ALI boosting retail, hospital folio for steady income stream

MANILA, Philippines - Property giant Ayala Land Inc. (ALI) is rapidly beefing up its recurring income portfolio, particularly its lineup of convenience stores, department stores, supermarkets and hospitals.

These new businesses will lessen the impact of the residential segment’s cyclical nature as ALI diversifies its income base, a ranking company executive said.

“While residential development still accounts for a huge chunk of income due to the strong demand for housing over the past several years, our goal is to balance the share of recurring income by expansion and new business lines with the development income moving forward,” ALI chief finance officer Jaime Ysmael in a corporate briefing organized by COL Financial Group Inc.

Specifically, ALI plans to open 40 FamilyMart convenience stores by yearend and expand to 700 branches in the next five years, Ysmael said.

Last year, SIAL CVS Retailers Inc., the joint venture between ALI and the Tantoco family’s Rustan’s Group, brought the world’s second largest convenience store chain FamilyMart to the Philippines.

“We also plan to roll out our first eight [supermarkets] in ALI’s mixed-use developments in three to five years,” Ysmael said. In July, ALI and grocery chain Puregold Price Club Inc. agreed on a joint venture deal to develop and operate mid-segment supermarkets for ALI’s new integrated and mixed-use developments.

For the hospitals, Ysmael said ALI is rolling out nine new hospitals in the next four years. In July, the company acquired the Mercado family’s Whiteknight Holdings Inc., which owns 33 percent of Mercado General Hospital Inc.

“We are consistently launching new growth centers nationwide and introducing new products to cater to the different markets, both existing and emerging to diversify our sources of income,” Ysmael said.

“[The new projects] will allow us to minimize the impact of the cycles from the residential market,” he stressed.

Japanese convenience store franchise FamilyMart will be put up both in ALI developments and as stand-alone outlets in other locations.

“For the supermarkets and department stores, initially, the plan is to locate in the key expansion areas that we are planning in the next five years,” Ysmael said.

Aside from increasing ALI’s offerings in its mixed-use projects, the consumer-focused retail projects and hospitals are also attractive businesses, Ysmael said.

For its core property business, ALI is expanding its shopping centers with an additional 344,000 square meters (sqm) by yearend while the office segment is on track to offering 279,000 sqm of new space.

In the first half this year, the property giant has spent P23.2 billion, up from P18.7 billion a year ago. ALI earmarked P65.5 billion this year for the completion of ongoing developments and the launch of 69 new projects with a combined value of P129 billion.

To date, ALI’s recurring income portfolio is composed of 35 shopping centers and 35 business process outsourcing (BPO) buildings. It also has numerous hotels including Cebu Marriott, Hotel Intercontinental Fairmont Hotels, Raffles Suites and Residences, Holiday Inn and Suites, and Seda Hotel.

ALI’s profits surged 30 percent in the first six months this year to P5.62 billion from P4.33 billion last year on the back of the strong performance of its property development, commercial leasing and construction businesses.