to retail investors – enabling
ALI to access the non-bank liquidity pool.
The STCP issue, rated “PRS 1” by PhilRatings,
highlighted the continued confidence of the
market in ALI’s capacity to pursue sound business
strategy and maintain profitability under difficult
market conditions.
Financials
Our financial strength remained steady with
a solid balance sheet with a high degree of
liquidity and strong cash flows. Total assets
stood at P67.01 billion at the end of 2003,
while stockholders’ equity amounted to
P35.27 billion.
11
In August, your Company declared a special
cash dividend amounting to P0.26 per share. In
September, a lot-for-share swap deal between ALI
and AC for the Ayala Museum was finalized.
In November, bonds with an aggregate face value
of P2 billion were issued. Similar to the STCPs, the
bonds were registered with the SEC and rated by
PhilRatings, likewise getting the highest rating possible
for long-term issues of PRS Aaa. The bonds were
split equally into fixed-rate and floating-rate tranches.
Both tranches were priced tightly, following a
successful Dutch auction. This allowed your Company
to achieve a new benchmark in loan pricing, with
spreads down to 13.5 bps and 125 bps for the fixedand floating-rate tranches, respectively.
Without prejudice to our unique position at the
high end of the real estate market, we would like
to see the day when a bigger percentage of sales
will come from a range of products that more and
more people at all levels of society can afford. We
have already taken some steps towards this goal with
the establishment of Laguna Properties Holdings,
Inc. (with the mass housing market in mind) and
Community Innovations, Inc. (for the core-midle
income residential market).
While expected to live up to the high standards set by
Ayala Land for all products and services, affordability
will be a key factor for these subsidiaries’ offerings.
Ayala South
We intend to continue the development of Ayala
South into a truly integrated community and
your Company’s most ambitious new community
development area for the next 20 to 30 years. Aside
from Ayala Westgrove Heights and Ayala Greenfield
Estates, we will begin the development of the
over 1,000 hectares that your Company purchased
from the Yulo family. We expect to launch the
middle-income components of the Ayala South
Development in 2004.
Fort Bonifacio Global City
We shall intensify the development of the Fort
Bonifacio Global City. In October 2004, we expect
to commence operations of Market! Market! – your
Company’s innovative value mall located along C5 road.
Ayala Land, Inc.
12
Annual Report ‘03
Earlier in 2004, we plan to launch an innovative
new residential project in the adjacent property
in joint venture with the Bases Conversion
Development Authority.
Summing up
In the next 15 years, we would like ALI to continue
being a leader in innovation. As customer needs and
preferences change, our products will evolve with
them, but the way we do business and our corporate
values will remain the same.
In closing, we wish to thank all of those who have
been supportive of your Company through these
15 years, without whose help none of this could
have been achieved. We thank our co-workers
for their dedication and loyalty, the members
of the board of directors for their counsel, and
you, our valued shareholders, for your continued
confidence and support.
We will keep the public trust through fair dealing and
by consistently offering quality products that sustain
their value over time.
As we extend our reach to a wider audience, there
will be more people who will invest significant
portions of their savings in our products. Having
such savings in our trust is a responsibility we take
very seriously, giving greater dimension to our
commitment to provide customer satisfaction. It is a
long-term commitment we are willing to make.
All companies say that their greatest asset is their
people. At Ayala Land, we truly believe that. We
will continue to recruit the best talent and invest in
their training and development. More importantly,
we will make sure that working for Ayala Land
is more than just a job. We will ensure that your
Company provides its young people with a home, a
place in which to grow and the scope to fulfill their
own dreams.
FERNANDO ZOBEL DE AYALA
Chairman
FRANCISCO H. LICUANAN III
President
Ayala Land, Inc.
15
Ayala Land, Incorporated:
15 years of realized dreams
A defining characteristic of mankind is the ability to dream. Every person hopes for a better
life: a good job, a loving family, a comfortable home. As we pursue our ideals, dreams fuel
our passions.
Among members of the extended family that is Ayala Land, dreams are shared and pursued
eagerly. They are given shape and substance as heads are put together and steps are locked in
common purpose as we live up to a commitment: to bring people’s dreams of a good life closer
to reality each day.
As Ayala Land turns 15, we look back at milestones which we hope amply testify to the strength
of that commitment, and its beneficial effects on the lives of people.
As we look forward, we would like to reaffirm our pledge to do right by people who have
willingly entrusted their aspirations to our company.
We promise to keep building on “such stuff (to paraphrase the bard), as dreams are made on.”
Annual Report ‘03
Ayala Land, Inc.
16
Annual Report ‘03
1988-1992
Pioneering moves
On September 16, 1988 Ayala
Land is spun off from Ayala
Corporation, the country’s oldest
and most prestigious business
house, to provide both with greater
flexibility and a clearer focus to
take advantage of opportunities in
a newly revitalized market.
Ayala Land swiftly makes its
mark with responsive and unique
projects, such as the highly
successful Salcedo series of
residential condominiums, that
whet the appetite of a public
already aware of the quality
synonymous to the Ayala brand.
Ignoring cynics and skeptics, the
Company and its like-minded
partners chart and brave new
paths that not only speak of good
business development sense but are
a testament to a commitment to
national development.
1988
After its spin-off from Ayala
Corporation, Ayala Land quickly
moves to broaden its revenue base
and diversify product lines and
markets.
1989
To further strengthen the Company’s recurring
income base, ALI launches an ambitious program to
redevelop Ayala Center.
Public interest in the high-rise residential sector is
spurred by the launch of One Salcedo Place, ALI’s
first condominium project. All available units are
bought within weeks.
The Company commits major resources in
anticipation of long-term development projects in the
Calabarzon. ALI becomes a pioneer in the region’s
transformation into the country’s most dynamic
industrial zone.
Ayala Land, Inc.
1990
Development begins on the 50-hectare Cebu
Business Park, which has since evolved into
the business and commercial hub of Southern
Philippines. The site of Visayas’ largest
commercial complex also hosts the Ayala
Center Cebu and the first Marriott hotel in the
Philippines.
Ayala Land sets new standards for industrial
estate development in the country with
Laguna Technopark, Inc., a joint venture with
Mitsubishi Corporation and Kawasaki Steel
Corporation.
Ayala Land establishes Ayala Hotels, Inc., a
subsidiary, to consolidate hotel operations.
1991
ALI becomes a publicly-listed company
when its Class B Common shares are
offered at the Manila and Makati Stock
Exchanges.
The Company makes its first venture into
office land development south of Makati
via the first phase of Madrigal Business
Park in Alabang.
1992
Ayala Land makes a donation for the
construction of a new building for the
united Philippine Stock Exchange.
6750 Ayala Avenue is completed and
offered for lease.
17
Annual Report ‘03
Ayala Land, Inc. 18
Annual Report ‘03
1993-1997
Diversification
Fueled by public trust and
peerless expertise, Ayala Land
grows in strength and confidence.
The Company spreads its
wings with the establishment
of subsidiaries to better cater
to an ever-expanding stable of
satisfied clients. And, in a display
of forward thinking, Ayala Land
continues to acquire properties for
future development.
1993
Ayala Land ventures
into the mass housing
market through Laguna
Properties Holdings, Inc.
The subsidiary gains a
significant foothold in
the market as it adopts
revolutionary building
systems and uses its
extensive experience
in planning residential
communities.
Through a joint venture
with the Yulo family, Ayala
Land acquires controlling
interest in 1,300 hectares
of land in Canlubang,
Laguna.
1994
Ayala Center Cebu is formally
launched.
Asia Tower is launched and
quickly sold out.
The Alabang Commercial
Center is renovated and
relaunched as the Alabang
Town Center.
1995
In partnership with the Makati City
Government and the Makati Commercial
Estates Assocation, Ayala Land launches a
long-term master plan for the Makati Central
Business District.
The Company enters into joint ventures with
SHV Makro for Makro and Hongkong Land
for One Roxas Triangle.
ALI gets involved in infrastructure
development by joining a consortium to
construct the EDSA Metro Rail Transit
System.
Tower One Ayala Triangle is completed.
Ayala Land, Inc.
1996
LPHI launches the Santarosa Estates residential subdivision.
Work commences on the construction of One Roxas Triangle.
A pedestrianization program in the Makati Central Business
District is launched. Construction begins on the elevated
walkway system.
Office building projects Ayala Life-FGU Center and
Ayala Life-FGU Center Alabang are launched.
Ayala Southvale Village, an upscale residential subdivision, is
offered for sale.
1997
Cebu Marriott opens.
Expansion of Alabang Town Center begins.
LPHI reaches out with residential projects in
Batangas, Lucena and Naga.
ALI undertakes a joint venture with the
Extraordinary Group for the Pavilion Mall in Biñan,
Laguna.
Marketing of Ayala Northpoint, the Company’s
initial venture in Negros Occidental, commences.
19
Annual Report ‘03
Ayala Land, Inc.
20
Annual Report ‘03
1998-2003
Sustaining
Leadership
Ayala Land enhances its
preeminent industry position
with the continued expansion
of operations through a variety
of responsive projects. The
Company also fortifies itself
internally with the establishment
of distinct Strategic Business
Units (SBU) that more effectively
address specific aspects of a
myriad of interests. On its 10th
year in 1999, the Company
lays out the groundwork for its
future by defining and asserting
its vision, credo, corporate
values, critical success factors
and the strategic thrust on total
customer satisfaction.
This future is further ensured
through Ayala Land and the
Unilab Group’s recent joint
acquisition of the prime property
that is the Bonifacio Global
City in Taguig. Envisioned as a
natural extension of the Makati
Central Business District, it
assures available inventory over
the long term.
1998
ALI celebrates its 10th year with
Project Odyssey – which articulates
ALI’s vision and reaffirms its basic
values.
The Construction Management
Group is awarded an ISO 9002
certification.
The Company introduces buyer
financing programs for high-end
subdivisions and middle-income
housing.
Glorietta 4 opens.
Development begins on Ayala
Westgrove Heights, ALI’s maiden
project in the 2,500-hectare
property dubbed Ayala South.
Ayala Heights Cebu is launched.
The Company enters the upscale
house-and-lot market with Ferndale
Homes in Quezon City.
LPHI launches a pilot test
marketing effort in Milan, Italy to
tap the OFW market.
The Company ventures into food
court and amusement center
operations.
1999
Plans for the redevelopment of
Greenbelt are finalized.
Ayala Life-FGU Center on Ayala
Avenue is completed.
Strategic Business Units are
created.
Metrostar Express opens.
The Cebu City Sports Club is
launched.
Oakwood Premier Ayala
Center soft-opens and sets new
standards in luxury serviced
apartments in the country.
2000
Work begins
on Greenbelt’s
redevelopment.
Ayala Greenfield Estates
in Calamba, Laguna is
launched.
LPHI’s low-cost
housing product line is
introduced
Ayala Land successfully
bids for the long-term
lease of a 9.8-hectare
property in Taguig.
Ayala Land, Inc.
2002
The Company enters the core-mid
residential market with Verdana Homes
and The Columns under new subsidiary
Community Innovations, Inc. The
projects are well-received by the public.
2001
ALI completes construction
of two mass transit-based
commercial centers: MRT-3 Ayala
Station, and Metro Point at the
corner of EDSA and Taft.
Paseo de Magallanes is launched.
Internally, ALI starts its asset
rationalization program and SAP
implementation. It also creates a
Buyer Financing Department.
Ayala Land launches Montgomery
Place.
Cebu Civic and Trade Center is
repositioned into an I.T. Park now
known as Asiatown I.T. Park.
To provide an additional distribution
channel for products, ALI forms
Ayala Land Sales, Inc., an exclusive allcommission sales force.
Ayala Hillside Estates is launched.
Work commences on Market! Market!, a
five-level value mall.
Ayala Center receives a “Mall of the
Year” award from the Philippine Retailers
Association and the Department of
Trade and Industry.
The Leisure and Lifestyle Communities
Group is created.
LPHI opens a sales office in Rome, Italy.
The Bases Conversion and Development
Authority awards development rights to
ALI for the 8.5-hectare Lot B in Fort
Bonifacio.
ALI re-enters the high-end residential
condominium market with the launch of
One Legazpi Park.
The Company is awarded by Asiamoney
magazine as the country’s best in financial
management.
2003
Three residential projects - The Residences at Greenbelt,
One Aeropolis, and the Columns - for three distinct
markets are launched to an enthusiastic market.
The partnership of Ayala Land and the Evergreen
Holdings, Inc. of the Unilab Group acquires controlling
interest in Bonifacio Global City, assuring additional
ample prime inventory for the future.
The Company launches Tamarind Cove, an exclusive
1.6-hectare enclave of 20 lots on the last remaining
parcel of real estate in Ayala Alabang Village
Ayala Land marks its first foray into housing for the
military via LPHI’s Riego de Dios Village in Tanza,
Cavite.
Bonifacio Ridge, Fort Bonifacio Development
Corporation’s sole residential building project, is relaunched.
Makati Development Corporation, Ayala Land’s
construction arm, is given three ISO certifications for
quality assurance.
Ayala Land prominently ranks as one of the best
Philippine companies according to the surveys of
various international business magazines such as Far
Eastern Economic Review, Finance Asia, Asiamoney, and The
Asset.
Company CEO Francisco H. Licuanan III and CFO
Jaime E. Ysmael are adjudged the best in the Philippines
by the Reuters Institutional Investor Research Group.
Greenbelt 3 is included in a distinguished circle of 10
winners of the Urban Land Institute’s (ULI) Awards
for Excellence competition - the only winner from the
entire Southeast Asian region. Its launch also earns
an award from the International Council of Shopping
Centers.
21
Annual Report ‘03
You keep dreaming, Ayala Land keeps building
Ayala Land, Inc.
23
Annual Report ‘03
Review of Operations
Amidst an extremely challenging environment
marked by political and security concerns, Ayala Land
remained financially strong and focused on delivering
superior shareholder value through solid operating
results, a sound balance sheet and quality products.
Earnings
The Company ended 2003 with a net income of
P2.71 billion, 8% higher than 2002 level of P2.52
billion. Consolidated revenues amounted to P14.62
billion, representing a 20% growth year-on-year.
Revenue growth was mainly due to higher rentals
from shopping centers with the full year operation
of Greenbelt 2 & 3, as well as the escalation in basic
rent of mall tenants at Ayala Center. Together with
rentals from office buildings, leasing operations
collectively accounted for P3.59 billion or 24% of
total revenues in 2003.
Also driving revenues were lot sales from high-end
residential communities such as Ayala Westgrove
Heights, Ayala Hillside Estates, Ayala Greenfield
Estates, Paseo de Magallanes, Plantazionne Verdana
Homes and Tamarind Cove. The sale of commercial
and industrial lots also contributed to land sales
which amounted to P2.85 billion or 19% of
total revenues.
Residential unit sales contributed P1.88 billion or
13% to total revenues. Three high-end residential
condominiums, namely One Roxas Triangle, One
Legazpi Park and The Residences at Greenbelt
(Laguna Tower), accounted for the bulk of the sales.
Mass housing revenues generated by Laguna
Properties Holdings, Inc. (LPHI) amounted
to P1.86 billion and accounted for 13% of
consolidated revenues. During the year, LPHI
ventured into its first medium-rise residential
building project, One Aeropolis, located
in Sucat, Parañaque. It also launched Sta.
Arcadia Village, its first mass housing project
in Northern Luzon.
The core middle-income residential segment,
through Community Innovations, Inc. (CII),
contributed P658 million or 5% to total
revenues. Following Verdana Homes’ full sellout, CII focused on the sale of The Columns,
its three-tower residential complex within
Makati. Given encouraging market response
in the first two towers, the third tower was
launched ahead of schedule in November.
Key support groups such as the hotel and
construction operations contributed 9% and
5%, respectively, to consolidated revenues.
Revenues from hotel operations amounted
to P1.28 billion, 2% lower year-on-year due
to lower occupancy rates and the continued
rate war among the hotels in the Makati
Central Business District. Revenues from
construction projects totaling P759 million
were also lower by 18% given the limited
opportunities in the construction sector.
Recurring revenues generated from
commercial centers, hotel and office
properties contributed 33% of total. Revenues
from development projects accounted for the
balance of 67%.
2003 Consolidated Revenue
Breakdown by Product Line
Interest & Investment
Income/Equity Earnings
12%
Rentals
24%
Construction Projects
5%
Core-Mid Residentials
5%
Hotel Operations
9%
Land Sales
19%
Mass Housing
13%
Residential
Unit Sales
13%
Rental revenues, chiefly from commercial centers,
contributed 24% of total revenues, followed by land
sales which comprised 19% of total
Revenues and Net Income
in Php Billion
Financial Highlights
16.0
14.62
14.0
12.21
11.67
12.0
10.31
10.0 8.94
8.0
6.0
4.0
2.28
2.60
2.71
2.52
1.84
2.0
1999
2000
2001
2002
2003
Revenues
Net Income
2003 revenues grew by 20% while net income
was up by 8% year-on-year
Ayala Land, Inc.
24
Annual Report ‘03
2003 Revenue Breakdown
By Strategic Business Units
Support Groups*
& Corporate
26%
Visayas-Mindanao Group
1%
Core-Mid Group
5%
Corporate
Business Group
Commercial
Centers Group
6%
20%
Residential
Buildings Group
13%
Mass
Housing Group
Land & Community
Development Group
15%
14%
In terms of revenue contribution by Strategic
Business Units (SBU), the Commercial
Centers Group remained the key driver,
accounting for 20% of total. Land and
Community Development Group was the
second largest revenue contributor with 15%.
Total assets amounted to P67.01 billion,
8% higher primarily due to the acquisition
of a controlling stake in Bonifacio Land
Corporation.
Increasing asset utilization is a key strategy
being pursued by the different SBUs. With
the growth in revenues in 2003 and the
continuing asset disposal program, asset
turnover has improved.
Five SBUs account for the bulk or 65% of
total assets.
End-2003 Asset Breakdown
by Strategic Business Units
Corporate
FBDC
4%
9%
Land & Community
Devt. Group
17%
Support Groups*
8%
Commercial
Centers Group
Core-Mid Group
6%
16%
VisayasMindanao group
8%
Mass
Housing Group
11%
Corporate
Business Group
Residential
Bulidings Group
10%
11%
* hotels, construction and property management
About 2/3 of Company assets are held by five SBUs: Land
and Community Development Group, Commercial Centers
Group, Corporate Business Group, Residential Buildings
Group and Mass Housing Group
LPHI’s inventory of various mass housing
projects and landbank represent 11% or
P7.4 billion of Ayala Land’s consolidated assets.
Asset Distribution
* hotels, construction and property management
The Commercial Centers Group remained the key driver
of revenues, accounting for 20% of total.
condominiums in Makati, One Legazpi Park,
The Residences at Greenbelt and One Roxas
Triangle, now nearing full sell-out.
The Land and Community Development
Group, responsible for the Company’s highend residential subdivision projects, accounts
for P11.4 billion or 17% of total assets
consisting mainly of land inventory. These
are carried in the books at acquisition cost and
include the landbank for Ayala South, the bulk
of which were acquired in 1993 and have been
under development since 1998.
Leased land and building improvements
within Ayala Land’s shopping centers, under
the Commercial Centers Group, amount to
P10.7 billion or 16% of total assets.
The Residential Buildings Group is
responsible for P7.4 billion in assets,
11% of total, including three residential
Office buildings for lease/sale, as well as
properties earmarked for industrial and
business park developments, managed by the
Corporate Business Group represent P6.7
billion or 10% of total. These include nearly
73,000 square meters of office space for lease
in the Makati Central Business District.
Equity Resources
Stockholders’ equity was at P35.27 billion,
slightly lower than the end-2002 level,
primarily due to a P0.26 per share special
cash dividend paid in the fourth quarter
which amounted to a total of P2.78 billion.
Significantly higher cash dividend payouts
were made in the last two years in line with the
Company’s efforts to reduce its equity base to
an optimal level.
The increase in dividend payments is backed
up by an ongoing asset rationalization program
which resulted in the sale of receivables and
non-strategic properties in 2003.
Liquidity and Debt Level
The Company’s financial strength is reflected
in its highly liquid position and comfortable
debt level. At the end of 2003, cash amounted
to P4.85 billion. Current ratio stood at 1.78:1
while debt-to-equity ratio was posted at 0.41:1.
Net debt-to-equity was at 0.27:1.
Ayala Land, Inc.
Investments
These borrowings significantly enhanced
Ayala Land’s financial flexibility. As of yearend, consolidated debt amounted to P14.38
billion, a significant amount of which matures
beyond 2005 at which time a broader-based
recovery of the property market is expected.
Average cost of borrowings slightly increased
to 9.1% in 2003 from 8.5% in the previous
year, but still at relatively low levels.
For 2004, Ayala Land is allocating P5.6 billion for
project and capital expenditures. About P2.4 billion
or 43% is being earmarked for projects, primarily
for residential building and high-end residential
subdivisions. The balance of P3.2 billion or 57%
is being set aside for capital expenditures, primarily
for investments in commercial centers and office
buildings, as well as equity investments in various
subsidiaries.
Liquidity is expected to further improve with
the sale of seasoned installment receivables and
non-strategic real estate assets and investments.
In 2003, the sale of ALI and LPHI receivables
generated a total of P820 million.
In 2003, the Ayala Land (parent company) disbursed
P5.2 billion or 66% of the P7.9 billion project
and capital expenditures earmarked for the year.
The disbursed amount included the P2.6 billion
investment in Bonifacio Land Corporation. The
rest were spent on residential building projects,
commercial centers, residential subdivision projects
and office building improvements.
Annual Report ‘03
Project and Capital Expenditures
(Parent Company)
Commercial
Centers/ Office
14%
Equity Investments
54%
Residential Bulidings/
Townhouses
23%
Residential Subdivisions
9%
Equity investments, largely for Bonifacio Land
Corporation, accounted for half of parent company’s
P5.2B project and capital expenditures
Current Ratio, Bank Debt-to-Equity
and Net Debt-to-Equity Ratios
(X:1)
Ayala Land’s access to the domestic capital
market remained unimpaired. In November
2003, the Company issued P2.0 billion 5-year
bonds which found strong support from
institutional investors, as well as retail and high
net worth individuals. Philratings rated this
bond issue PRS Aaa and maintained its PRS
Aaa rating for the P3.0 billion bonds issued in
April 2002 and maturing in 2007.
25
3.00
2.50
2.00
1.50
1.00
0.50
0.00
1999
2000
2001
2002
Current Ratio
Bank Debt-to-Equity Ratio
Net Debt-to-Equity Ratio
High liquidity and low gearing provide financial
flexibility to the Company
Sep-03
Ayala Land, Inc.
26
Annual Report ‘03
Stock Performance
The local stock market performed favorably in
2003, backed by a relatively stable interest rate
environment and generally improved economic
and corporate earnings performance. Putting a cap
on the market’s advance, however, were political
concerns on the upcoming 2004 elections and
security concerns brought about by some attempts
to destabilize the government.
The Philippine Composite Index (Phisix) posted a
42% growth during the year. Ayala Land stock (ALI)
and the Property Index were up by 34% and 37%
respectively, but underperformed the overall market.
As of December 30, 2003, ALI share price closed
34% higher than at the start of the year
Relative Performance
ALI
Phisix
Property Index
Dec. 27, 2002
4.55
1,018.41
417.52
Dec. 30, 2003
6.10
1,442.37
571.35
Change
34.07%
41.63%
36.84%
ALI stock moderately underperformed the Phisix and
the Property Index
At the end of 2003, ALI closed at P6.10 per share,
significantly higher than end-2002 level of P4.55
per share. However, the stock’s trading liquidity
was relatively limited compared to the previous year.
ALI’s average daily volume and value turnover of 5.6
million shares and P32.0 million, respectively, were
lower than the 8.1 million shares and P49.3 million
averages in 2002.
In December, the Company issued 63.375
million new shares, bringing the total
outstanding shares to 10.76 billion and Ayala
Corporation’s (AC) effective interest in the
Company to 65% by the end of the year. The
share issuance was in relation to the transfer
to Ayala Land of AC’s 2,340-square meter lot,
the former site of the Ayala Museum along
Makati Avenue, which is now part of the
initial redevelopment phase of Greenbelt.
A special cash dividend of P0.26 per share was
paid to stockholders in the fourth quarter of
2003, in addition to the regular cash dividends
of P0.03 per share per semester. The
increased dividend yield is a continuation of
the Company’s effort to reduce its capital base.
In the previous year, Ayala Land also declared
a special cash dividend of P0.15 per share.
Given the special cash dividends in the past
two years, dividend pay-out rates were high at
98% and 136% for 2002 and 2003, respectively.
Stock Price Information (YTD - Dec. 30, 2003)
Starting Price
Ending Price
Percent Change
Highest Close
Lowest Close
Avg. Daily Price
Avg. Daily Volume
Avg. Daily Value
4.55
6.10
34.07
6.90
4.40
5.70
5,626,625
32,050,832
Date
Dec. 27, 2002
Dec. 30, 2003
July 23, 2003
March 10, 2003
With a market capitalization of P65.6 billion by end2003, Ayala Land was the 9th largest listed company
in the Philippines, accounting for 2.1% of total
market capital and 5.5% of the index-linked stocks’
total capitalization.
Despite price appreciation as of year-end, trading of ALI
shares was lower than previous year in terms of volume
and value
Dividend Pay-Out Ratios
Cash Dividends
per share
P0.03 (1H'03)
P0.26 (special)
P0.03 (2H'03)
Declaration Date
June 20, 2003
August 27, 2003
December 5, 2003
Record Date
July 25, 2003
September 26, 2003
December 23, 2003
Payment Date
August 20, 2003
October 22, 2003
January 16, 2004
The Company’s efforts to reduce its capital base and rationalize assets
enabled it to pay a special cash dividend in addition to the regular cash
dividends of P0.03 per share
1999
2000
2001
2002
2003
Cash
21%
23%
35%
98%
136%
Stock
68%
-
Total
21%
91%
35%
98%
136%
With the special cash dividends in 2002 and 2003, pay-out ratios were
significantly higher in the past two years
Ayala Land, Inc.
Land & Community
Development Group
In line with the Company’s thrust to prime
Ayala South, Ayala Land continued to
introduce additional lots and amenities
for Ayala Westgrove Heights and Ayala
Greenfield Estates.
In 2003, a total of 236 new lots were launched
at Ayala Westgrove Heights, bringing
cumulative lot offering in this project to 1,329
lots. As of end-2003, cumulative take up was
posted at 86%. About 31 homes have been
fully-built in this subdivision while 32 houses
were under construction as of year-end.
At Ayala Greenfield Estates, 94 lots in Phase
2 were added to the inventory, bringing total
lot offering to 457 lots, which as of end-2003
was 78% taken-up. Construction of the golf
course commenced in February 2003 and
completion of the first 9 holes is scheduled by
May 2004. When completed, the golf course
will be an 18-hole, par 72, championship golf
Helping these two Ayala South communities establish
critical mass are the support facilities which have
been established nearby. There are already three
major educational facilities operating in the area,
offering courses from pre-school up to the college
level. Nearly 2,000 students are now enrolled at the
De La Salle University - Canlubang, St. Scholastica’s
College - Westgrove and Don Bosco Caritas School.
Annual Report ‘03
Within the next two years, the Company will
continue to unlock values in its Ayala South
landbank. New concepts and amenities
will be introduced in the existing residential
developments to accelerate sale take up, as well
as enhance capital values.
At the same time, Ayala Land will aggressively
identify new areas and tap unserved markets in
Northern Luzon and east of Metro Manila.
LCDG Sales Volume
Continuing with the success of Paseo de Magallanes’
initial phase, Phase 2, consisting of 17 residential and
6 commercial lots, was launched in May which as of
year-end were 59% and 67% taken up, respectively.
Commercial establishments, including banks, offices
and retail stores, have started to operate in the initial
phase of the project.
In September, Phase 2 of Ayala Hillside Estates was
launched consisting of 9 choice lots in an exclusive
neighborhood called The Pinnacle and 20 regular
lots with varying views of the golf course fairways.
Fourteen of these 29 lots are ALI’s share, while the
balance is owned by Capitol Hills Golf Club, the
Company’s joint venture partner in this project. Sales
have been brisk, with 100% of ALI’s share taken-up by
year-end. Phase 3A, launched in November, offered 78
lots, 48 of which are ALI’s share. By end-2003, 60%
of the 48 lots have been taken-up. The first 9 holes of
the all-weather golf course integrated in this residential
development were already playable by year-end.
Capitalizing on the success of Ayala Alabang Village,
the Company joined hands with Bank of Philippine
Islands to develop the latter’s 1.7-hectare property
inside the subdivision. In May 2003, Tamarind
Cove, consisting of 20 lots, was launched and the
Company’s share of 9 lots was 56% sold by year-end.
338
350
306
300
250
No. of Units
The prevailing low-interest rate environment,
coupled with the availability of attractive inhouse financing schemes, encouraged both
end-users and investors to make their purchase
decisions. There was also opportunistic
buying in some of the Company’s new
projects situated within Metro Manila. As a
result, high-end residential lot sales volume
has been on the rise for the past three years.
course covering approximately 60 hectares. This,
together with other amenities introduced in the
village such as the 9-hole putting green and riparian
grove, the outdoor basketball & tennis courts and
tree groves, attracted new buyers.
301
237
277
212
200
150
100
50
0
12
97
98
99
00
01
02
03
Ayala Westgrove Heights
Tamarind Cove
Paseo de Magallanes
Others
Ayala Hillside Estates
Ayala Greenfield Estates
Sale of lots at Ayala South (Ayala Westgrove Heights,
Ayala Greenfield Estates) continued to account for the bulk
of high-end residential lot sales
LCDG Sales Value
in Php Million
Demand for the Company’s high-end
residential lots was sustained as market
preference for the Ayala brand, which
has become synonymous to high-quality,
continued to draw buyers. Further
augmenting market interest was the
Company’s continuous effort to add more
value to its developments by introducing
village amenities catering to the different
lifestyles of the buyers.
27
2000
1800
1600
1400
1200
1000
800
600
400
200
0
1,788
1,438
1,195
1,095 1,053
709
106
1997 1998 1999 2000 2001 2002 2003
In terms of value, lot sales in 2003 were significantly
higher than all previous years since the 1997 crisis
Ayala Land, Inc.
28
Annual Report ‘03
Commercial Centers Group
The Company’s shopping centers once again
delivered a strong performance despite political
and economic uncertainties which tended to stifle
consumer spending. Its expertise in the ABC+
market and the ability to innovate and capture market
interest, was evident in a high weighted average
occupancy of 98% for its six malls.
in Php Billion
Ayala Center Sales
25
18.72
20
15
10
5
0
1999
19.13
20.18
20.66
21.87
2000
2001
2002
2003
Despite market uncertainties, Ayala Center sales
remained steady
Ayala Center, with over 600,000 square meters of
gross leasable area (GLA) and over 1,000 land and
building tenants, continued to generate the bulk of
shopping center revenues. Despite depressed market
conditions, sales at Ayala Center grew by 6% with
building occupancy at a high 95%.
in %
ALI Commmercial Centers
Building Occupancy Rates
100
95
90
85
80
75
70
65
60
55
50
1999
2000
2001
Overall shopping center revenues grew by 8% due
to the full year operation of Greenbelt 2 and 3, an
entertainment and dining hub built with a 3-hectare
park, and a 5% - 12% escalation in Ayala Center’s
basic rental rate. Traffic was sustained by year-round
high-impact marketing activities. Merchant-to-space
application ratio still stands at 5:1.
2002
2003
Ayala Center Makati
Alabang Town Center's reduced occupancy in 1999 due
to construction of new wing
Ayala Center Cebu's 2003 occupancy affected by
4th level renovation
Occupancy of the Company’s major malls remained
high at above 90%
An integrated web of elevated walkways and passages
now provides greater convenience of access to
Ayala Center. Linked to the Legaspi Village walkway
system, shoppers have continuous pedestrian
connectivity to the Metro Rail Transit-3 (MRT-3)
station thru Greenbelt and Glorietta.
Greenbelt 4, consisting of 5,000 square meters of
GLA, soft opened in November 2003, housing
high-end fashion brands. Further enhancing the
value of Greenbelt is a world-class Ayala Museum
opening in June 2004 which completes the initial
redevelopment phase of Greenbelt.
The new Greenbelt has redefined shopping,
dining and malling experience in Metro Manila and
represents the country’s first Lifestyle Center. Its
unique, exciting concepts in entertainment
and retail reflect a dynamic partnership with
merchants.
Greenbelt won three international awards
as an exemplary, world-class development.
In October 2003, Greenbelt 3 won the
prestigious Award for Excellence from the
Washington D.C.-based Urban Land Institute
(ULI). Greenbelt 3 was one of the ten winners
and one of only three shopping centers from
among 109 developments from all over the
world. The competition considered a wide
range of criteria including design, leadership,
contribution to the community, innovation,
environmental protection and enhancement
and financial success.
Also in October 2003, Greenbelt won a Merit
Award (Silver Award) in the International
Council of Shopping Center (ICSC) Maxi
Awards for Marketing Excellence in the grand
opening, expansion and renovation category.
In addition, Greenbelt won first place in
Chain Store Age’s 2003 Retail Store of the
Year Competition (Open Shopping Center
Category). Chain Store Age, a US-based retail
trade magazine, gathered a well-respected
panel of judges composed of architects,
designers and retailers who evaluated the
nominated stores and shopping centers
based on project objective, unique project
characteristics and special design elements.
Nearby San Antonio Plaza Arcade was
100% occupied by select retail establishments
catering to the needs of residents of Forbes
Park and Dasmariñas Village. This 1,900square meter neighborhood shopping center is
Ayala Land, Inc.
A merchant replacement program now on
its third year successfully positioned the
84,000-square meter Alabang Town Center
as the family shopping and entertainment
destination in the South. Themed zone
concepts were introduced targeting the
sports buff and hobbyist, young shopper
and other market segments. A newly opened
2,600-square meter anchor store and
restaurant row complemented the existing
mix in the mall. Continuing efforts are being
made to transform the mall into another
lifestyle center.
Phase 1A of Market! Market!, a retail
development within the Bonifacio Global
City, was 50% complete as of year-end and
is scheduled to open in October 2004. This
super-regional value mall brings together
traditional and non-traditional retailers and
wholesalers and caters to “value-conscious”
consumers. With about 150,000 square
meters of GLA, this mall will have more
than 1,000 retail and food outlets and will
include a hawkers area, department store and
supermarket, fruits and flower market and
a public transport terminal. As of year-end,
90% out of 244 regular spaces have been
leased out. 54% of over 600 bazaar spaces
have already been committed.
Popular Metro Manila brand outlets offering
affordable and marked-down prices were
introduced to reinforce the value mall
positioning of Pavilion Mall, a 14,000-square
meter development located in Biñan, Laguna,
29 kilometers south of Makati. Given the
mall’s primarily local, interneighborhood market,
community-building activities to establish shoppers’
loyalty were the focus of its marketing program.
Now on its third year of operations, Metro Point,
another value mall, continued to capitalize on
an 80,000 daily pedestrian traffic resulting from
its connection to both the LRT-1 and MRT-3
stations in Pasay City. Mall performance improved
significantly because of the strong growth of
merchant sales, better building occupancy and the full
operations of the mall’s link to the LRT north-and
south-bound locations.
Over 76,000 square meters in retail developments
within Bonifacio Global City are now under
management by the Commercial Centers Group
following the Company’s major investment in
Bonifacio Land Corporation. These include
Annual Report ‘03
Bonifacio Stop-over and The Fort. Ongoing
work consists of optimizing merchandise mix,
leasing of spaces and tenant relations, and
marketing, advertising and promotions.
In the next five years, shopping center
expansion involving an additional 476,000 square
meters of GLA, will increase retail stock by
at least 54%. In addition to Market! Market!,
future mall projects include the North Triangle
Commercial Center at the MRT depot in
Quezon City and new lifestyle centers.
Even as the Company expands into new areas,
marketing and promotions of Ayala Center
will be sustained, projecting its completeness
given its unique, complementary components,
Glorietta and Greenbelt.
Total Shopping Center Leasable Areas
in Sqms
located at the junction of McKinley Road and
Palm Avenue.
29
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
-
1,317,000 1,357,000 1,358,000
1,027,000 1,035,000
881,000
03
04
05
06
07
08
* Leasable areas exclude parking
Shopping center leaseable area will increase by more than 50% in 2008
compared to 2003 levels
Greenbelt Redevelopment
Greenbelt 2
Greenbelt 3
Greenbelt 4
Museum
retail
retail / entertainment
retail
GLA
4,512
19,967
5,114
1,800
31,393
Over 30,000 sqms. in gross leasable area
completes the transformation of Greenbelt into
an award-winning Lifestyle Center
Ayala Land, Inc. 30
Annual Report ‘03
Corporate Business Group
Ayala Land’s office buildings continued to command
premium pricing given their superior location, better
quality and high level of property management.
Rents at Tower One, 6750 Ayala Avenue, MSE
Building and Ayala Life FGU Center in Makati
collectively ranged from P468 to P719 per square
meter per month.
Given the continued pressure on lease rates,
Ayala Land was constrained to renew expiring
leases at lower effective rental rates, by way of
concessions such as rent-free period, to keep
existing office tenants. The Company, however,
maintained its headline rates for its office
buildings at the same levels as in 2002.
Ayala Land’s office buildings posted high
occupancy rates, averaging 95%, higher than
MCBD’s average occupancy rate of 88%. Because
of limited available space, the Company was
unable to immediately accommodate new demand
from call centers and BPO firms requiring large,
contiguous space.
in %
ALI and MCBD Office Occupancy Rates
100
95
90
85
80
75
96%
95%
95%
94%
92%
90%
87%
83%
99
00
01
85%
02
88%
03
ALI Average Occupancy Rate
MCBD Office Occupancy Rate *
* Source: Colliers International
Average occupancy of Company’s office buildings
has always been higher than the average rate in the
Makati Central Business District
in %
ALI Office Buildings
Occupancy Rates
Given its initial success, the Company intends to
replicate this E-services building project in other
properties within the MCBD, Fort Bonifacio,
Alabang and Quezon City.
100
90
80
70
60
50
1999
2000
As a result of marketing activities conducted in
2003, Ayala Land will begin construction in early
2004 of PeopleSupport Center – the country’s first
office building fully dedicated to BPO and call center
operations - in the MCBD. The five-storey building,
located at the corner of Amorsolo Street and Ayala
Avenue, will have almost 16,000 square meters of
leasable space and over 1,000 square meters of retail
when completed in April 2005. The office space is
covered by a ten-year lease agreement with US-based
PeopleSupport, reputedly the most profitable BPO
firm in the country today and the second largest in
terms of employment.
2001
2002
2003
Tower One
MSE Bldg.
6750 Ayala Ave.
Ayala Life-FGU Center
Occupancy rates of all four office buildings generally
remained stable throughout the past five years
In the next 12 months, MCBD occupancy rates are
expected to gradually improve while rental rates are
expected to post slight improvements. As such, the
Company expects to maintain its existing offer rates
and continue implementing an escalation structure
of leases by 2004. Ayala Land will also pursue
the conversion of vacant units and underutilized
spaces into income-generating amenities.
Meanwhile, the industrial estate sector continued
to face an oversupply. Despite limited demand
from new foreign investors, Laguna Technopark,
Inc. (LTI) managed to sell 7 lots with a total area
of 4.1 hectares in 2003, higher than the previous
year’s sale of one lot with an area of 0.6 hectare.
To address the demand for smaller lot cuts, LTI
re-blocked some of the remaining inventory to
come up with less than 1-hectare lot parcels.
LTI continued to attract small to medium
enterprises, particularly suppliers of big
manufacturing facilities operating within Laguna
Technopark. These suppliers are now tenants
of LTI’s fully leased-out Standard Factory
Building (SFB). With demand for SFB units
noted, LTI is planning a second factory building
project which will offer 11 units with areas
ranging from 800 square meters to 925 square
meters per unit.
In 2004, LTI will focus on selling the remaining
saleable inventory in the existing industrial
park while it pursues the development of an
expansion area.
Office Rental Revenue Contribution
to Consolidated Revenues
in Php Million
A gradual improvement in the Makati office
vacancy rate was noted during the year, with
new demand coming from call centers and
business process outsourcing (BPO) firms which
require relatively low rental rates. As such, the
improved occupancy rates did not translate to
any improvement in rental rates.
16000
14000
12000
10000
8000
6000
4000
2000
0
3%
5%
1999
5%
2000
4%
2001
4%
2002
Office Buildings
Rental revenues from office properties accounted for
3% of total revenues in 2003
2003
Ayala Land, Inc.
31
Annual Report ‘03
Residential Buildings Group
A key achievement in 2003 was the successful
grand launch in June of The Residences at
Greenbelt. Laguna Tower, the first of the
three towers to be located right within the
Greenbelt Redevelopment, reinvigorated the
high-end condominium market. Despite
competition and lingering fear of a glut in
this segment, The Residences achieved a sales
take-up of as much as 40% of its 249 units
in the first month of sale. As of the end
of 2003, sales reached 61%, surpassing its
forecast for the year.
Another major accomplishment was the near
full sell-out of the 369 units of One Legazpi
Park, within less than two years from launch
in March 2002. The project introduced
smaller units while maintaining the same
quality finishes of Ayala Land’s traditional
larger sized high-end products. Construction
is progressing as planned and reached 40%
completion by end-2003. Building top-off is
expected in July 2004.
The Bonifacio Ridge project of Fort
Bonifacio Development Corporation, now
managed and marketed by Ayala Land,
came into the market with its re-launch in
Building on its success this year, the Company
will be developing the recently acquired 8.5hectare Fort Bonifacio property and other
projects in 2004 and the years ahead.
RBG Sales Volume
RBG continued to be a dominant player in the highend, low-density residential market, through Ferndale
Homes and Montgomery Place, both located in
Quezon City. Sales rates remained stable in the
past year, and the selling process is now at its final
stages. Majority of buyers are end-users, rather than
investors. Affordable payment terms remained an
attraction for these buyers.
As of year-end, remaining inventory at the 7.5 hectare Montgomery Place consisted of only 45 out
of 270 units. Thirty six lots/units remained unsold
at Ferndale Homes, a 25-hectare single-detached
cluster housing development.
The Company’s leased units also did better than
market. Rents across residential condominiums in
the Makati area declined by almost 2% compared to
2002. However, rentals at both One Roxas Triangle
and The Residences at Greenbelt Townhouses
held steady. Twelve Company-owned One Roxas
Triangle units remained leased out as of end-2003.
Leasing of the 28-unit The Residences at Greenbelt
Townhouses, which went into full swing this year,
achieved an 86% occupancy rate by year-end.
400
No. of Units
Sales at One Roxas Triangle (ORT) were sustained
with 16 units sold during the year, bringing aggregate
sales to 72% of the project’s 182 units. The 5year, interest-free scheme being offered remains
very popular among the buyers. This financing
scheme, plus the lease of units at very attractive
rates, have earned ORT the distinction of being the
best investment alternative in the luxury residential
condominium market.
300
382
392
2002
2003
235
200
100
65
43
0
1999
2000
2001
The Residences at Greenbelt
Ferndale Homes
One Legazpi Park
One Roxas Triangle
Montgomery Place
Others
Strong take-up of high-end residential building projects
demonstrates the Company’s dominance of the market
MCBD Residential Condominium Vacancy Rates
in %
These results, realized amidst a very dynamic
competitive environment, clearly demonstrate
Ayala Land’s strong brand equity and
continuing product innovation.
September. Scheduled delivery by second half of
2004 is a strong competitive advantage in the light
of later completion dates of similar projects being
presold. By end - 2003, Seventeen Bonifacio Ridge
units were taken up since project re-launch.
18
16
14
12
10
8
6
4
2
0
15.9%
12.9%
10.2%
10.1%
99
00
11.6%
01
02
03
* Source: Colliers International
Despite continued high vacancy rates in the MCBD,
Ayala Land’s residential building projects in Makati
experienced brisk take-up
RBG Revenues
in Php Million
The Residential Buildings Group (RBG)
concluded 2003 with record breaking sales
of 392 units, 3% higher than last year’s level
and 67% higher than 2001’s. More than 70%
of the volume came from condominium
projects at the MCBD, which remained a main
attraction for investors and end-users alike.
2000
1500
1000
500
0
1,482
636
1999
1,634
1,891
678
2000
2001
Revenues over the past three years show
strong, steady growth
2002
2003
Ayala Land, Inc.
32
Annual Report ‘03
Mass Housing Group Revenues
Mass Housing Group
2500
2,041
In 2003, demand for low-end and affordable
housing continued to be strong as seen in the
substantial increases in Licenses to Sell issued
by the Housing and Land Use Regulatory
Board. More than half of this demand was
in the National Capital Region, Central Luzon
and Southern Tagalog regions. Growth was
fueled by liberal financing terms both in the
commercial and Pag-Ibig sectors, and the newfound speed of the government sector in
processing local and national permits.
Laguna Properties Holdings, Inc. (LPHI) made
its presence felt in these growth regions through
the opening of new phases in three ongoing
projects in Dasmariñas, Cavite; Antipolo, Rizal;
and Sto. Tomas, Batangas; and through its initial
venture north of Metro Manila in Cabanatuan,
Nueva Ecija. A new product line was introduced
in Sucat, Parañaque within the National Capital
Region. In addition, customer-friendly financing
was emphasized through strengthened tie-up
with Pag-ibig.
No. of Units
Mass Housing Booked Unit Sales*
1600
1400
1200
1000
800
600
400
200
0
1,451
1,121
608
1999
754
2000
806
2001
2002
* Excludes socialized housing units
Medium-Rise Residential Building (P900k-P2.2M)
Middle-Income House-and-Lot (P2.8M-P4.0M)
Affordable House-and-Lot (P750k-P1.8M)
Low-Cost House-and-Lot (P400k-P650k)
Lots Only (P200k-P2.0M)
Unit sales grew nearly 30% year-on-year
2003
As a result of its expanded market presence and
intensified sales efforts, LPHI ended 2003 with a
sales volume of 1,451 units, 29% higher than 1,121
unit sales booked in 2002. In peso terms, LPHI
ended 2003 with revenues of P1.8 billion, up by
nearly 30% from previous year. Growth was driven
by strong sales experienced in affordable housing,
farm and hacienda lots and new projects.
Sale of affordable housing totaled 772 units, up by
11% from previous year. The affordable housing
line consists of housing units that are priced from
P750,000 to P1.8 million, as well as lots with an
average selling price of P470,000. This product
line represents 53% of LPHI’s total booked sales,
making the company the leading affordable housing
developer. Growth was driven by sales from three
projects: Sta. Catalina Village (Dasmariñas, Cavite),
launched in August 2002; San Antonio Heights (Sto.
Tomas, Batangas) where new house models priced
from P650,000 to P1.2 million were introduced; and
Villa Sta. Monica residential lots (Lipa, Batangas).
Ninety-five hacienda and farm lots were sold at
Hacienda Sta. Monica, LPHI’s first integrated farm
lot development in Lipa, Batangas. In peso terms,
sales of hacienda and farm lots amounted to P239
million, up by 72% from previous year. With 188 of
total 283 lots unsold, expansion of the 95-hectare
property is on-going.
New projects such as Sta. Arcadia Estates
(Cabanatuan, Nueva Ecija) and One Aeropolis
(Sucat, Parañaque) continued to enjoy very healthy
take up rates.
LPHI’s venture in Cabanatuan, Nueva Ecija was
favorably received. With only three months of selling,
a total of P104 million was generated from the sale
of 26 residential lots at Sta. Arcadia Estates and 8
commercial lots at Sta. Arcadia Town Center in 2003.
in Php Million
2000
1,591
1500
821
1000
500
-
604
649
1999
2000
2001
2002
2003
Medium-Rise Residential Building (P900k-P2.2M)
Middle-Income House-and-Lot (P2.8M-P4.0M)
Affordable House-and-Lot (P750k-P1.8M)
Low-Cost House-and-Lot (P400k-P650k)
Lots Only (P200k-P2.0M)
Although the overall market remained soft, mass
housing revenues were more than triple 1999 levels
In Sucat, Metro Manila, 197 units at
One Aeropolis, LPHI’s first residential
condominium project, were sold, representing
14% of total LPHI unit sales. The project
consists of 12 medium-rise residential
buildings with 12 floors, with each building
featuring a signature atrium garden capped by
translucent skylight roofs. Although the first
building will not be completed until December
2004, commitments for 218 out of 240 units
were received only six months after its launch
in June. Because of strong sales, the second
building was opened for sale in November.
LPHI expects to do as well, if not better, in
2004 and succeeding years. The growth driver
will be its medium density residential building
projects providing affordable housing to
Metro Manila, where demand is highest.
As financing terms became more attractive,
more than 50% of LPHI buyers availed of
affordable payment schemes. Supplementing
these in-house loans were Pag-ibig housing
loans which feature reduced interest rates and
longer terms. Pag-ibig-financed sales accounted
for about 35% of total accounts, up from 13%
in 2002, and is expected to grow further.
Ayala Land, Inc. 33
Annual Report ‘03
Core Middle-Income
Residential Group
The condominium segment of the industry
was seen to be more active than the lots
and house-and-lots sector. In addition, an
affordable condominium sub-segment has
emerged, with units selling at prices ranging
from P1 million to P2.5 million. More than
2,000 units have been sold by the industry
within the first half of 2003 alone.
With operations starting only in March 2002,
Community Innovations, Inc. (CII) has already
established a firm foothold in the core-mid
residential segment.
CII’s maiden project, the Verdana Homes
in Bacoor, Cavite near Ayala Alabang, was a
remarkable success, experiencing fast take up
right after its launch in 2002 and was fully sold
by 2003. The project consisted of 468 lots
and 88 house-and-lots designed in Californian
architecture. Development of the lots and
clubhouse amenities has been completed,
and turnover to unit owners of Phase 1 has
started. The remaining house-and-lot units
will be completed by June 2004.
CII launched the Verdana Village Center in
the third quarter to complete the community
offering. Five out of 18 commercial lots
put on the market were sold as of year-end.
Inquiries are continuously coming in.
With the success of its first subdivision
project, CII went into condominiums with
The Columns at Ayala Avenue. It is a
trio of 30-storey buildings, each with 284
units, at the corner of Ayala and Buendia Avenues
in Makati. Again, this project is proving to be
another remarkable feat, with sales exceeding
expectations. The first tower was nearly sold out in
four months from soft launch in November 2002.
Tower Two was launched soon after and likewise
experienced fast sell-out at 71% of its 284 units by
year-end. Soft launch of Tower Three followed in
late October. With 13% take up by year-end, it is
expected to be fully sold out towards the end of the
first half of 2004.
In February 2004, the first phase of the 60-hectare
project sequel to Verdana Homes, will be launched.
A total of 416 lots will be offered for sale. The
subdivision, located in Biñan, Laguna, just off
the Mamplasan interchange, will feature a bigger
clubhouse and central park.
CII’s organization continues to evolve, with sales
reach to be expanded with the establishment of
satellite offices in Alabang and in the Bonifacio
Global City. Provincial and international
sales presence which started in 2003 will be
strengthened in 2004.
CII 2003 Revenue Breakdown
Verdana Village Center
4%
Verdana Homes
69%
The Columns
27%
To be launched within the first quarter is an
innovatively-designed residential development on
the 8.5-hectare property in Bonifacio Global City
through a joint development agreement with the
Bases Conversion Development Authority. The
project will highlight a design approach which will be
the first of its kind in the country.
Revenues from Verdana Homes, launched in 2002,
accounted for 69% of CII’s revenues in 2003
Aggressive business development activities shall
continue within 2004. Several sites are under study
for future launches.
Core Middle-Income
Residential Group Revenues
in Php Million
Driven by low interest rates and attractive
affordable product offerings, the core middleincome (core-mid) residential market remains
very strong in Metro Manila and outlying
areas, particularly in the Makati-Taguig vicinity.
700
600
500
400
300
200
100
0
681
508
The Columns
2002
2003
The Core Mid Group
generated nearly P1.2 billion
in revenues after barely two
years of operation
Tower 1
Tower 2
Tower 3
Launch Date
November 2002
March 2003
October 2003
No. of Units
284
284
284
End-2003 Take-up
93%
71%
13%
Due to favorable market response, three towers of The Columns were
successively launched ahead of schedule
Ayala Land, Inc.
34
Annual Report ‘03
Visayas & Mindanao Group
Ayala Center Cebu, the centerpiece of the 50hectare Cebu Business Park, performed well.
Sales per square meter of building merchants
and land lessees grew by 14% and 6%,
respectively. Now on its 10th year of operations,
the mall, with nearly 80,000 square meters of
gross leasable area, remains the main revenue
generator for CHI.
Year-round occupancy averaged at 97%.
Although average daily traffic count decreased
by 3% to about 62,000 due to security concerns
that prevailed nationwide during certain
periods of the year, purchase amount per
shopper improved by 10%, strengthening the
mall’s position as the preferred destination
for shopping, dining and entertainment.
Continuous evaluation of existing merchants
resulted in the replacement of low-performing
outlets and the introduction of new marketdriven concepts. Almost twenty new outlets
opened in the past year.
New and improved amenities, such as a
renovated cinema, a new foodcourt, and an
enhanced outdoor lagoon area, have been lined
up for 2004.
Demand for club shares, considered as luxury
products, was soft. Despite the availability of
City Sports Club Cebu shares in the secondary
market and entry of new projects, share prices were
maintained at 2002 levels. Aggressive marketing
initiatives resulted in the sale of 47 shares in 2003.
The entry of IT-enabled firms to Cebu boosted the
positioning of Asiatown IT Park, the flagship project
of CPVDC.
E-offices at the 24-hectare Asiatown IT Park
successfully addressed the demand for office space
from IT-enabled locators who opted for leasing
arrangements. Approximately 11,130 square meters.
of E-office space have been leased out or committed
to five locator-companies. The lease contracts with
three of these, namely, People Support, Epson and
NCR, were executed in 2003.
In addition, two lots with a total area of 1,760 square
meters were sold in December. This was the
result of efforts to match property investors with
prospective locators. Lot owners are presented with
opportunities to provide e-office buildings and satisfy
a growing demand from IT companies interested in
locating at Asiatown.
More e-office buildings are expected to be built in
the coming months for other companies who have
either reserved or have firmly signified interest to
locate at Asiatown.
Plantazionne Verdana Homes, launched only
in October 2002, has gained a foothold in the
middle-income lot market in Bacolod City.
Plantazionne Verdana Homes is a residential
subdivision offering cluster lots with a
resort ambiance and a total area of about 21
hectares. Phase 1 consists of 159 lots or an
area of about 6 hectares. As a result of an
intensive marketing and sales campaign, takeup as of year-end reached to 113 lots or 71%
of total. Of these, 76 were realized in 2003,
the weak market notwithstanding.
Ayala Northpoint, now on its 5th year, has
firmly established itself as the premiere
residential address in Negros. This 122hectare property has been planned following
the village concept with a central core housing
retail establishments, a civic center and a
school. Thirty three lots were sold in 2003,
bringing take-up to 62% of total 416 lots
comprising Phases 1 and 2. The village now
has 11 houses while 9 are under construction.
Ayala Center Cebu Sales
in Php Million
Company investments in Cebu are through
Cebu Holdings, Inc. (CHI), a 47%-owned
affiliate, and Cebu Properties Ventures and
Development Corporation (CPVDC), 76%owned by CHI.
The Cebu Business Park saw renewed interest from
Cebu-based businessmen looking for new investment
and expansion area. One lot with an area of 4,800
square meters was sold, with only 12 remaining
lots unsold at year-end. The business park todate
remains the only masterplanned location in Cebu
that integrates business, commercial, recreational,
entertainment and high-rise residential components.
8000
6000
4000 2,847
2000
0
1999
3,293
3,610
3,877
2000
2001
2002
4,146
2003
Sales at Ayala Center Cebu, now on its 10th year of
operation, remain healthy
Ayala Northpoint & Plantazionne Verdana Homes
No. of Lots
As in the previous year, the real estate market in
the Visayas and Mindanao regions, faced with
weak demand, remained competitive in 2003.
The Company’s Cebu-based business unit, which
handles all market segments in these regions,
however, continued to pursue available growth
opportunities in Bacolod and Cebu.
120
100
80
60
40
20
0
35
76
26
69
47
43
33
1999
2000
2001
2002
2003
Ayala Northpoint
Plantazionne Verdana Homes
Combined residential lot sales at Ayala Northpoint and
Plantazionne Verdana Homes was up by 40% in 2003
Ayala Land, Inc.
35
Annual Report ‘03
Fort Bonifacio Development
Corporation
In April, Ayala Land, through a joint venture
with Evergreen Holdings, Inc., a Philippine
corporation owned and controlled by the
shareholders of United Laboratories, Inc.,
completed the acquisition, through Columbus
Holdings, Inc., of 50.38% of the total
outstanding capital stock of Bonifacio Land
Corporation from Metro Pacific Corporation.
Bonifacio Land owns 55% of Fort Bonifacio
Development Corporation (FBDC) which
then owned approximately 55 hectares of
semi-developed land in the Bonifacio Global
City, a modern and fully-masterplanned
business district only minutes away from
Makati and the airport.
FBDC has been under new management
since the acquisition. Ayala Land lends its real
estate experience to FBDC and takes the lead
in managing its commercial operations and
marketing of projects. Evergreen Holdings
provides its expertise in overseeing the
financial group.
Financial Highlights. FBDC’s initial goal is to
achieve financial stability by reducing debt and
overhead expenses, which FBDC began to
significantly achieve in 2003.
condominium sales accounted for P340 million.
Leases generated P170 million in revenues. Total
cash from operations generated during the year
amounted to P223.5 million.
Land Sales. FBDC’s main strategy is to hold on to
the most prime areas for future appreciation, and
aggressively sell its other lots on the fringes of the
Global City to generate cash and partly reduce debt.
Land sales generated a total of P678 million in
revenues in 2003. McKinley Business Park, a 2hectare property at the South District of the Global
City, was launched in September 2003. All 17 lots
averaging 1,132 square meters were taken up within
3 weeks. A 1,747-square meter lot in E-Square was
also sold in June.
Plans for the rehabilitation of The Fort as well
as the parking areas, are underway. Planning is
also ongoing for a sports retail development at
the City Center to complement the surrounding
sports facilities, construction of which will
commence in 2004.
Residential Buildings. Bonifacio Ridge, FBDC’s
sole residential building project, was re-launched
in September 2003. The building is comprised
of 288 2-bedroom units, each with an average
area of 113 square meters.
Completion was at 85% as of end-2003. The
building is expected to be completed by the
fourth quarter of 2004. A total of 167 units
have been taken up as of end-2003.
Land Leases. FBDC currently leases a total of 6.8
hectares of land to various lessees, including Price
Smart, as well as MC Home Depot which held its
formal opening in September 2003. Lessees which
began construction in 2003 include the Car Plaza,
Sports Kamp, Fort Strip and The Forum.
The City Center, considered the most prime area of
the Global City, will be held for future appreciation.
In the interim, the land will be leased out for a period
ranging from 5 to 20 years to provide recurring
income as well as generate activity in the Global City.
Debt restructuring activities were undertaken,
resulting in the stretching out of the loan
maturities and a reduction of borrowing cost
from about 14.3% as of end-2002 to 12.7%
as of end-2003. Excluding financing for
the Bonifacio Ridge project, bank debt was
reduced by P26.7 million by end-2003.
Building Leases. FBDC increased its total retail
leasable space to 5,446 square meters with the
expansion of the Bonifacio Stop-over in 2003.
Rentals from The Fort and Bonifacio Stop-over
amounted to P43.4 million in 2003, 62% higher than
that in the previous year.
Consolidated revenues of FBDC in 2003
was P1.3 billion. Land sales contributed P678
million or 53% of the total revenues, while
Office leases at Bonifacio Technology Center
generated P55.4 million in 2003, which is 63% higher
than the 2002 level.
FBDC 2003 Revenues
Condominium
Sales
27%
Land Sales
53%
Leases
13%
Others
7%
Land sales, derived mostly from McKinley
Business Park, generated half of total revenues
Ayala Land, Inc.
36
Annual Report ‘03
Other Business Interests
Construction
Opportunities in the construction sector
continued to be limited. While there were a
number of new developments undertaken
by the private sector, the rising costs of steel
and steel-based products, as well as the peso’s
depreciation, capped construction activities.
Meanwhile, the government’s ability to pumpprime public infrastructure projects was
restricted by the budget deficit. The lack of
counterpart funds to foreign-assisted projects led
the government to re-prioritize its infrastructure
projects.
Makati Development Corporation (MDC),
being the construction arm of Ayala Land and
its subsidiaries, was able to maintain a relatively
full work load as Ayala Land continued to
introduce new projects, both in the high-end and
middle-income segments. Although MDC had
business with third-party clients, as much as 79%
of MDC’s revenues was generated from Ayala
Land-related projects. MDC, however, actively
participates in project biddings being conducted
by external clients, both private and public, to
beef up third-party revenue contribution.
While MDC’s focus and expertise has been
on horizontal land development projects, the
company is gearing up for its plan to actively
engage in building construction projects to
better support Ayala Land and its subsidiaries,
and tap opportunities in the market. The
Columns, a three-tower residential condominium
project of Community Innovations, serves as
MDC’s initial venture into high-rise building
construction.
To ensure world-class quality, customer
satisfaction and competitiveness in its
construction undertakings, MDC pursued
and got certified for ISO 9001:2001
(Quality Management), ISO 14001:1996
(Environment Management), and OHSAS 18001:
1999 (Occupational Health and Safety Management
System). The integrated certification is the first in the
local construction industry.
Hotels
In the first half of 2003, the hotel sector was set back
by the SARS scare which saw a substantial drop in
tourist and visitor arrivals. Demand was significantly
reduced as seen in the lower occupancy rates. This,
coupled with the continued pressure on room rates
due to the unyielding rate war among the hotels in
Makati, resulted in reduced hotel revenues.
Within the MCBD, occupancy rates among the
deluxe hotels and serviced apartments averaged at
63%, lower than 66% average in 2002. Room rates
averaged at P3,616 per night, a slight decline from
previous year’s rate of P3,633.
Meanwhile, Cebu City Marriott Hotel
performed favorably, benefiting from a pick
up in room bookings from local clients, as well
as the closure of one of the major hotels in
the city. Marriott’s average occupancy rate of
76% in 2003 exceeded previous year’s average
of 65% while its average room rate of P1,860
per night was 7% higher than the 2002 level.
In the year ahead, AHI will focus on securing
healthy occupancy levels for its properties
through active solicitation of new corporate
and retail accounts, while maintaining strong
loyalty among its existing clients. In addition,
AHI will ensure that its hotels and serviced
apartments will command profitable but
competitive room rates.
Property Management
Ayala Hotels, Inc.’s (AHI) Makati properties were not
spared by the industry-wide reduction in occupancy
and room rates. Fortunately, occupancy rates of
AHI’s hotels and serviced apartments held on at
above-market levels.
Hotel InterContinental Manila registered an average
room rate of P3,170 per night in 2003, 2% lower
than previous year’s level while occupancy rates
averaged at 66%, down from 2002 level of 75%.
Oakwood Premier Ayala Center’s average room rate
of P4,917 per night slightly declined from the 2002
average of P4,943 while its average occupancy level
of 69% was lower compared to previous year’s 75%.
Ayala Property Management Corporation
(APMC) continued to expand the coverage of
its services, both for Ayala Land and external
clients. APMC secured the management
contract for new Ayala Land-related properties
including the Bonifacio Ridge, the new
Ayala Museum and the upcoming e-services
office building in Makati. Outside Ayala
Land, APMC secured new deals with utility
companies, Manila Water and Bayantel.
Intensified security measures in the APMCmanaged properties remained a priority
given heightened security threats. Partly
instrumental in enabling Ayala Land
Hotel Occupancy Rates
Hotel InterContinental Manila
Oakwood Premier Ayala Center
Cebu City Marriott Hotel
MCBD Hotel Market
Cebu Hotel Market
No. of Rooms
338
306
303
2003 Occupancy
66%
69%
76%
63%
66%
The Company’s hotel properties continued to do better than market in
terms of occupancy
Ayala Land, Inc.
properties to command premium pricing
over competition has been the high-quality
property maintenance which APMC attains
through continuous improvement in its
services, facilities and systems.
Looking ahead, APMC intends to intensify
its leasing/brokering service for residential
condominiums while it offers premises
management to tenants. It will also pursue
new opportunities by offering parking
management services to hotels, hospitals and
other properties and by exploring possible
projects with other utility companies.
The Company’s entry into this new business
is consistent with Ayala Land’s continuing
diversification moves. LLCG aims to provide
new venues for individuals and families who
seek to cultivate healthier lifestyles.
After a year of intensive site selection, LLCG
is in the process of finalizing plans for its
maiden projects targeted for launch in 2004
and 2005.
Annual Report ‘03
Key Corporate Initiatives
In the past year, Ayala Land vigorously pursued
initiatives to rationalize its asset portfolio and to
improve return on assets.
Ayala Land will continue to prioritize the
no recourse sale of its receivables, drawing
on its financial wherewithal to patiently and
satisfactorily season its accounts in-house.
Sale of Receivables
Asset Disposition
As of December 30, 2003, total consolidated inhouse receivables amounted to P5.79 billion. Buyer
loans of Ayala Land accounted for P3.28 billion or
57% of the total. In-house sales receivables of LPHI
and CII amounted to P1.95 billion (34%) and
P558 million (9%), respectively.
ALI has carved out certain non-core assets in its
balance sheet for disposition.
Asset Rationalization
Leisure and Lifestyle Communities
With the growing demand for products
and services offering leisure, relaxation and
physical wellness, the Leisure and Lifestyle
Communities Group (LLCG), one of Ayala
Land’s newest business units, actively identified
new ventures that will address this demand.
37
The Company continued to sell its seasoned
installment receivables, allowing it to liquefy its
receivables and, more importantly, offload the credit
risk. In 2003, a total of P820 million in receivables
were sold, P554 million of which were sold by Ayala
Land on a no recourse basis. For LPHI, total sale of
receivables amounted to P266 million in 2003, P117
million of which represents accounts which migrated
from in-house to bank / Pag-ibig financing.
These sales were covered by in-house receivable
financing lines negotiated with banks amounting
to P3.7 billion, consisting of P2.5 billion for Ayala
Land, P0.7 billion for LPHI and P0.5 million for CII.
The favorable terms that were obtained from the
purchasing banks largely recognized the company’s
tight credit origination and judicious accounts
management processes.
These include real estate properties which form
part of the Company’s nearly 3,700-hectare
landbank and are carried in the books at original
acquisition cost.
For 2003, the Company generated about
P1.0 billion from the sale of non-core assets
and investments. These include two gas station
sites in the MCBD, developed lots at Madrigal
Business Park and two Boracay properties
covering 80 hectares.
Landbank (As of End-2003)
3,677 Hectares
Visayas/
Mindanao Area
11%
Other Luzon Area
2%
Calabarzon
76%
Metro Manila
11%
Receivables sales will accelerate in the coming years
when installment receivables of residential building
projects, such as One Legazpi Park, Montgomery
Place and Ferndale Homes, which comprise the
bulk of Ayala Land receivables, shall have complied
with the prescribed seasoning criterion for physical
accomplishment.
The 3,677-hectare landbank includes 383 hectares in Metro
Manila and the remaining 2,300 hectares comprising Ayala South
38
Ayala Land, Inc.
Annual Report ‘03
Increased Dividend Payout
The Company continued to increase dividend
yield to shareholders to reduce its equity base to
an optimal level and, ultimately, lead to higher
return on capital employed and increased value
to shareholders.
The Company’s improved cash flow arising
primarily from the sale of receivables and noncore assets, cash dividends from subsidiaries and
higher cash flow from operations, enabled Ayala
Land to pay special cash dividends amounting to
P2.78 billion or P0.26/share in October.
Future special dividend distributions are
planned depending on the availability of cash,
taking into account project requirements as
well as the progress of the Company’s asset
rationalization program.
Sales and Marketing Services
Overall real estate sales was dampened by the
continued erosion in investor confidence due to
prevailing political and economic uncertainties.
Even under an extremely difficult operating
environment, the Company’s ability to market its
products remains strong.
successfully aligned with all-out efforts to market
high-end residential and commercial lots, as well as
building units.
SMSG’s sales volume of 695 units was 3% higher
than the 2002 level, and represents an all-time
high since 1996. Favorable sales performance is
attributable to two factors.
First is the steady stream of product offerings,
representing the best the marketplace had to offer.
Tamarind Cove and The Residences at Greenbelt,
launched in the first half of the year, were very well
Sustained sales and marketing activities,
received. In response to market demand, new phases including themed open-houses, on-site and
at existing developments were opened for sale.
off-site cocktails, generated a healthy pool of
reservations during the year. As a result of
Significantly increasing sales was a strengthened
heightened market awareness, The Residences
and optimized sales structure consisting of Ayala
at Greenbelt saw strong sales immediately
Land Sales, Inc. (ALSI), an in-house, commissionafter the launch in June.
based brokerage group formed in 2002 to focus on
the company’s high-end subdivision and building
Aggressive promos, including upgrading of
projects; accredited third party brokers; and Ayala
selected units, were implemented to sell out
Land’s business development executives.
the remaining units at One Legazpi Park,
Montgomery Place and Ferndale Homes. As a
ALSI generated P3.0 billion in sales, substantially up result, the remaining 100 units at One Legazpi
from the P1.3 billion in sales generated during its
Park at the end of 2002 were nearly sold out
initial 10-month operations in 2002.
by end-2003.
The sales and distribution channels of the Sales
and Marketing Services Group (SMSG) were
SMSG Sales Volume
800
672
No. of Units
600
400
129
200
695
458
368
323
325
1998
1999
209
0
1996
1997
2000
Residential Lots
Residential Condo/Townhouse Units
Office Lots/Units
SMSG’s sales volume at an all-time high since 1996
2001
The business generated by accredited third
party brokers likewise strengthened and
amounted to P2.8 billion in 2003, representing
a growth of 20%. This growth largely
stems from the focus placed by the business
development executives on helping ALSI and
third party brokers develop their business
through individualized goal setting, marketing
support planning, intensified product
knowledge training, and regular business
consultations and reviews.
2002
2003
The Company also took on the projects of
Fort Bonifacio Development Corporation.
Sales take-up was brisk at the McKinley
Business Park, with the full sell-out of
the 17 commercial lots. Bonifacio Ridge
condominium was re-launched last September
and marketed with an assurance of Ayala
quality and on-time delivery.
Internal systems were developed to cope with
the increased volumes. These include an
SMS-based and soon to be web-based online
reservation system and an automated sales
document tracking system.
Ayala Land, Inc.
Buyer Financing
Cost Management
Affordability continues to be the driving
force in the formulation of payment schemes
developed by the Company’s Buyer Financing
Division (BFD) in close consultation with the
Sales and Marketing Services Group and the
Strategic Business Units.
Faced with a tough market in 2003, Ayala Land
continued to be diligent in managing cost and
improving profitability.
These payment schemes focus on allowing
buyers more time to build up their equity
base prior to their takeout by mortgage banks.
Downpayment is lower compared to banks’
typical requirement of at least 30% equity
upfront. Maximum term of the loan is 10
years. Buyer financing tie-ups with
partner mortgage banks have been made to
give the best real estate value at least financing
cost to buyers.
As of end-2003, about 45% of the Company’s
high-end sales were financed in-house,
most of which were for residential buildings
marketed on a pre-selling basis.
Higher availments were experienced at LPHI,
where 50% of their mass housing buyers
availed of in-house financing. An increasing
number of buyers availed of Pag-ibig housing
loans with a term of 20 to 30 years and
interest rates below bank rates. Sales financed
through Pag-ibig housing loans accounted for
35% of LPHI’s unit sales in 2003, higher than
previous year’s 13%.
These in-house accounts are managed and
monitored closely by the BFD to allow the
Company to immediately sell the accounts to
banks as soon as they are seasoned.
Materials Management
The consolidation of cement and rebar requirements
of different units and supply agreements with a
price ceiling provision with large cement suppliers
reduced costs significantly. Similarly, system contract
agreements with suppliers for maintenance, repair
and office supply items subject of year-round repeat
orders enabled the Company to enjoy volume
discounts and savings in administrative costs.
E-bidding, though business-to-business solutions
service provider, BayanTrade, was successfully
institutionalized in the Company’s procurement
process. E-bidding has since been rolled-out to
Ayala Land subsidiaries, namely Makati Development
Corporation and Laguna Properties Holdings, Inc.
In 2003, e-bid volume amounted to over P1.8 billion,
generating savings of P330 million by year-end.
Construction Management
An average of 3% to 6% savings on construction
cost was realized in 2003 across the different highend product lines due to proper planning, research
and development, and cost reduction initiatives. Cost
reduction initiatives involved the practice of marketdriven, design-to-cost process and value engineering
in the areas of design efficiency and material selection.
These initiatives were institutionalized across all
operating units by way of Ayala Land’s ISO9002certified Quality Management System which ensures
that learnings and good practices are disseminated
throughout the company. An R&D unit is being
39
Annual Report ‘03
created within the Construction Management
Group to sustain improvements in technical
product development and cost reduction.
Cost structure improvement was particularly
important for LPHI to ensure its
competitiveness in the price-sensitive mass
housing market. More cost efficient supply and
production systems were put in place to deal with
increased costs arising from increased dispersal
of projects through several locations in Luzon.
LPHI aggressively pushed for the standardization
of house components and work processes for
increased efficiency and lower cost.
LPHI also began to involve itself in the supply
chain, specially for materials critical to its
building systems, such as the structural steel
framing system for PHENIX.
Complementing cost reduction measures were
research and development on new design
schemes, use of better material specifications
and adoption of its TEX and PHENIX building
components. These building components serve
as more efficient cladding and partitioning
materials, significantly increasing usage in
multi-rise condominiums, as well as traditional
residential units.
These initiatives, coupled with the aggressive
implementation of e-procurement and
contract volume award, enabled LPHI to meet
its construction budget, specifically in the
affordable product line, and to maintain selling
prices in 2003.
Ayala Land, Inc.
40
Annual Report ‘03
3
4
1. Ayala Hillside Estates
2. Ayala Westgrove Heights
3 & 4. Greenbelt 3
5. Glorietta 2 Restaurant Row
1
2
5
>
Ayala Land, Inc.
41
Annual Report ‘03
Ayala Land, Inc.
42
Annual Report ‘03
Ayala Land, Inc. 43
5
6
7
1. The Residences at Greenbelt Laguna Tower
2. Montgomery Place
3. Riego de Dios Village
4. & 5. One Aeropolis
6. The Columns
7. Bonifacio Ridge
<
1
2
3
4
Annual Report ‘03
BOARD OF
DIRECTORS
1. Fernando Zobel de Ayala, Chairman of the Board
2. Francisco H. Licuanan III, President
3. Jaime Augusto Zobel de Ayala II, Vice Chairman
1
2
3
4
5
9
4. Aurelio R. Montinola III
5. Ramon R. del Rosario, Jr.
6. Delfin L. Lazaro
7. Nieves R. Confesor
8. Leandro Y. Locsin, Jr.
9. Mercedita S. Nolledo, Executive Vice President, Corporate Secretary and Treasurer
6
8
7
MANAGEMENT COMMITTEE
1. Francisco H. Licuanan III, President
2. Vincent Y. Tan, Executive Vice President
4
3. Mercedita S. Nolledo, Executive Vice President,
5
Corporate Secretary and Treasurer
4. Manuel J. Colayco, Jr., SVP, Head - Mass Housing Group
6
Miriam O. Katigbak, SVP, Head - Commercial Centers Group
Angela dV. Lacson, SVP, Head - Residential Buildings Group
and Core Middle-Income Residential Group
5. Jaime E. Ysmael, SVP, Chief Finance Officer
Tristan B. de la Rosa, SVP, Head - Land and Community
Development Group and Sales and Marketing Services Group
6. Emilio J. Tumbocon, VP, Head - Construction Management Group
Ma. Victoria E. Añonuevo, VP, Head - Corporate Business Group
and Leisure and Lifestyle Communities Group
Jose Rene D. Almendras, VP, Head - Visayas-Mindanao Group
3
2
1
Ayala Land, Inc.
47
Annual Report ‘03
AYALA LAND, INC. OFFICERS
President
Francisco H. Licuanan III
Executive Vice Presidents
Mercedita S. Nolledo
Vincent Y. Tan
Senior Vice Presidents
Manuel J. Colayco, Jr.
Miriam O. Katigbak
Angela dV. Lacson
Emmanuel R. Nisperos
Tristan B. de la Rosa
Jaime E. Ysmael
Vice Presidents
Jose Rene D. Almendras
Ma. Victoria E. Añonuevo
Marcelo M. Casillan, Jr.
Arturo G. Corpuz
Raul M. Irlanda
Ma. Cynthia H. Poblador
Eliezer C. Tanlapco
Emilio J. Tumbocon
*As of December 31, 2003
Assistant Vice Presidents
Ruel C. Bautista
Dinna G. Bayangos
Aniceto V. Bisnar, Jr.
Roberto A. Chan
Maria Corazon G. Dizon
Bernard Vincent O. Dy
Vernon A. Gamboa
Segundina J. Laurel
Helen Grace T. Lazo
Michael Alexis C. Legaspi
Joselito N. Luna
Estrella E. Mariano
Joseph V. Mendoza
Francis O. Monera
Rowena M. Nazareth
Rodelito J. Ocampo
Ma. Teresa S. Palma
David L. Rafael
Ruperto G. Rodriguez
Ma. Carmen M. Rosal
Juanito P. Rosales
Teodoro B. San Juan
Rowena M. Tomeldan
Senior Division Managers
Dante M. Abando
Leovigildo D. Abot
Ma. Cristina G. Angan
Steven J. Dy
Ramoncito J. Gabriel
Catherine A. Ilagan
Cesar Jose C. Jesena
Jose Ma. D. Lopez
Ramel R. Mella
Thomas F. Mirasol
Rosaleo M. Montenegro
Francisco Ma. D. Roxas
Pierangeli T. Sulit
Roberto P. Tagamolila
Sheila Marie U. Tan
Zosimo G. Tayaban
Jonathan E. Umali
Division Managers
Rosabella S. Abella
Joselito V. Abrogar
Tetta Baad
Gilbert Enrique M. Berba
Cristina C. Comia
Melito A. Cruz
Rowena Paz S. Cruz
Wenceslao A. Cruz, Jr.
Ma. Cristina D. Esguerra
Berni C. Espiritu
Myrna Lynne C. Fernandez
Josue A. Ferrer
Wilbert M. Haduca
Javier D. Hernandez
Yolanda F. Ibarle
Ma. Carmela K. Ignacio
Jose Emmanuel H. Jalandoni
Jose Juan Z. Jugo
Christopher B. Maglanoc
Roberto S. Marquez, Jr.
Ma. Fatima C. Mijares
Mario C. Monsalve
Rafael Ramon L. Prats, Jr.
Christine Y. Reyes
Angelica L. Salvador
Salvador C. Tan
Laurence John I. Visco
Ma. Katrina M. Yatco
Eliseo P. Cardenas (consultant)
Ayala Land, Inc.
48
Annual Report ‘03
Statement of Management’s
Responsibility for Financial Statements
The management of Ayala Land, Inc. is responsible for all information and representations contained in the consolidated balance sheets of Ayala Land,
Inc. and Subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of income, changes in stockholders’ equity and cash flows
for each of the three years in the period ended December 31, 2003. The consolidated financial statements have been prepared in conformity with generally
accepted accounting principles in the Philippines and reflect amounts that are based on the best estimates and informed judgement of management with
an appropriate consideration to materiality.
In this regard, management maintains a system of accounting and reporting which provides for the necessary internal controls to ensure that transactions
are properly authorized and recorded, assets are safeguarded against unauthorized use or disposition and liabilities are recognized. The management
likewise discloses to the Company’s audit committee and its external auditor: (i) all significant deficiencies in the design or operation of internal controls
that could adversely affect its ability to record, process, and report financial data; (ii) material weaknesses in the internal controls; and (iii) any fraud that
involves management or other employees who exercise significant roles in internal controls.
The Board of Directors reviews the consolidated financial statements before such statements are approved and submitted to the stockholders of the Company.
SyCip Gorres Velayo & Co., the independent auditors appointed by the stockholders, has examined the consolidated financial statements of the Company
and its subsidiaries in accordance with generally accepted auditing standards in the Philippines and has expressed their opinion on the fairness of
presentation upon completion of such examination, in their report to the Board of Directors and stockholders.
FERNANDO ZOBEL DE AYALA
Chairman
FRANCISCO H. LICUANAN III
President
JAIME E. YSMAEL
Chief Finance Officer
Ayala Land, Inc.
49
Annual Report ‘03
Report of Independent Auditors
The Stockholders and the Board of Directors
Ayala Land, Inc.
We have audited the accompanying consolidated balance sheets of Ayala Land, Inc. and Subsidiaries as of December 31, 2003 and 2002, and the related
consolidated statements of income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2003.
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the Philippines. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ayala Land, Inc. and
Subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended
December 31, 2003 in conformity with accounting principles generally accepted in the Philippines.
PTR No. 7012968
January 5, 2004
Makati City
February 3, 2004
50
AYALA LAND, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
December 31
ASSETS
Current Assets
Cash and cash equivalents (Note 3)
Accounts and notes receivable - net (Notes 4, 8 and 13)
Subdivision land for sale
Condominium and residential units for sale
Other current assets (Note 12)
Total Current Assets
Noncurrent Assets
Noncurrent accounts and notes receivable (Notes 4 and 13)
Land and improvements (Note 8)
Investments - net (Notes 5, 8, 10 and 20)
Property and equipment - net (Note 6)
Other assets (Note 12)
Total Noncurrent Assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued expenses (Note 7)
Short-term debt (Note 8)
Income tax payable
Current portion of:
Long-term debt (Note 8)
Estimated liability for land and property development
Other current liabilities (Note 12)
Total Current Liabilities
Noncurrent Liabilities
Long-term debt - net of current portion (Note 8)
Noncurrent liabilities and deposits (Notes 9 and 12)
Estimated liability for land and property development net of current portion
Total Noncurrent Liabilities
Total Liabilities
Minority Interest in Consolidated Subsidiaries
Stockholders’ Equity (Note 10)
See accompanying Notes to Consolidated Financial Statements.
2003
2002
(As Restated)
=4,854,920
P
4,506,321
3,884,117
3,263,767
994,604
17,503,729
=
P 5,713,495
3,953,451
3,779,670
2,697,297
758,775
16,902,688
5,458,708
19,065,290
22,712,299
1,514,522
757,504
49,508,323
=67,012,052
P
4,035,244
19,712,712
18,834,031
1,494,390
788,151
44,864,528
=
P 61,767,216
=4,023,475
P
1,457,000
112,507
=
P 3,792,662
1,942,000
538,681
1,335,995
2,445,702
458,107
9,832,786
309,884
1,427,642
431,703
8,442,572
11,588,299
3,246,497
8,622,614
2,886,994
1,228,484
16,063,280
25,896,066
5,842,715
35,273,271
=67,012,052
P
731,546
12,241,154
20,683,726
5,676,489
35,407,001
=
P 61,767,216
51
AYALA LAND, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except Earnings Per Share)
Years Ended December 31
2002
2001
2003
(As Restated)
(As Restated)
REVENUE
Real estate (Note 13)
Hotel operations
Equity in net earnings of investees, interest, fees,
investment and other income (Notes 5 and 13)
COSTS AND EXPENSES
Real estate (Notes 11 and 13)
Hotel operations (Note 11)
General and administrative expenses (Notes 11 and 14)
Interest and other charges (Note 8)
Provision for income tax (Note 12)
INCOME BEFORE NET EARNINGS (LOSS) APPLICABLE TO
MINORITY INTEREST
NET EARNINGS (LOSS) APPLICABLE TO
MINORITY INTEREST
NET INCOME
Earnings Per Share (Note 15)
See accompanying Notes to Consolidated Financial Statements.
=11,602,680
P
1,282,325
=
P 9,860,057
1,308,957
=
P 9,104,315
1,320,417
1,738,927
14,623,932
1,045,119
12,214,133
1,243,986
11,668,718
6,910,722
1,068,433
1,540,510
1,517,493
793,102
11,830,260
5,458,797
1,080,195
1,313,540
695,130
1,125,278
9,672,940
5,616,815
1,055,530
1,044,054
783,524
919,320
9,419,243
2,793,672
2,541,193
2,249,475
84,517
22,678
(28,861)
=2,709,155
P
=
P 2,518,515
=
P 2,278,336
=0.25
P
=
P 0.24
=
P 0.21
52
AYALA LAND, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Amounts in Thousands, Except Par Value and Cash Dividends Per Share)
2003
CAPITAL STOCK - =
P 1 par value (Note 10)
Issued
Balance at beginning of year
Issuance of shares
Balance at end of year
Subscribed (Notes 10 and 16)
Balance at beginning of year
Issuance of shares
Stock options exercised
Balance at end of year
ADDITIONAL PAID-IN CAPITAL (Note 16)
Balance at beginning of year
Issuance of shares
Stock options exercised (cancelled)
Balance at end of year
SUBSCRIPTIONS RECEIVABLE (Note 16)
Balance at beginning of year
Stock options exercised
Balance at end of year
RETAINED EARNINGS (Note 10)
Appropriated for future expansion
Unappropriated:
Balance at beginning of year, as previously stated
Effect of change in accounting for
preoperating expenses (Note 2)
Balance at beginning of year, as restated
Cash dividends – P
=0.32 per share in 2003, P
=0.21
per share in 2002 and =
P 0.06 per share in 2001
Net income
Balance at end of year
TREASURY STOCK (Note 10)
See accompanying Notes to Consolidated Financial Statements.
Years Ended December 31
2002
2001
=10,684,360
P
68,923
10,753,283
=
P 10,684,310
50
10,684,360
=
P 10,684,075
235
10,684,310
9,361
(7,951)
7,837
9,247
9,022
(50)
389
9,361
9,046
(235)
211
9,022
3,018,990
468,975
38,256
3,526,221
3,013,769
–
5,221
3,018,990
3,063,340
–
(49,571)
3,013,769
(16,587)
6,616
(9,971)
14,278,780
(22,266)
5,679
(16,587)
13,696,124
(56,494)
34,228
(22,266)
13,684,835
6,000,000
6,000,000
6,000,000
15,780,253
15,505,985
13,860,295
(68,819)
15,711,434
(67,805)
15,438,180
(58,858)
13,801,437
(3,425,541)
2,709,155
14,995,048
20,995,048
(2,245,261)
2,518,515
15,711,434
21,711,434
(641,593)
2,278,336
15,438,180
21,438,180
(557)
=35,273,271
P
(557)
=
P 35,407,001
(557)
=
P 35,122,458
53
AYALA LAND, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Amounts in Thousands)
Years Ended December 31
2002
2001
2003
(As Restated)
(As Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax and net earnings (loss) applicable to minority interest
Adjustments to reconcile income before income tax and net earnings (loss) applicable to minority
interest to operating income before changes in working capital:
Interest expense - net of amount capitalized
Depreciation and amortization
Dividends received from investee
Provision for doubtful accounts
Interest income
Equity in net earnings of investees
Operating income before changes in working capital
Decrease (increase) in:
Accounts and notes receivable - trade
Subdivision land for sale
Condominium and residential units for sale
Other current assets
Increase (decrease) in:
Accounts payable and accrued expenses
Other current liabilities
Estimated liability for land and property development
Cash generated from operations
Interest received
Income tax paid
Interest paid - net of amount capitalized
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Net additions to:
Land and improvements
Investments
Property and equipment
Decrease (increase) in:
Accounts and notes receivable - nontrade
Other assets
Net cash used in investing activities
(Forward)
=3,586,774
P
=
P 3,666,471
=
P 3,168,795
878,939
801,677
18,460
12,210
(535,830)
(128,417)
4,633,813
685,085
810,303
10,500
37,003
(696,926)
(37,195)
4,475,241
542,465
731,954
14,000
23,543
(626,618)
(42,916)
3,811,223
(1,302,371)
(104,447)
229,843
(98,737)
(1,788,714)
406,244
1,728,329
73,903
(333,343)
118,447
652,954
181,353
243,016
25,559
1,514,998
5,141,674
349,674
(1,328,544)
(893,205)
3,269,599
(1,067,411)
5
656,338
4,483,935
390,461
(911,576)
(643,763)
3,319,057
340,666
(175,036)
(116,982)
4,479,282
489,788
(851,879)
(575,196)
3,541,995
(148,891)
(3,729,579)
(299,850)
(23,179)
(2,121,065)
(376,602)
(301,666)
(1,743,552)
(232,538)
(500,017)
16,050
(4,662,287)
386,227
107,859
(2,026,760)
266,160
(206,415)
(2,218,011)
54
Years Ended December 31
2002
2001
2003
(As Restated)
(As Restated)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from (payments of):
Short-term debt
Long-term debt
Increase (decrease) in:
Noncurrent liabilities and deposits
Minority interest in consolidated subsidiaries
Proceeds from issuance of capital stock (cancellation of subscriptions)
Dividends paid
Net cash provided by (used in) financing activities
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
(P
=485,000)
3,991,796
=
P 1,182,000
(1,227,530)
=
P 527,000
2,080,390
318,780
81,709
50,306
(3,423,478)
534,113
86,158
(122,804)
11,289
(2,245,246)
(2,316,133)
(251,179)
(395,072)
(15,131)
(641,590)
1,304,418
(858,575)
(1,023,836)
2,628,402
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR
5,713,495
6,737,331
4,108,929
CASH AND CASH EQUIVALENTS AT
END OF YEAR
=4,854,920
P
=
P 5,713,495
=
P 6,737,331
See accompanying Notes to Consolidated Financial Statements.
55
AYALA LAND, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Corporate Information
Ayala Land, Inc. (the Company) is incorporated in the Republic of the Philippines. The Company’s registered office and its principal place of business is
at Tower One, Ayala Triangle, Ayala Avenue, Makati City. The Company’s parent is Ayala Corporation (AC).
The Company is incorporated to hold, develop, manage, administer, sell, convey, encumber, purchase, acquire, rent or otherwise deal in and dispose of,
for itself or for others, residential including, but not limited to, all kinds of housing projects, commercial, industrial, urban or other kinds of real property;
to acquire, purchase, hold, manage, develop and sell subdivision lots, with or without buildings or improvements; to erect, construct, alter, manage,
operate, lease, in whole or in part, buildings and tenements of the Company or of other persons; and, to engage or act as real estate broker.
The number of employees of the Company and its subsidiaries averaged 1,488 in 2003 and 1,491 in 2002.
The consolidated financial statements of Ayala Land, Inc. and Subsidiaries for the year ended December 31, 2003 were authorized for issue by the Audit
Committee and Executive Committee on February 3, 2004.
2.
Summary of Significant Accounting Policies
Basis of Preparation
The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the Philippines using the historical
cost basis.
Adoption of New Accounting Standards
On January 1, 2003, the Company and its subsidiaries adopted the following accounting standards:
•
Statement of Financial Accounting Standards (SFAS) 38/International Accounting Standard (IAS) 38, Intangible Assets, establishes the criteria for the
recognition and measurement of intangible assets. It also requires that expenditures on research, start-up, training, advertising and relocation be
expensed as incurred. Accordingly, certain subsidiaries changed their method of accounting for preoperating expenses and reversed their
unamortized preoperating expenses to conform to the standard. Previously, such expenses were deferred and amortized. The change in accounting
for preoperating expenses was accounted for retroactively and comparative statements for 2002 and 2001 have been restated. The change decreased
net income in 2002 and 2001 by P
=1.0 million and =
P 8.9 million, respectively. Retained earnings as of January 1, 2003, 2002 and 2001 has been
reduced by P
=68.8 million, =
P 67.8 million and P
=58.9 million, respectively.
•
SFAS 22/IAS 22, Business Combinations, requires that an acquisition where an acquirer can be identified should be accounted for by the purchase
method. Any goodwill arising from the acquisition should be amortized generally over 20 years. Adoption of this standard has no effect on the
Company and its subsidiaries’ goodwill amortization since existing goodwill is amortized over a ten-year period.
In addition, under SFAS 22/IAS 22, any negative goodwill arising from a business acquisition should be accounted for as follows:
•
•
The portion of the negative goodwill that relates to expected future losses and expenses that are identified in the acquirer’s plan for the
acquisition should be recognized as income when the future losses and expenses are recognized.
To the extent that negative goodwill does not relate to expected future losses and expenses:
Negative goodwill not exceeding the fair values of acquired nonmonetary assets should be recognized as income over the remaining
weighted average useful life of the identifiable acquired depreciable/amortizable assets; and
Negative goodwill in excess of the fair values of acquired identifiable nonmonetary assets should be recognized as income
immediately.
56
The acquisition of Bonifacio Land Corporation (BLC) shares (see Note 5) has been accounted for using the purchase method. The negative
goodwill arising from the acquisition has been accounted for in accordance with SFAS 22/IAS 22 and will be recognized as income as the
underlying lots are sold.
•
SFAS 37/IAS 37, Provisions, Contingent Liabilities and Contingent Assets, provides the criteria for the recognition and bases for measurement of
provisions, contingent liabilities and contingent assets. Adoption of the standard has no effect on the consolidated financial statements.
•
SFAS 10/IAS 10, Events After the Balance Sheet Date, prescribes the accounting and disclosures related to adjusting and non-adjusting subsequent
events. Additional disclosures required by the standard were included in the financial statements, principally the date of authorization for issuance of
the financial statements.
Basis of Consolidation
The consolidated financial statements represent the consolidation of the financial statements of the Company and the following wholly owned and
majority-owned subsidiaries:
Effective
Percentages
of Ownership
Real Estate:
Amorsedia Development Corporation and subsidiaries
OLC Development Corporation
Ayala Greenfield Development Corporation (AGDC)
Ayala Land Sales, Inc.
Buendia Landholdings, Inc.
Community Innovations, Inc.
Crimson Field Enterprises, Inc.
First South Properties, Inc.
Food Court Company, Inc.
Laguna Properties Holdings, Inc. and subsidiaries
Regent Time International, Limited (Regent)
Red Creek Properties, Inc.
Liberty Real Holdings Corporation (LRHC)
Aurora Properties Incorporated
Vesta Property Holdings, Inc.
Laguna Technopark, Inc.
CMPI Holdings, Inc.
ALI-CII Development Corporation (ALI-CII)
Roxas Land Corporation (RLC)
Construction:
Makati Development Corporation
Hotels:
Ayala Hotels, Inc. (AHI) and subsidiaries
Property Management:
Ayala Property Management Corporation
Ayala Theatres Management, Inc. and subsidiaries
Entertainment:
Five Star Cinema, Inc.
Leisure and Allied Industries Philippines, Inc. (LAI)
Others:
ALInet.com, Inc. (ALInet)
Ayala Infrastructure Ventures, Inc.
100%
100
50
100
100
100
100
100
100
100
100
100
80
70
70
61
60
50
50
100
50
100
100
100
50
100
100
57
AC owns the other 50% of AHI and subsidiaries. The Company exercises significant management influence and control over AHI and subsidiaries.
Likewise, the Company, through its 50% effective ownership and by virtue of a management contract or shareholders’ agreement, exercises significant
influence and control over the operation and management of RLC, AGDC, ALI-CII and LAI. Accordingly, the accounts of AHI, RLC, AGDC,
ALI-CII and LAI are consolidated with the accounts of the Company.
Except as stated otherwise, consolidated financial statements are prepared using uniform acco unting policies for like transactions and other events in
similar circumstances. All significant intercompany transactions and balances are eliminated in consolidation.
Cash and Cash Equivalents
Cash includes cash on hand and cash in banks. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts
of cash with original maturities of three months or less from dates of acquisition and that are subject to an insignificant risk of change in value.
Trade Receivables
Trade receivables are recognized and carried at the original contract price or invoice amount less any unrealized gain, as applicable, and allowance for any
uncollectible amounts. An estimate for doubtful accounts is made when collection of the full amount is no longer probable.
Subdivision Land for Sale and Condominium and Residential Units for Sale
Subdivision land for sale and condominium and residential units for sale are carried at the lower of cost or net realizable value (estimated selling price less
cost to complete and sell) and include those costs incurred for development and improvement of the properties, including capitalized borrowing costs.
Land and Improvements
Land and improvements are carried at the lower of aggregate cost or net realizable value and include those costs incurred for development and
improvement of the properties, including capitalized borrowing costs. The aggregate net realizable value on a per location basis is substantially in excess
of costs.
Investments
Investments in associates and joint ventures are accounted for under the equity method of accounting. An associate is an entity in which the Company
has significant influence and which is neither a subsidiary nor a joint venture. A joint venture is an entity, not being a subsidiary or an associate, in which
the Company exercises joint control together with one or more other partners.
Investments in associates and joint ventures are carried in the consolidated balance sheets at cost plus post-acquisition changes in the Company and its
subsidiaries’ share in the net assets of the investees, less any impairment in value. The consolidated statements of income reflect the Company and its
subsidiaries’ share on the results of operations of these investees. Unrealized gains arising from intercompany transactions are eliminated to the extent of
the Company and its subsidiaries’ interest thereon. Unrealized losses are eliminated similarly but only to the extent that there is no evidence of
impairment of the asset transferred. Dividends received are treated as a reduction in the carrying value of the investments.
A subsidiary discontinues applying the equity method when its investments are reduced to zero. Accordingly, additional losses are not recognized unless
the subsidiary has guaranteed certain obligations of the investee. When the investee subsequently reports net income, the subsidiary will resume applying
the equity method but only after its share of that net income equals the share of net losses not recognized during the period the equity method was
suspended.
The Company’s investments in associates include goodwill on acquisition (net of accumulated amortization and any impairment in value). Goodwill
represents the excess of the cost of acquisition over the fair value of identifiable net assets of the associate at the date of acquisition which is not
identifiable to specific assets. Goodwill is amortized on a straight-line basis over a ten-year period. Goodwill is reviewed for impairment when events or
changes in circumstances indicate that the carrying amount may not be recoverable.
Regent’s negative goodwill arising from the acquisition of the BLC shares is amortized to income as the underlying lots are sold.
58
Investments in shares of stock of companies in which the Company and certain subsidiaries do not exercise significant influence and investments in land
are carried at cost less any substantial and presumably permanent decline in aggregate carrying value of these investments. Land improvements, buildings
and hotel property and equipment are carried at cost less accumulated amortization and depreciation and any impairment in value. All costs that are
directly attributable to the construction of the building and hotel property and equipment are capitalized, including interest during construction period.
Amortization and depreciation are computed on a straight-line method over the estimated useful lives of the assets.
The estimated useful lives of investments in land improvements, buildings and hotel property and equipment are as follows: land improvements 5 years; buildings - 20 to 40 years; and, hotel property and equipment - 10 to 50 years.
The cost of significant additions, renewals and betterments are capitalized while minor expenditures for repairs and maintenance are directly charged to
operations. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any
resulting gain or loss is credited or charged to operations.
Investment in government bond is carried at amortized cost using the effective interest rate method less any provision for permanent impairment in
value.
Property and Equipment
Property and equipment, except land, are carried at cost less accumulated depreciation and amortization and any impairment in value. Land is carried at
cost.
The initial cost of property and equipment comprises its construction cost or purchase price and any directly attributable costs of bringing the asset to its
working condition and location for its intended use. Expenditures incurred after the fixed assets have been put into operation, such as repairs and
maintenance, are normally charged to operations in the period in which the costs are incurred. In situations where it can be clearly demonstrated that the
expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property and equipment
beyond its originally assessed standard of performance, the expenditures are capitalized as an additional cost of property and equipment.
Depreciation is computed on a straight-line basis over the estimated useful life of the asset as follows: buildings and improvements - 20 to 40 years;
machinery and construction equipment - 5 years; furniture, fixtures and equipment - 3 to 10 years; and, transportation equipment - 3 to 5 years.
The useful life and depreciation method are reviewed periodically to ensure that the period of depreciation and method are consistent with the expected
pattern of economic benefits from items of property and equipment.
The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not
be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units
are written down to their recoverable amount. The recoverable amount of property and equipment is the greater of net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessment of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the
recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses are recognized in the statements of income.
Provisions
Starting in 2003, provisions are recognized when the Company and its subsidiaries have a present obligation (legal or constructive) as a result of a past
event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be
made of the amount of the obligation. Where the Company and its subsidiaries expect a provision to be reimbursed, the reimbursement is recognized as
a separate asset but only when the reimbursement is virtually certain.
In prior years, provisions for contingencies were accrued when it is probable that a liability had been incurred at balance sheet date and the amount can
be reasonably estimated. Otherwise, the loss contingency was disclosed.
59
Revenue and Cost Recognition
Income from sales of substantially completed projects where collectibility of sales price is reasonably assured is accounted for using the full accrual
method while income from sales of projects where collectibility of sales price is not reasonably assured is recognized using the installment method.
Realized income on installment sales is computed based on collections multiplied by the gross profit rates of individual sales contracts. The percentage
of completion method is used to recognize income from sales of projects where the Company and certain subsidiaries have material obligations under
the sales contract to complete the project after the property is sold. Under this method, the gain on sale is recognized as the related obligations are
fulfilled.
Cost of subdivision land sold before the completion of the development is determined on the basis of the acquisition cost of the land plus its full
development costs, which include estimated costs for future development works, as determined by the technical staff of the Company and certain
subsidiaries. Cost of condominium and residential units sold before completion of the project is determined based on actual costs and project estimates
of building contractors and technical staff. The estimated future expenditures for the development of the sold portion of the subdivision land and
condominium and residential units are shown under the “Estimated Liability for Land and Property Development” account in the consolidated balance
sheets with the portion expected to be incurred within the succeeding year presented as a current liability.
Revenue from construction contracts of a subsidiary are recognized using the percentage of completion method, measured principally on the basis of the
estimated physical completion of the contract work.
Contract costs include all direct materials and labor costs and those indirect costs related to contract performance. Expected losses on contracts are
recognized immediately when it is probable that the total contract costs will exceed total contract revenue. Changes in contract performance, contract
conditions and estimated profitability, including those arising from contract penalty provisions, and final contract settlements which may result in
revisions to estimated costs and gross margins are recognized in the year in which the changes are determined.
Rental income from investment properties is accounted for based on the terms of the lease contracts.
Revenue from hotel operations of a subsidiary are recognized when services are rendered. Revenue from banquets and other special events are
recognized when the events take place.
Management fees from administrative, property management and other fees are recognized when earned.
Interest is recognized as it accrues.
Stock Option Plans
The Company has stock option plans for the granting of nontransferable options to key officers and employees, whereby they are granted an option to
purchase a fixed number of shares of stock at a stated price during a specified period. Options exercised are recorded at the option price.
Retirement Costs
The Company and most of its subsidiaries’ retirement costs are determined using the entry age normal method. Under the entry age normal method,
each employee is assumed to have entered the plan when first employed or as soon as he or she became eligible. Under this method, the current service
cost is a level annual amount or a fixed percentage of salary which, when invested at the rate of interest assumed in the actuarial valuation, is sufficient to
provide the required retirement benefit at the employee’s retirement.
Certain subsidiaries and associates continue to determine their retirement costs using the projected unit credit method. The projected unit credit method
sees each year of service as giving rise to an additional unit of pension entitlement and values each unit separately to build up a total retirement benefit
obligation. Under this method, the annual normal cost for an equal unit of benefit increases each year because the p eriod to the employee’s retirement
continually shortens, and the probability of reaching retirement increases.
IAS 19, Employee Benefits, will become effective January 1, 2005. Under IAS 19, the only allowed valuation method is the projected unit credit method.
The Company and its subsidiaries currently using the entry age normal method will shift to projected unit credit method in 2005. The Company and its
subsidiaries have not yet determined the financial impact of the shift to projected unit credit method.
60
Borrowing Costs
Borrowing costs are generally expensed as incurred. Interest and other financing costs incurred during the construction period on borrowings used to
finance property development are capitalized as part of development costs (included in “Subdivision land for sale,” “Condominium and residential units
for sale,” “Land and improvements” and “Investments” accounts in the consolidated balance sheets). Capitalization of borrowing costs commences
when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Capitalization of borrowing costs ceases
when substantially all the activities necessary to prepare the asset for its intended use or sale are complete. If the carrying amount of the asset exceeds its
recoverable amount, an impairment loss is recorded. Capitalized borrowing cost is based on applicable weighted average borrowing rate.
Income Tax
Deferred income tax is provided using the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable
to (a) differences between the financial reporting bases of assets and liabilities and their related tax bases and (b) carryforward benefits of the excess of
minimum corporate income tax (MCIT) over the regular corporate income tax and, net operating loss carryover (NOLCO). Deferred tax assets and
liabilities are measured using the tax rates applicable to taxable income in the years in which those temporary differences are expected to be recovered or
settled and the NOLCO is expected to be applied.
A valuation allowance is provided for deferred tax assets which are not reasonably expected to be realized in the future. Any change in the valuation
allowance on deferred tax assets is included in the computation of the provision for deferred income tax for the period.
Foreign Currency Transactions
Transactions in foreign currencies are recorded using the exchange rate at the date of the transactions. Monetary assets and liabilities denominated in
foreign currencies are restated using the closing exchange rates prevailing at balance sheet dates. Exchange gains or losses arising from foreign exchange
transactions are credited or charged to operations for the year.
Earnings Per Share
Basic earnings per share (EPS) is computed by dividing net income for the year attributable to common stockholders by the weighted average number of
common shares issued and outstanding during the year adjusted for any subsequent stock dividends declared. Diluted EPS in 2002 and 2001 is
computed by dividing net income plus interest expense (net of income tax) on convertible long-term commercial papers (LTCPs) by the weighted
average number of common shares issued and outstanding during the year after giving effect to assumed conversion of potential common shares and the
retroactive effect of stock dividends declared.
Segments
The Company and its subsidiaries’ operating businesses are organized and managed separately according to the nature of the products and services
provided, with each segment representing a strategic business unit that offers different products and serves different markets. Financial information on
business segments is presented in Note 17.
New Accounting Standards Effective Subsequent to 2003
The Accounting Standards Council (ASC) has approved the following accounting standards which will be effective subsequent to 2003:
•
SFAS 21/IAS 21, The Effects of Changes in Foreign Exchange Rates, provides restrictive conditions for the capitalization of foreign exchange losses.
Certain subsidiaries will adopt the standard in 2005 on a retroactive basis. As of December 31, 2003, undepreciated capitalized foreign exchange
losses included in hotel property and equipment amount to =
P 176.6 million. Upon adoption of SFAS 21/IAS 21 in 2005, any undepreciated
capitalized foreign exchange losses will be adjusted against beginning retained earnings and prior years’ financial statements presented will be
restated.
•
SFAS 12/IAS 12, Income Taxes, prescribes the accounting treatment for current and deferred income taxes. The standard requires the use of a
balance sheet liability method in accounting for deferred income taxes. It requires the recognition of a deferred tax liability and, subject to certain
conditions, asset for all temporary differences with certain exceptions. The standard provides for the recognition of a deferred tax asset when it is
probable that taxable income will be available against which the deferred tax asset can be used. It also provides for the recognition of a deferred tax
liability with respect to asset revaluations. The Company and its subsidiaries will adopt SFAS 12/IAS 12 in 2004. The financial impact of the
adoption of SFAS 12/IAS 12 has not yet been determined.
61
•
SFAS 17/IAS 17, Leases, prescribes the accounting policies and disclosures to apply to finance and operating leases. Finance leases are those that
transfer substantially all risks and rewards of ownership to the lessee.
A lessor is required to record finance leases as receivables at an amount equal to the net investment in the lease. Lease income should be recognized
on the basis of a constant periodic rate of return on the lessor’s outstanding net investment. A lessor should present as an asset and depreciate
accordingly assets that are subject to operating leases. Rental income from operating leases should be recognized by the lessor on a straight-line
basis over the lease term.
The Company and certain subsidiaries will adopt SFAS 17/IAS 17 in 2004 and, based on current circumstances does not believe the effect of
adoption will be material.
3.
Cash and Cash Equivalents
This account consists of:
2003
Cash on hand and in bank
Short-term investments
2002
(In Thousands)
=1,389,378
P
=
P 801,693
3,465,542
4,911,802
P 4,854,920
=
=
P 5,713,495
Cash in bank earns interest at the respective bank deposit rates. Short -term investments are made for varying periods depending on the immediate cash
requirements of the Company and its subsidiaries, and earn interest at the respective short-term investment rates.
4.
Accounts and Notes Receivable
Accounts and notes receivable are summarized as follows:
2003
2002
(In Thousands)
Trade - net of unrealized gain of =
P 1,476,038
in 2003 and P
=1,228,524 in 2002 (see Note 8)
Related parties (see Note 13)
Advances
Accrued receivable
Advances to contractors
Dividends receivable
Others
Less allowance for doubtful accounts
Less noncurrent portion
=7,384,541
P
934,002
645,283
248,215
195,346
71,488
621,082
10,099,957
134,928
9,965,029
5,458,708
=4,506,321
P
=
P 6,049,380
238,753
926,179
194,037
134,699
–
571,038
8,114,086
125,391
7,988,695
4,035,244
=
P 3,953,451
62
5.
Investments
This account consists of investments in:
Shares of stock:
At equity:
Acquisition cost
Accumulated equity in net earnings:
Balance at beginning of year
Equity in net earnings for the year
Dividends received during the year
Balance at end of year
2003
2002
(As restated)
(In Thousands)
=5,181,183
P
=
P 2,617,182
597,381
128,417
(18,460)
707,338
5,888,521
570,686
37,195
(10,500)
597,381
3,214,563
855,702
881,505
1,737,207
7,625,728
2,443,257
855,702
1,247,947
2,103,649
5,318,212
1,780,561
9,231,624
7,848,187
3,411,690
–
=22,712,299
P
3,772,749
114,322
=
P 18,834,031
At cost:
MRT Holdings, Inc.
Others
Land and improvements - net of amortization
Buildings - net of accumulated depreciation of
=
P 2,731,582 in 2003 and P=2,423,131 in 2002
Hotel property and equipment - net of accumulated
depreciation of =
P 1,362,857 in 2003 and
=
P 1,186,069 in 2002 (see Note 8)
Government bond
The Company and its subsidiaries’ equity in the net assets of associates and joint ventures and the related percentages of ownership
are shown below.
2003
Percentage of
Ownership
Cebu Holdings, Inc. (CHI) and subsidiaries
Emerging City Holdings, Inc. (ECHI)
Pilipinas Makro, Inc. (PMI)
Berkshires Holdings, Inc. (BHI)
Alabang Commercial Corporation (ACC)
BLC (through Regent)
Lagoon Development Corporation
MyAyala.com, Inc.
Ayala Port, Inc. (Ayala Port)
47
50
28
50
50
4
30
50
50
Equity in Net Assets
2003
2002
(In Thousands)
=1,622,079
P
=
P 1,593,998
1,564,576
–
1,125,720
1,078,834
670,527
–
444,667
440,337
378,273
–
77,717
84,401
4,962
9,000
–
7,993
=5,888,521
P
=
P 3,214,563
63
On April 17, 2003, the following transactions have been consummated pursuant to the terms and conditions of the Assignment Agreement, dated
February 8, 2003, among the Company, Evergreen Holdings, Inc. (EHI), Greenfield Development Corporation and Larouge, B.V. (Larouge), as
amended, and the Agreement, dated November 23, 2002, among the Company, EHI and Metro Pacific Corporation (MPC) as amended:
(a) The assignment to the Company and EHI of the rights and obligations of Larouge under the loan agreement between Larouge and MPC, pursuant
to which, Larouge extended MPC a loan in the principal amount of US$90 million, together with all the rights, title and interests of Larouge in the
pledge constituted on 50.38% of the outstanding shares in BLC. The consideration paid by the Company and EHI for such assignment was
approximately US$90 million, subject in part to foreign exchange adjustment.
(b) The assignment to the Company and EHI (acting in this instance through the joint venture corporation, Columbus Holdings, Inc.) of the controlling
interest in BLC representing 50.38% of BLC’s outstanding capital stock. This assignment was effected by MPC under a dacion en pago
arrangement, and included an assignment of payables of BLC in the principal amount of P=655 million together with its underlying security in the
form of shares in Fort Bonifacio Development Corporation (FBDC) representing 5.55% of its outstanding capital stock.
The Assignment Agreement, as amended, also provides for the constitution of a pledge over 5% of BLC’s unencumbered shares as security for
contingent liabilities and breach of representation and warranties. The pledge lien over the 5% BLC shares shall continue to subsist until the third
anniversary of the closing date.
The Company and EHI now jointly hold the 50.38% (56.19% beneficial interest) equity interest in BLC through ECHI and BHI. The Company and
EHI assigned the notes receivable from MPC to ECHI and BHI, which acquired the shares of stock of Columbus Holdings, Inc. (Columbus). Columbus
directly owns the 50.38% interest in BLC. BLC owns 55% interest in FBDC, the primary developer of certain areas in Fort Bonifacio Global City for
residential, commercial and business development.
Columbus accounted for the acquisition of the 50.38% interest in BLC using the purchase method. The fair value of the identifiable consolidated assets
and liabilities of BLC as at April 17, 2003, the date of acquisition, amounted to about =
P 5.6 billion resulting in a negative goodwill of =
P 1.4 billion.
Columbus’ amortization of negative goodwill based on FBDC lots sold in 2003 amounted to =
P 27.4 million of which the Company shares 50% through
its equity share in the net earnings of ECHI and BHI.
Regent also owns 3.9% of BLC shares which it accounted for using the equity method. Regent’s negative goodwill arising from the acquisition amounted
to =
P 57.6 million and negative goodwill amortization in 2003 amounted to P
=1.1 million.
Certain parcels of land are leased to several individuals and corporations. Some of the lease contracts provide, among others, that within a certain period
from the expiration of the contracts, the lessee will have to demolish and remove any and all improvements introduced or built within the leased
properties. Otherwise, the lessor will cause the demolition and removal thereof and charge the cost to the lessee unless the lessor occupies and
appropriates the same for its use and benefit.
Consolidated depreciation on buildings and hotel property and equipment amounted to =
P 493.6 million in 2003, P=536.6 million in 2002 and P
=550.7
million in 2001. Consolidated amortization of land improvements amounted to =
P 13.4 million in 2003, =
P 16.2 million in 2002 and =
P 14.5 million in 2001.
64
6.
Property and Equipment
This account consists of:
Land, Machinery and
Furniture,
Buildings and Construction Fixtures and
Improvements Equipment
Equipment
(In Thousands)
Cost
January 1
Additions
Disposals
December 31
Accumulated Depreciation
January 1
Depreciation
Disposals
December 31
Net Book Value
Transportation
Equipment
2003
Total
2002
=911,926
P
25,813
(17,172)
920,567
=843,178
P
170,413
(61,105)
952,486
=532,248
P
103,101
(20,177)
615,172
=208,226
P
70,122
(26,050)
252,298
=2,495,578
P
369,449
(124,504)
2,740,523
=
P 2,162,266
413,143
(79,831)
2,495,578
151,017
35,391
(26)
186,382
=734,185
P
393,233
96,176
(25,893)
463,516
=488,970
P
322,354
105,482
(4,741)
423,095
=192,077
P
134,584
42,669
(24,245)
153,008
=99,290
P
1,001,188
279,718
(54,905)
1,226,001
=1,514,522
P
807,058
240,634
(46,504)
1,001,188
=
P 1,494,390
Consolidated depreciation and amortization of property and equipment (charged to various expense and development cost accounts) amounted to
=
P 279.7 million in 2003, =
P 240.6 million in 2002 and =
P 183.1 million in 2001.
7.
Accounts Payable and Accrued Expenses
This account consists of:
2003
Accounts payable and accrued expenses
Taxes p ayable
Dividends payable
Retentions payable
Others
8.
=2,953,989
P
370,195
322,875
21,634
354,782
=4,023,475
P
2002
(In Thousands)
=
P 2,594,890
434,342
320,812
43,479
399,139
=
P 3,792,662
Short-term and Long-term Debt
In 2003, short-term debt co nsists of bank loans and short-term commercial papers (STCPs).
The Company issued STCPs in 2003 with an aggregate face value of =
P 1.0 billion at par with fixed and floating interest rates. The STCPs are payable
lumpsum at various maturity dates in 2004. The fixed-rate STCPs bear interest at 8.20% and 8.59% per annum while the floating STCPs bear interest at
25 basis points (bps) over the benchmark 91-day rate and are repriceable every three months. The Philippine Rating Service Corporation (PhilRatings)
assigned the issue a PRS 1 rating, indicating the Company’s strong capacity to meet its financial commitment on this issue.
65
The bank loans of =
P 457.0 million in 2003 and P=1,942.0 million in 2002 represent unsecured peso-denominated short-term borrowings by the Company
and its subsidiaries with interest rates ranging from 5.75 % to 10.75% per annum. The P
=50.0 million loan drawn by a subsidiary in 2003 from an affiliate
bank is subject to the Directors, Officers, Stockholders and Related Interests rules of the Bangko Sentral ng Pilipinas.
Long-term debt consists of:
2003
2002
(In Thousands)
Parent Company:
Bonds
Due 2007
Due 2008
Bank loans - with interest rates ranging
from 6.50% to 11.40% per annum
Fixed-rate corporate notes (FXCNs)
Subsidiaries:
Bank loans - with interest rates ranging from
6.79% to 14.88% per annum
Philippine peso
Foreign currency
Less current portion
=3,000,000
P
2,000,000
=
P 3,000,000
–
3,358,333
1,060,000
9,418,333
2,170,000
1,060,000
6,230,000
2,585,457
920,504
3,505,961
12,924,294
1,335,995
=11,588,299
P
1,607,596
1,094,902
2,702,498
8,932,498
309,884
=
P 8,622,614
In 2002, the Company issued =
P 3.0 billion bonds at par, with interest at 200 bps over benchmark 91-day rate.
In 2003, the Company issued =
P 2.0 billion bonds due in 2008 with fixed and floating rate tranches. The fixed-rate bonds carry a coupon of 10.75% p.a.
and have a nominal principal amount of P
=1.0 billion. The floating rate bonds, also worth =
P 1.0 billion, bear a margin of 125 bps over benchmark 91-day
rate and is re-priced quarterly.
PhilRatings assigned a PRS Aaa rating on both the Company’s =
P 2.0 billion bond issue in 2003 and the P
=3.0 billion bond issue in 2002, indicating the
Company’s strong capacity to meet its financial commitment on the bond issues.
The Company’s long-term bank loans will mature on various dates up to 2008. These borrowings are unsecured except for a P
=594.2 million loan drawn
by the Company in 2003, which is secured by a mortgage on certain parcels of land with a carrying value of =
P 213.8 million.
The FXCNs consist of 3-, 5-, 7- and 10-year notes issued to various financial institutions and will mature on various dates up to 2012. The FXCNs bear
fixed interest rates ranging from 11.875% to 14.875% depending on the term of the loan. The Company may redeem all (but not part only) of the
FXCNs on the 2nd , 3rd, 4th and 7th anniversaries, respectively, of the 3-, 5-, 7- and 10-year FXCNs.
In 1997, the Company issued LTCPs totaling =
P 6.0 billion, of which P=4.0 billion are convertible at the option of the holders into shares of stock of the
Company based on a predetermined formula. As of December 31, 2001, total conversions of LTCPs into shares of stock of the Company amounted to
=
P 1.8 million. The remaining LTCPs were fully paid in April 2002.
The subsidiaries’ loans will mature on various dates up to 2010. Certain subsidiaries’ loans are collateralized by trade receivables amounting to =
P 52.3
million and P
=65.6 million in 2003 and 2002, respectively; and mortgages on real estate properties, hotel property and equipment and leasehold rights with
a total carrying value of =
P 3.2 billion and =
P 3.6 billion in 2003 and 2002, respectively.
66
The Company pledged its investment in shares of stock of LRHC with a carrying value of =
P 1.1 billion as of 2003, as collateral to secure the latter’s bank
loans.
The loan agreements contain some or all of the following restrictions: material changes in nature of business; payment of dividends; merger or
consolidation; guaranties, investments or advances; encumbrance for borrowed money; sale of substantially all of assets and additional loans maturing
beyond a year, except under certain conditions. These restrictions and requirements were complied with by the Company and its subsidiaries.
Interest capitalized amounted to P
=333.4 million in 2003, P
=288.4 million in 2002 and =
P 337.0 million in 2001.
9.
Noncurrent Liabilities and Deposits
Noncurrent liabilities and deposits consist of:
2003
Deposits
Deferred credits
Deferred tax (see Note 12)
Retentions payable
Installment payable - net of current portion
of =
P 147,222 in 2002
Other liabilities
=1,221,607
P
876,144
575,765
411,349
2002
(In Thousands)
=
P 782,745
508,345
535,042
502,585
–
161,632
=3,246,497
P
147,222
411,055
=
P 2,886,994
10. Stockholders’ Equity
The details of the number of shares (in thousands) follow:
Authorized
Issued
Subscribed
Treasury
2003
12,000,000
10,753,283
9,247
(24)
10,762,506
2002
12,000,000
10,684,360
9,361
(24)
10,693,697
2001
12,000,000
10,684,310
9,022
(24)
10,693,308
In 2003, the Board of Directors (BOD) approved the issuance of 63.4 million new common shares to AC in exchange for land at a transfer price of
=
P 532.3 million recorded under the investments account in the consolidated balance sheets.
No transfer of stock or interest which will reduce the ownership of Filipino citizens to less than the required percentage of the capital stock as provided
by existing laws shall be allowed or permitted to be recorded in the books of the Company.
In 2003, the Board of Directors approved the declaration and payment from unappropriated retained earnings of the following cash dividends:
a)
regular cash dividend of =
P 0.06 per share
b)
special cash dividend of =
P 0.26 per share.
67
Retained earnings include undistributed net earnings amounting to =
P 3,908.7 million, P
=3,300.1 million, =
P 3,333.2 million as of December 31, 2003, 2002
and 2001, respectively, representing accumulated equity in the net earnings of subsidiaries, associates and joint ventures, which are not available for
dividend declaration until received in the form of dividends from the investees.
Retained earnings are further restricted for the payment of dividends to the extent of the cost of the shares held in treasury.
11. Costs and Expenses
Depreciation and amortization expense included in consolidated statements of income are as follows:
2003
Included in:
Cost of:
Real estate
Hotel operations
General and administrative expenses
=457,473
P
179,389
164,815
=801,677
P
2002
2001
(As restated)
(As restated)
(In Thousands)
=
P 430,801
206,648
172,854
=
P 810,303
=
P 415,694
215,835
100,425
=
P 731,954
General and administrative expenses consist of:
2003
Manpower cost (see Note 14)
Depreciation and amortization
Utilities
Others
=857,011
P
164,815
62,920
455,764
=1,540,510
P
2002
2001
(As restated)
(As restated)
(In Thousands)
=
P 733,985
=
P 644,018
172,854
100,425
58,031
73,371
348,670
226,240
=
P 1,313,540
=
P 1,044,054
12. Income Taxes
Components of the deferred tax assets and liabilities as of December 31, 2003 and 2002 are as follows:
Deferred tax assets on:
NOLCO
Unrealized gain, deposits and accruals for
various expenses on real estate
transactions and MCIT
Allowance for doubtful accounts
Unrealized foreign exchange loss
Less valuation allowance
Deferred tax liabilities on capitalized customs
duties, interest and other expenses
2003
2002
(As restated)
(In Thousands)
=292,528
P
=
P 221,759
332,812
43,177
14,681
683,198
236,791
446,407
159,825
40,125
22,098
443,807
125,930
317,877
(573,635)
(P
=127,228)
(554,373)
(P
=236,496)
68
The net current and noncurrent components of deferred tax assets and liabilities are included in the following accounts in the consolidated
balance sheets:
2002
(As restated)
(In Thousands)
=414,390
P
=
P 277,298
242,434
228,690
(208,287)
(207,442)
(575,765)
(535,042)
(P
=127,228)
(P
=236,496)
2003
Other current assets
Other assets
Other current liabilities
Noncurrent liabilities and deposits (see Note 9)
Provision for income tax consists of:
2003
Current
Deferred
P 902,370
=
(109,268)
=793,102
P
2002
2001
(As restated)
(As restated)
(In Thousands)
=
P 1,107,787
=
P 875,644
17,491
43,676
=
P 1,125,278
=
P 919,320
A reconciliation between the statutory and the effective income tax rates follows:
Statutory income tax rate
Tax effect of:
Equity in net earnings of investees
Income subjected to lower income
tax rates (see Note 19)
Interest income and capital gains
taxed at lower rates
Others - net
Effective income tax rate
2003
32.00%
2002
(As restated)
32.00%
2001
(As restated)
32.00%
(1.15)
(0.32)
(0.43)
(0.74)
(0.60)
(1.79)
(3.16)
(4.84)
22.11%
(1.58)
1.19
30.69%
(4.62)
3.85
29.01%
13. Related Party Transactions
The Company and its subsidiaries, in their regular conduct of business, have entered into transactions with associates and other related parties principally
consisting of advances and reimbursement of expenses, purchase and sale of real properties, construction contracts, and development, management,
underwriting, marketing, and administrative service agreements. Sales and purchases of goods and services to and from related parties are made at
normal market prices.
Revenue from transactions with associates and other related parties amounted to =
P 149.1 million in 2003, =
P 230.4 million in 2002 and P
=567.9 million
in 2001.
69
The following are the outstanding balances of receivables from related parties resulting from the above transactions, as of December 31, 2003 and 2002
(see Note 4).
2003
2002
(In Thousands)
BLC
FBDC
CHI and subsidiaries
Ayalaport Makati, Inc.
Manila Water Company, Inc.
ACC
MyAyala.com, Inc.
PMI
Others
=505,754
P
243,777
78,876
24,606
18,333
13,226
8,878
–
40,552
=934,002
P
=
P–
–
103,993
50,290
7,034
9,209
8,817
9,002
50,408
=
P 238,753
Receivables from BLC and FBDC consist of promissory notes issued by BLC, which were assigned by MPC to the Company and EHI; the advances
subsequently made by the Company to FBDC to fund the completion of the Bonifacio Ridge project and to BLC to finance the costs to be incurred in
relation to its restructuring program. These notes and advances are due and demandable and bear interest at the rate of 12% to 14% per annum.
14. Retirement Plan
The Company and its subsidiaries have funded, noncontributory tax-qualified defined contribution type of retirement plans covering substantially all of
their employees. The benefits are based on defined contribution formula with minimum lump-sum guarantee of 1.5 months’ basic salary per year of
service. The consolidated retirement costs charged to operations amounted to =
P 118.9 million in 2003, =
P 76.8 million in 2002 and =
P 68.2 million in 2001.
Based on the latest actuarial valuations of the Company and its subsidiaries, the aggregate actuarial present value of pension benefits amounted to P
=898.1
million. The aggregate fair value of their respective plan assets amounted to P
=422.9 million. The principal actuarial assumptions used to determine the
cost of pension benefits with respect to the discount rate, salary increases and return on plan assets were based on historical and projected normal rates.
Actuarial valuations are made at least every one to three years. The Company’s and its subsidiaries’ annual contributions to their respective plans consist
principally of payments covering the current service cost for the year and the required funding relative to the guaranteed minimum benefits as applicable.
15. Earnings Per Share
The following table presents information necessary to compute EPS (in thousands except EPS):
a. Net income
b. Weighted average number of
common shares
c. EPS (a/b)
2003
=2,709,155
P
2002
(As restated)
=
P 2,518,515
2001
(As restated)
=
P 2,278,336
10,706,701
=0.25
P
10,693,608
=
P 0.24
10,693,190
=
P 0.21
The assumed conversion of the Company’s LTCPs into common shares in 2001 (see Note 8) and the assumed exercise of stock options have no dilutive
effect. Accordingly, no diluted EPS is presented in the accompanying consolidated statement of income for 2001.
70
16. Stock Option Plans
The Company has stock option plans for key officers (Executive Stock Option Plan - ESOP) and employees (Employee Stock Ownership Plan ESOWN) covering 2.5% of the Company’s authorized capital stock. The plans provided for an initial subscription price of shares subject to each option
granted equivalent to 85% of the initial offer price. Any subsequent subscriptions shall be paid for at a price equivalent to 85% of the average closing
price for the month prior to the month of eligibility under ESOP and the average closing price for the month prior to the month of eligibility under
ESOWN.
The qualified officers and employees shall pay for the shares subscribed under the plans through installments over a maximum period of 10 years. The
shares of stock have a holding period of five years and the employees must remain with the Company or any of its subsidiaries over such period. The
plans also restrict the sale or assignment of such shares for five years from dates of subscription.
Subscriptions receivable from the stock option plans are presented in the statements of changes in stockholders’ equity.
In June 2000, the Company offered all its ESOP subscribers with outstanding subscriptions the option to either cancel their subscriptions, convert their
payments on outstanding subscriptions to fully paid shares or maintain their existing subscriptions. The availments of the one-time cancellation or
conversion offers have resulted in the reduction in the subscribed capital stock, additional paid-in capital and subscriptions receivable of the Company.
Starting 2001, the Company offered new ESOP to the executives and key officers of the Company. The ESOP is a ten-year option plan. The grantee is
selected based on certain criteria like outstanding performance over a three-year period. The executive or officer may subscribe to the number of shares
allocated for him in accordance with the vesting percentage and vesting schedule stated in the Plan.
In November 2001, the Company offered all its ESOWN subscribers with outstanding subscriptions the option to cancel the subscriptions within the
5-year holding period. The availments of the cancellation have resulted in the reduction of subscribed capital stock, additional paid-in capital and
subscriptions receivable of the Company. In December 2001, the program for ESOWN was indefinitely suspended.
Movements in the number of stock options outstanding are as follows:
At January 1
Granted
Exercised
Cancelled
At December 31
ESOP
2003
2002
105,917,962
71,433,929
37,592,500
37,341,481
(7,837,382)
(2,857,448)
(114,279)
–
135,558,801
105,917,962
ESOWN
2003
2,141,100
–
–
–
2,141,100
2002
2,141,100
–
–
–
2,141,100
The options that have been exercised in 2003 had a weighted average exercise price of =
P 4.17 or about =
P 88.6 million. The average fair market value of
the shares as at exercise date was =
P 6.36 or about P
=135.5 million.
Outstanding options for the executives and key officers have the following terms:
Exercise Dates
2002 to 2011
2003 to 2012
2004 to 2013
2005 to 2014
2006 to 2015
Number of Options
25,947,443
28,356,591
47,496,823
22,480,194
11,277,750
135,558,801
71
17. Segment Information
The industry segments where the Company and its subsidiaries and associates operate are as follows:
•
•
•
•
•
Land, condominium and residential units - development and sale of lots for residential, business and industrial purposes, development of
residential and office condominium projects and single-detached housing for high-end, middle income and low income markets;
Rentals - development of commercial centers and lease to third parties of retail space and land therein; operation of movie theaters, food courts
and entertainment facilities in these commercial centers; office units and carparks leasing;
Hotel operations - development and operation of hotels and serviced apartments;
Construction - engineering, design and construction of vertical and horizontal developments;
Others - management services contracts and other investment activities
The Group generally accounts for inter-segment rates and transfers as if the sales and transfers were to third parties at current market prices.
Segment assets and results of the segments for 2002 and 2001 have been restated to reflect the effect of the change in accounting policy with respect to
preoperating expenses to conform with SFAS 38/IAS 38 (see Note 2).
Business segments
The following tables regarding business segments present assets and liabilities as of December 31, 2003 and 2002 and revenue and income information
for each of the three years in the period ended December 31, 2003 (in thousands).
2003
Revenues
Operating expenses
Earnings before interest,
taxes, depreciation and
amortization (EBITDA)
Depreciation and amortization
EBIT
Segment assets
Segment liabilities
Land,
Condominium
and Residential
Units
7,253,899
5,553,322
1,700,577
67,308
1,633,269
31,636,683
10,292,268
Rentals
3,589,669
1,103,412
Hotel
Operations
1,282,325
926,653
Construction
759,112
589,262
Others
1,738,927
545,339
Total
14,623,932
8,717,988
2,486,257
403,546
2,082,711
15,232,374
3,434,089
355,672
186,470
169,202
4,461,189
3,179,197
169,850
72,713
97,137
1,261,527
984,413
1,193,588
71,640
1,121,948
14,420,279
13,848,814
5,905,944
801,677
5,104,267
67,012,052
31,738,781
72
2002
Revenues
Operating expenses
Earnings before interest,
taxes, depreciation and
amortization (EBITDA)
Depreciation and amortization
EBIT
Segment assets
Segment liabilities
Land,
Condominium
and Residential
Units
5,608,105
4,149,660
1,458,445
50,409
1,408,036
29,188,563
7,949,470
Rentals
3,329,626
823,869
Hotel
Operations
1,308,957
904,557
Construction
922,326
715,318
Others
1,045,119
448,825
Total
12,214,133
7,042,229
2,505,757
432,755
2,073,002
13,469,054
1,733,289
404,400
213,862
190,538
4,810,339
3,517,097
207,008
56,213
150,795
1,256,697
950,113
596,294
57,064
539,230
13,042,563
12,210,246
5,171,904
810,303
4,361,601
61,767,216
26,360,215
Rentals
3,107,298
822,043
Hotel
Operations
1,320,417
871,220
Construction
1,563,575
1,291,957
Others
1,243,986
422,293
Total
11,668,718
6,984,445
2,285,255
391,759
1,893,496
449,197
219,256
229,941
271,618
56,222
215,396
821,693
43,191
778,502
4,684,273
731,954
3,952,319
2001
Revenues
Operating expenses
Earnings before interest,
taxes, depreciation and
amortization (EBITDA)
Depreciation and amortization
EBIT
Land,
Condominium
and Residential
Units
4,433,442
3,576,932
856,510
21,526
834,984
18. Note to Consolidated Statements of Cash Flows
The principal noncash transactions of the Company are as follows:
• Issuance of shares to AC in exchange for land at a transfer price of =
P 532.3 million in 2003.
• Assignment of P
=2.1 billion notes receivable from MPC in exchange for equity in ECHI and BHI in 2003.
• Land purchased on installment amounting to P
=442.0 million in 2001.
19. Registration with Philippine Economic Zone Authority (PEZA)
A subsidiary is registered with PEZA on October 27, 1999 as a non-pioneer “ecozone developer/operator.” The PEZA registration entitled the
subsidiary to a four-year income tax holiday from the start of its commercial operations. At the expiration of its four-year tax holiday, the subsidiary shall
pay income tax at the special tax rate of 5% on its gross income earned from sources within the PEZA economic zone in lieu of paying all national and
local income taxes.
73
20. Long-term Commitments and Contingencies
The Company has an existing contract with the Bases Conversion Development Authority (BCDA) to develop, under a lease agreement a mall with an
estimated gross leasable area of 152,000 square meters on a 9.8-hectare lot inside Fort Bonifacio. The lease agreement covers 25 years, renewable for
another 25 years subject to reappraisal of the lot at market value. The annual fixed lease rental amounts to =
P 117.0 million while the variable rent ranges
from 5% to 20% of gross revenue. Subsequently, the Company transferred its rights and obligations granted to or imposed under the lease agreement to
LRHC, a subsidiary, in exchange for equity.
As part of the bid requirement, the Company procured a performance bond from the Government Service Insurance System in favor of BCDA
amounting to P
=3.9 billion and P
=4.8 billion in 2003 and 2002, respectively, to guarantee the committed capital to BCDA. Moreover, the Company
obtained surety bonds to guarantee the payment of the fixed and variable rent as prescribed in the lease agreement. The surety bonds are secured by a
mortgage on a property of certain subsidiary with a carrying value of P
=46.0 million in 2003.
In October 2002, the Company was awarded by the BCDA the contract to develop a lot with a gross area of 11.6 hectares adjacent to the abovementioned lot which is intended for residential development. The Company’s bid was made on the basis of a joint development structure and, subject to
the terms and conditions stated in its bid, includes an upfront cash payment of =
P 700 million and a guaranteed annual revenue stream totaling P
=1.0 billion
over an 8-year period. As of December 31, 2003, the execution of the joint development agreement between the Company and BCDA remains subject
to both parties agreeing on certain issues.
In 2002, the Company agreed to underwrite the subscription to North Triangle Depot Commercial Corporation (NTDCC) additional shares amounting
to =
P 1.4 billion over a 4-year equity schedule up to 2006 in exchange for a 5% underwriting fee (net of a 1.5% rebate to existing shareholders who
subscribed).
MRT Development Co. assigned development rights to NTDCC in 2002. NTDCC will construct and operate the commercial center under certain terms
and conditions until the end of a 50-year lease term renewable for another 25 years.
The Company and its subsidiaries are contingently liable for lawsuits or claims filed by third parties which are either pending decision by the courts or
under negotiation, the outcomes of which are not presently determinable. In the opinion of management and its legal counsel, the eventual liability under
these lawsuits or claims, if any, will not have a material effect on the consolidated financial statements.
21. Reclassification of Accounts
Certain accounts in the 2002 and 2001 consolidated financial statements were reclassified to conform with the 2003 presentation of accounts.
Ayala Land, Inc.
74
Annual Report ‘03
SUBSIDIARIES AND AFFILIATES
Subsidiaries
Laguna Properties Holdings, Inc.
Buklod Bahayan Realty and Devt. Corp.
First Communities Finance Corporation
Laguna Phenix Structures Corporation.
Makati Development Corporation
MG Construction Ventures Holdings, Inc.
Community Innovations, Inc.
Ayala Land Sales, Inc.
Ayala Property Management Corporation
Ayala Theatres Management, Inc.
Alabang Theatres Management Corp.
Five Star Cinema, Inc.
Ayala Infrastructure Ventures, Inc.
MRT Holdings, Inc.
Metro Rail Transit Corp. Ltd.
Amorsedia Development Corporation
OLC Development Corporation
Ayala Greenfield Development Corp.
HLC Development Corporation
Red Creek Properties, Inc.
Crimson Field Enterprises, Inc.
Streamwood Property, Inc.
Piedmont Property Ventures, Inc.
Stonehaven Land, Inc.
Buendia Landholdings, Inc.
First South Properties, Inc.
Food Court Company, Inc.
ALInet.com, Inc.
MyAyala.com, Inc.
Ayalaport, Inc.
Ayalaport Makati, Inc.
Liberty Real Holdings Corp.
Vesta Property Holdings, Inc.
Aurora Properties, Inc.
Laguna Technopark, Inc.
CMPI Holdings, Inc.
CMPI Land, Inc.
Ayala Hotels, Inc.
Enjay Hotels, Inc.
Cebu Insular Hotel Company, Inc.
Makati Property Ventures, Inc.
Roxas Land Corporation
ALI-CII Development Corporation
Leisure and Allied Industries Phils., Inc.
Affiliates
Alabang Commercial Corporation
Cebu Holdings, Inc.
Cebu Property Ventures & Devt. Corp.
Cebu Leisure Company, Inc.
CBP Theatre Management Inc.
Cebu Insular Hotel Company, Inc.
Lagoon Development Corporation
Pilipinas Makro, Inc.
Emerging City Holdings, Inc.
Columbus Holdings, Inc.
Bonifacio Land Corp.
Fort Bonifacio Devt. Corp.
Berkshires Holdings, Inc.
Columbus Holdings, Inc.
Bonifacio Land Corp.
Fort Bonifacio Devt. Corp.
Regent Time International Limited
Bonifacio Land Corp.
North Triangle Depot Commercial Corp.
Ownership
By ALI
By Subsidiary
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
80.5
70.0
70.0
61.0
60.0
50.0
50.0
50.0
50.0
50.0
47.2
8.0
30.0
28.0
50.0
50.0
100.0
15.8
100.0
100.0
50.0
66.0
100.0
18.6
84.9
100.0
50.0
100.0
50.0
50.0
62.0
60.0
100.0
62.9
60.0
76.0
100.0
100.0
37.1
70.0
50.4
55.0
30.0
50.4
55.0
3.9
Nature of Business
Mass housing development
Socialized housing development
Financing company
Pre-fabricated house manufacturing
Construction company
Construction holding company
Residential property development
Real estate broker company
Property management
Theatre management
Theatre management
Theatre management
Holding company (for infrastructure and related activities)
Holding company (for rail transport and development)
Transportation development
Land holding company
Land holding company
Property development
Land holding company
Land holding company
Land holding company
Land holding company
Land holding company
Land holding company
Land holding company
Land holding company
Food court operations
Holding company (for IT-related ventures)
Lifestyle and entertainment portal
Holding company
Internet data center development
Shopping center development/operations
Mixed-use development
Mixed-use development
Industrial estate development
Holding company
Land holding company
Hotel holding company
Hotel operations
Hotel operations
Serviced apartment operations
Property development
Shopping center development/operations
Family entertainment center operation/management
Shopping center development/operations
Mixed-use development
Mixed-use development
Entertainment facilities management
Theatre management
Hotel operations
Shopping center development/operations
Wholesale consumer products distribution
Holding company
Holding company
Property development
Property development
Holding company
Holding company
Property development
Property development
Holding company
Property development
Shopping center development / operations
(As of December 31, 2003)
Ayala Land, Inc.
75
Annual Report ‘03
SHAREHOLDER INFORMATION
Ayala Land, Inc.
Corporate Information
Address:
Tower One Building
Ayala Triangle, Ayala Avenue
Makati City 1226
Philippines
Tel. Nos.:
(632) 848-5000
(632) 848-5643
Fax No.:
(632) 848-5336
Web site:
www.ayalaland.com.ph
Email:
ir@ayalaland.com.ph
Shareholder Services and Assistance
For inquiries regarding dividend payments, change of address and account status, lost or damaged
stock certificates, please write or call Bank of the Philippine Islands
Address:
Tel. Nos.:
Fax No.:
4th Floor, BPI Building
Ayala Avenue corner Paseo de Roxas
Makati City
Philippines
(632) 816-9067 to 68
(632) 845-5515
Institutional Investor Inquiries
For inquiries from institutional investors, analysts and the financial community, please write or call Ayala
Land, Inc. - Investor Relations Unit
Address:
Tel. Nos.:
Fax. No.:
Email:
29th Floor, Tower One
Ayala Triangle, Ayala Avenue
Makati City 1226
Philippines
(632) 848-5313
(632) 841-5675 to 77
(632) 848-6059
ir@ayalaland.com.ph
Ayala Land, Inc.
76
Annual Report ‘03
Nurturing
Communities
and Partnerships
Ayala Land’s vision enshrines the
cherished Ayala tradition of principled
operations. As such, in its 15 years, ALI
has endeavored to be not only a thriving
real estate concern, but also a responsible,
responsive, and ethical company – traits
that have lent moral strength to its policies
and practices.
Through the years, ALI has become
more than a structural landmark in the
communities that are home to its projects.
It is more than an employer, business
partner, and taxpayer. ALI is an involved
neighbor and a steadfast friend to the
environment. It cares about the quality of
life and education, organizing livelihood
projects and social development programs
that support health, culture, and tourism.
It has even engaged itself in traffic
management and investment promotion.
In all these undertakings, ALI forges strong
partnerships with local officials, private
entities, and non-government organizations
– partnerships that assure your Company
of the goodwill and support of our host
communities, and in the long-term create
a pool of resources and build markets for
our business.
Livelihood. Through the “Dagdag-Kita
sa Pamilya” program, ALI partnered
with the Technical Education Skills
and Development Authority and local
government units of Calamba City, Laguna
and Silang, Cavite to teach food processing,
cooking, and landscaping skills to over 100
local residents.
ALI is also a prime mover in the Laguna
Manpower Employment and Development
Council, a multisectoral organization
advocating programs on workforce
development and employment. Its projects
include the establishment of Centers for
Technical Training Excellence; the creation of
the Laguna Workforce Information System,
which links through the Internet Lagunabased employers and job seekers; and the
implementation of an entrepreneurship
development program.
Environment. To help protect and rehabilitate
waterways in Calamba, ALI created the
Calamba Green Stream Brigade (CGSB). An
awardee of the Department of Environment
and Natural Resources and the Laguna
Lake Development Authority, CGSB works
with barangays, private corporations and
government agencies in rehabilitating Baranca
de Sipit and Bucal Creeks, two vital waterways
that replenish Laguna de Bay. In 2003, a
massive cleanup was conducted along Baranca
de Sipit, supported by activities that included
landscaping and project marker installation.
To sustain the initiative, trash and silt from
the creek are collected daily, and a community
information campaign is conducted regularly.
Formed by ALI in 1999, the Laguna Water
Conservancy, meanwhile, is a forum of more
than 30 business enterprises that regularly
discusses issues on water resource utilization,
protection, and management with national
agencies.
The Ayala Tree Nursery, established in 1994,
is now a primary supplier of free shade tree
saplings for serious reforestation efforts like
Culture and Tourism. In Makati, your
Company helped in the formation
of the Makati Festivals Foundation,
a partnership between the city
government and the business
sector. The foundation is tasked
to manage and promote city-wide
cultural events such as the Caracol
Festival, the Araw ng Makati
parade, and the Makati New Year’s
Party. ALI is also a partner of the
Department of Tourism in its bid
to make Makati a primary tourist
destination.
those in Makiling, Balara, and
the watersheds of La Mesa and
Wawa dams. The nursery has
likewise donated saplings to the
local government units of Makati,
Quezon City, Muntinlupa, Las
Pinas, Calamba, Sta. Rosa and
Silang.
Flood Control. ALI spearheaded the
creation of the Makati-ParañaquePasay Flood Control Association
(also known as Task Force Noah)
to find solutions to flooding. The
group dialogues with government
agencies on flood management
programs covering, among others,
the Maricaban-Dilain and Tripa de
Gallina creeks.
Health. The Ayala Land Mobile
Clinic has conducted free dental
and medical missions in various
parts of Luzon, benefiting
thousands of patients. Missions
are regularly held in Makati,
Quezon City, Pasay City, Taguig,
Muntinlupa, Las Piñas, Laguna and
Cavite.
The Laguna Tourism Foundation
LTF), on the other hand, was
founded in 2002 with the help
of ALI. LTF involves tourism
prime movers in Laguna in the
formulation and implementation
of tourism-related policies and
projects.
Traffic Management. The Laguna
Traffic Task Force is a joint private
sector-government initiative to
manage traffic in Laguna’s first and
second districts, specifically the
industrial and commercial corridors
along the Sta. Rosa-Tagaytay Road
and the Biñan-Sta. Rosa portion of
the old national highway.
A similar traffic program is in place
for the Alabang-Zapote Road,
which straddles the growth areas of
Muntinlupa and Las Piñas. Formed
by ALI in 1997, Task Force A-Z
is made up of corporate entities
and village associations, and works
closely with the local governments.
Investment Promotion. The Laguna
Investment Promotions Bureau
(LIPB) – a special project of
ALI and the Laguna provincial
government – is a one-stop
shop for investors interested
in doing business in Laguna.
LIPB provides investors basic
information on Laguna such as
investment-related ordinances,
regulations, and permits
processing.
elementary schoolhouses will be
constructed in Taguig, Quezon
City, Antipolo, Calamba and
Cavite. Beneficiary schools will
likewise receive teachers training,
feeding programs, health services,
educational reference materials,
and full landscaping for the
schoolhouses.
Education. Every year, your
Company donates school supplies
to incoming elementary school
pupils. Launched in 1998,
the “School Starter” program
has benefited thousands of
schoolchildren in Quezon City,
Muntinlupa, Las Piñas, Laguna,
and Cavite.
In Muntinlupa, ALI is an active
partner of the city government
in its “Adopt-A-School Program”
and has chosen Putatan
Elementary School, one of the
city’s biggest public schools, as
beneficiary.
Yearly, ALI, in coordination
with the Museo ng Makati,
provides free tours and seminars
at the Ayala Museum for public
elementary students. ALI also
supports Lakbay Aral programs in
Laguna, Cavite and Muntinlupa.
As your Company turns 15 and
adopts the theme “Knowledge
Management,” education gains
added impetus in ALI’s social
investment agenda with the
launching of “the Build-ASchoolhouse Project.” Under
this project, three-room
concept and design k2 interactive (asia) inc. portraiture by tom epperson operations photography + internal portraits by menchit ongpin, bern mejias & ricky ladia