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ALI's long-term focus ensures stability


(The Philippine Star) Updated December 20, 2009 12:00 AM

MANILA, Philippines - With the global economic crisis marking the Philippines’ start of 2009 with a bleak outlook for many industries including real estate, Ayala Land Inc. (ALI) put financial measures in place to ensure the company’s stability.

Backed by a history of successfully weathering economic turmoil such as the 1997 Asian financial crisis, Ayala Land set forth at the start of the year with strategic moves intending to keep cash flow healthy and the balance sheets stable, by strengthening cost effectiveness, exploring new markets and maintaining transparency and heightened awareness among customers and stakeholders with project developments.

Antonio T. Aquino, Ayala Land president, gives an overview of this year: “Certain adjustments happened in the marketplace due to the global economic crisis that started in the third quarter of last year. But fortunately, we were able to see that the country was not as badly affected and that demand had proven to be very resilient.”

Early conservative posture

“Given the projections on the crisis, Ayala Land took on a conservative posture. We made sure that the company had sufficient liquidity so that if the crisis deepens, we would still be left standing. We geared up to survive and be prepared for the worst possible scenario,” recounts Aquino.

To achieve this, Ayala Land launched a limited supply of the originally planned number of units compared to the last two years. “We were conscious and cautious of the rate of market absorption,” he states.

“But things ended up being not as bad as we expected. By the second quarter, we started noticing that there was a mild recovery. We also realized that the dip in sales at the early part of the year was mainly due to issues related to market confidence rather than to the fundamentals of the economy,” he adds.

Aquino notes that to date, interest rates are benign and banks are still looking to improve their mortgage portfolio. Consumer lending remains to be the only significant outlet for bank lending. Banks are looking at other investment opportunities, primarily property. “We realized too, that household wealth in the Philippines has not been significantly affected by the crisis. That’s the biggest difference with other major economies.”

The Ayala Land head pointed to remittances from the nine to 10 million overseas Filipinos as the single biggest reason for the resilient economy. Studies indicate that one of four Filipino households receives remittances, a significant portion of which is spent on food, and other daily necessities. Some 20 to 25 percent is estimated to be spent on housing needs.

Shifting gears

By the third quarter, with the Philippine economy clearly panning out differently as expected, Ayala Land changed strategies and instead grabbed the opportunities presented by the stable market and pushed with aggressive sales and promotional programs.

Marketing efforts for residential projects were doubled as Ayala Land hosted more overseas events, with forays into new markets in Europe and the Middle East.  This even provided the company with a clearer understanding of the unmet needs of Overseas Filipinos and highlighted the opportunity to help the fulfill their aspirations.

Alongside these ramping up activities, Aquino put major focus on the company’s adoption of a strong cost-mindset, attributing the improvements to many operational efficiencies put in place. “We improved on our cost models and we achieved significant over-all cost reduction in operating and direct expenses by shortening our product planning cycles which in turn allow us to roll out our projects faster to the market,” he narrates.  “We also rendered more attention on our integrated sustainability program to reduce energy and water consumption, as well as to achieve better waste management, all of which improved on our bottom line.”

Moving forward together

The company president can’t attribute to any single business unit, be it residential, retail or offices, the successful task of carrying the ball for Ayala Land in this challenging year but merits the contribution of all its members. “All our business units did their share to buoy us up this year. We were in this together.  Everyone was on board the process, and it was important to get everyone to do his share in this crucial time.”

He points to the townships of Makati, Bonifacio Global City and NUVALI in Laguna as having fared very well with sales from big commercial lots providing good revenue.  This, he notes, continues to indicate the market’s appreciation of Ayala Land’s overall advantage, which has always been how it manages and develops areas from what were once raw lands. “For instance, where Makati used to be an airfield, Bonifacio used to be a military camp, Alabang used to be a mango plantation, NUVALI used to be sugar fields, these have now been transformed into business districts largely with mixed-use development, integrating the residential component with some retail and office projects” he states.

At the year’s onset, the activity level with the Residential Business Group dropped and revenue slowed down.  But taken with the perspective that 2008 was a record year for Ayala Land and that 2009 was a challenging year, Aquino states that the company performed much better than expected. In fact, the gap against 2008 quarterly revenues was seen growing smaller through the year and it looks like revenue at the end of the year will closely match that of last year. “Right now, we are in the process of rolling out a very robust pipeline of projects,” said Aquino.

Significant residential project completions this year as well as new sales bookings, bolstered revenue. Ayala Land Premier opened Santierra in NUVALI in November and etched a successful sales record, while Alveo Land launched Ametta Place in Pasig sometime June and Asyana in August. Also, Avida Towers in San Lorenzo and Avida Residences in Dasmarinas, Cavite were launched in May and October respectively.

Business at the malls was fairly steady as consumption did not waver. “We ramped up with new malls to offset the closure of Glorietta 1 and 2 which underwent revitalization. Glorietta 5 was opened in May while NUVALI’s retail center, Solenad, was opened a month earlier. Marquee Mall in Pampanga was opened in September and we gladly see it performing beyond expectations,” Aquino enthuses.

At the same time, office buildings remain as preferred in the market and Ayala Land, Aquino states, still gets the premium value it deserves from first-rate clients even as the demand for office spaces dwindled a bit this year. The new Solaris building in Makati, UP- AyalaLand TechnoHub in Diliman, Quezon City and One Evotech in NUVALI are providers of premium office spaces for the only growing sector in the Philippines, the BPO industry.

Key learnings

Challenging periods bring about many positive changes for those who manage for the long haul. In the case of Ayala Land, among the valuable take-aways from the period is its enhancement of the principle of right-sizing its offerings.

“Because of the global crisis, we kept our focus on the customer. We are keener in considering the configurations of residential needs and we are making sure that we are more optimally in-tuned with what the market is looking for.  We are able to address the needs of the evolving market.”  Aquino adds, “On top of this, we are doing things a lot faster. We are putting major effort in cutting the time we allot to market our products.”

He also views as significant, the directions that the company is leveling on organizational development. “I would say there’s an ongoing transformation in the process of how our people do things as we continue to provide quality products and services and as we exceed our customer’s expectations.”

At the same time, he adds that in a period that was earlier marked with a lot of uncertainty, the importance of constantly communicating to stakeholders and customers should not be overlooked. “We have communicated more to the market and to our shareholders as we lived up to transparency in our plans. Planning for different scenarios has kept us stable.”

He concludes it is important to note that what drives Ayala Land’s behavior as a company is its long-term perspective. “Our investors as well as our customers, appreciate Ayala Land’s traditional focus on ensuring the company’s long-term stability,” Aquino declares.

Ayala Land, enhancing land, enriching lives for more people.

For more information about Ayala Land, you may log on to www.ayalaland.com.ph

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