Q2 2026 Megaworld Corp Earnings Call
Speaker #1: You know.
Speaker #2: Good afternoon, everyone, and welcome to the first half: Financial and Operating Results Briefing of Megaworld Corporation for the year 2026. I'm JC Nayara, and I'll be your host and moderator for today's session.
Speaker #2: Before we dive into the presentation proper, I'd like to first introduce you to our distinguished panelists, who will provide valuable insights and answer any queries you may have later on.
Speaker #2: And joining us here today are Ms. Cleofe Alviso, Managing Director of Megaworld Hotels and Resorts;
Speaker #3: Good afternoon, everyone. Pleased to be here.
Speaker #2: Mr. Roland Tiungson, First Vice President, Megaworld Premier Offices;
Speaker #1: Good afternoon. Happy to be here.
Speaker #2: Mr. Andy Dela Cruz, the new Head of Group Investor Relations and Capital Markets;
Speaker #4: Everyone, good afternoon.
Speaker #2: Mr. Jeffrey Lucero, our new Investor Relations Officer for Megaworld Corporation, and a presenter for today's session.
Speaker #5: Hi, good afternoon, everyone.
Speaker #2: We encourage everyone to actively participate in this briefing. Questions will be addressed right after the presentation, and you may either choose to raise an option or type your questions into the Q&A box.
Speaker #2: At this juncture, I'll now turn the floor over to Sir Jeff, who will walk us through the results of the company for the first half of 2026.
Speaker #2: Sir Jeff.
Speaker #5: Thank you, JC. Good afternoon again, everyone. So let's start the briefing. First half 2026: Megaworld briefing, weather financial performance. So, first half revenues increased by 3% year-on-year to ₱44.2 billion, driven by sustained growth of our recurring revenues and stable residential revenue bookings.
Speaker #5: Residential gross profit margin expanded 363 basis points to 53.87%, on the back of a more premium sales mix and disciplined cost management. EBITDA margin improved 240 bps to over 44%, reaching $19.49 billion.
Speaker #5: Core profit rose 13% to $11.79 billion, driven by both top-line growth and margin expansion. Notably, Megaworld recorded significant margin expansion notwithstanding inflationary pressures from the Middle East crisis, on the back of operating efficiencies and highlighting the financial merits of our sustainability initiatives, particularly our contracted 100% renewable energy supply.
Speaker #5: Next slide, please. Per segment, real estate sales are up as we continued our development and construction cadence throughout the period, continuing to deploy capital to advance our projects and meet our commitments to customers.
Speaker #5: Office rental revenues grew 5% to $7.8 billion, reflecting strong leasing activity and are well above the market occupancy rate. Megaworld Lifestyle Malls delivered an 8% increase in revenues to $3.6 billion, supported by built-in demand from township residents, office workers, hotel guests, and visitors. The mall sustained high levels of consumer activity despite inflationary pressures.
Speaker #5: Hotels was the fastest-growing recurring segment, with revenues rising 11% year on year to $3.1 billion, on the back of new hotel openings and higher MICE-related revenues.
Speaker #5: Our balance sheet was further fortified by our capital recycling initiatives through MREIT, with cash and cash equivalents rising 9% to $22.76 billion, and net debt-to-equity ratio improving even further to only 0.24x.
Speaker #5: Our book value as of June now stands at $320 billion. Total debt is below $100 billion. Debt funding remains diversified, reflecting flexible funding access from both banks and capital markets. Our debt exposure is also predominantly peso-denominated, limiting forex risk.
Speaker #5: So far, we've spent $21.1 billion in capex. This was primarily for project development and is on track with our full-year target. Meanwhile, the land banking side remains selective and opportunistic.
Speaker #5: Megaworld's dividend per share jumped 25% to $11.73, totaling $3.81 billion. This is equivalent to a dividend yield of 5.2% based on last close. This significant increase reflects a two-pronged approach: number one, our continued strong earnings growth; and number two, a material increase in the dividend payout ratio.
Speaker #5: This is in line with Megaworld's goal of meaningfully expanding shareholder returns. Our share buyback program still has over $1.7 billion in unutilized budget, available for deployment and support.
Speaker #5: So this is simultaneous with a significant dividend growth discussed in the previous slide. Megaworld has 37 townships so far, with Sugartown being the newest, which was launched earlier this year. In the second half of 2026, we're scheduled to launch what would be our 38th township.
Speaker #5: Our industry-leading real estate gross profit margins continued at 54.3% in the second quarter, on the back of a more premium sales mix, disciplined pricing, and disciplined cost management.
Speaker #5: As a result, residential gross profit increased by 8% to $14.7 billion. Eighty-eight percent of residential revenue bookings come from the upper mid- to high-end segments, where demand has remained the most resilient.
Speaker #5: Metro Manila accounts for 64% of revenue bookings, anchoring earnings stability, while provincial markets continued to gain share. On reservation sales, first-half 2026 reservation sales surged 15% to $63 billion.
Speaker #5: This performance stood in stark contrast to the overall Metro Manila market, where net unit pre-sales fell 47% over the same period, according to Colliers.
Speaker #5: Strong take-up was recorded from provincial projects, including those in Ilocanya Coast Town and Paragua Coast Town, and provincial sales now account for almost half of the total reservation figure.
Speaker #5: Project launches totaled $16 billion in the first half, with a bigger share of our 2026 launches scheduled for the second half. Launches were all provincial in the first half, reflecting Megaworld's pivot into high-growth regional locations.
Speaker #5: So these were all in the upper mid to high-end segment. In the second quarter, we launched the $7 billion Villa Scala. This is a horizontal residential development in Scala Coast, Batangas.
Speaker #5: So the project comprises 217 residential lots, representing approximately 116,700 square meters of saleable area. Next slide, please. Moving on to office, office rentals continued to grow, up 5% year-on-year to $7.8 billion in the first half, reflecting continued strong leasing activity and are well above the industry occupancy rate of 87%.
Speaker #5: Megaworld's tenant base is anchored by global capability centers and knowledge process outsourcing firms. These tenants perform knowledge-intensive, business-critical functions that are deeply embedded into enterprise operations, underpinning longer planning horizons and more stable space requirements.
Speaker #5: Weighted average lease expiry is stable at 3.25 years. Office transactions totaled 180,000 square meters in the first half, with lease renewals rising by around 40% to 123,000 square meters.
Speaker #5: So just halfway through the year, over 80% of leases expiring in 2026 have already been renewed. Moving on to malls, Megaworld Lifestyle Malls delivered an 8% increase in revenues to $3.6 billion during the first half.
Speaker #5: Tenant sales and foot traffic maintained strong momentum. Occupancy rate remained high at 95%. Average daily sales grew 9% year-on-year to $142 million. Average daily foot traffic jumped 44% to 393,000 in the first half, and the malls sustained a very high level of consumer activity despite all the inflationary pressures.
Speaker #5: A total of 16,300 square meters of new store openings during the first half, spanning food, fashion, and experiential retail concepts. Next slide, please. At Megaworld, placemaking goes beyond developing physical spaces.
Speaker #5: It is about creating vibrant townships where people want to spend more time, through lifestyle, sports, and wellness initiatives. And next slide. Alongside these are festivals, cultural celebrations, and community events.
Speaker #5: So these activities give people more reasons to visit, stay longer, and return more often, generating sustained foot traffic and supporting our retail and commercial ecosystem.
Speaker #5: On to hotels. This was the fastest-growing recurring income segment, with revenues rising 11% to $3.1 billion. Meanwhile, the ADR moderation reflects the contribution of recently opened hotels still in the ramp-up phase, with stabilized properties continuing to perform well.
Speaker #5: With the opening of Belmont Hotel Iloilo, total hotel room keys now stand at 7,348. The opening of the 405-room Belmont Hotel Iloilo expanded Megaworld's portfolio in the Iloilo Business Park to 880 rooms, commanding a 25% hotel room market share in the region, strengthening its position to capture growing leisure, corporate travel, and MICE demand in Iloilo.
Speaker #5: Megaworld Hotels also launched the TARA, or Travel Away and Reignite Adventure, domestic tourism campaign. This is a nationwide campaign encouraging Filipinos to rediscover local destinations through special offers across our growing hotel portfolio.
Speaker #5: Running until November 2026, the campaign aims to make domestic travel more accessible while supporting local tourism and communities across the country.
Speaker #2: One simple word that instantly brings people together. We always say, "Tara, kain tayo." Tara, gala tayo. Tara, sa Savoy Hotel Manila. Tara, sa Belmont, we can staycation.
Speaker #2: Tara, sa King's Court. Today, we proudly launch Tara—travel away and reignite adventure. Tara is an invitation to travel mindfully, to slow down, and create meaningful memories with the people who matter most.
Speaker #5: What Megaworld Hotel is doing with this Tara campaign is exactly the kind of energy, exactly the kind of private sector initiative that the Department of Tourism has been hoping to see more of.
Speaker #5: The Philippines has always had more to offer than one season, and every Filipino deserves a chance to discover it. And when they travel, the Megaworld Hotels of this country are exactly where we want them to end up.
Speaker #2: If you want to relax, you want to see the beauty of the country, book a destination within the country. Tara, sa Chancellor. Tara, sa hotel lang, in Chinatown.
Speaker #2: Let's rediscover the Philippines—one story and one unforgettable experience at a time. This is Megaworld Hotels and Resorts.
Speaker #4: Tara, sa Megaworld Hotels and Resorts.
Speaker #2: Tara, travel away and reignite adventure.
Speaker #5: So that's Tara, very exciting tourism campaign indeed. For the full year of 2026, we're maintaining our targets, so 55 billion pesos in capex, 38 townships by the end of the year, so one more township to be launched in the second half, 125 billion pesos in reservation sales, and the total of 50 billion pesos in project launches.
Speaker #5: As you already know, this is our pipeline until 2029. The most recent completion was the 405-room Belmont Hotel Iloilo. For our key takeaways on the real estate side, reservation sales reached ₱63 billion, up 15% year on year, underpinned by resilient demand for Megaworld's township developments.
Speaker #5: On the office side, occupancy remained healthy at 87%, supported by strong tenant retention, higher renewals, and sustained demand from high-quality BPO and traditional occupiers. On the mall side, rental income improved 8% year-on-year to ₱3.6 billion, on the back of very high occupancy, stronger tenant sales, and sustained foot traffic.
Speaker #5: Hotels was the fastest-growing segment, with double-digit revenue growth of 11% to ₱3.1 billion. And for our outlook, on the real estate side, Megaworld remains on track toward its ₱125 billion reservation sales target, supported by township demand and disciplined project launches.
Speaker #5: Offices, strong renewals, and sustained BPO and traditional tenant demand are expected to support leasing and stable occupancy. On malls, our very high occupancy rate, tenant mix optimization, and sustained consumer activity are expected to support rental growth, while new store openings will expand the revenue base.
Speaker #5: For hotels, targeted travel campaigns—including Tara—and the continued ramp-up of new properties are expected to drive occupancy, direct bookings, and revenue growth. So with that, let me now turn the floor back over to JC, who will open our Q&A session.
Speaker #6: Thank you, Sir Jeff, for that insightful presentation. We'll now proceed to our Q&A session. Again, you may ask your questions by either raising your virtual hand or typing them into the Q&A box.
Speaker #6: We'll begin by entertaining questions from those who have raised their virtual hands. Any participants who would like to ask their questions live? Okay. So, we have Carl C.
Speaker #7: Hi, Carl.
Speaker #6: Please go ahead.
Speaker #7: Afternoon. Let me just ask first if you can hear me.
Speaker #6: Yes, Carl. Loud and clear.
Speaker #7: Thank you. I'll ask first a housekeeping question. What was the value of your unsold residential inventory in Q2?
Speaker #5: Yes. So as of June, that's ₱119 billion. That's ₱119 billion. So that's lower quarter-on-quarter, and less than one year's worth of sales.
Speaker #7: Understood. And can you give me the percentage of RFO?
Speaker #5: One-third.
Speaker #7: One-third. Got it. Regarding the improvement in residential gross profit margin, you did mention product mix was one of the reasons. Could you tell us which areas or which projects have the higher margins?
Speaker #5: Yeah, no, the provincial projects in the upper mid to high-end segment have higher margins, because basically, we're bringing their Metro Manila prices. So, for the likes of those in Paragua Coast Town, the selling price is up to ₱300,000 or well above ₱300,000 per square, which is basically almost close to what you have on the Metro Manila side.
Speaker #7: Okay. I believe Paragua Coast Town, I assume, isn't being recognized as revenue yet. But on your point regarding this, it is a reservation project.
Speaker #5: Correct, correct. Yes. But for the rest, it's also the provincial projects that, basically, we're selling at Metro Manila prices.
Speaker #7: Okay, so provincial projects actually have higher margins. Okay. And then, going back to reservation sales, how much of your sales were to foreigners?
Speaker #5: 13%.
Speaker #7: 13% to sales to foreigners. Okay. And on the office segment this time, for MREIT, I understand that rental reversions were mildly negative. At the Megaworld level, was that also the case?
Speaker #5: Yes, so at the Megaworld level, we're at mid-single-digit negative rental reversion overall. The same with MREIT—it's flat or even positive rental reversion for most areas, except Eastwood.
Speaker #5: We're really taking a pragmatic approach in that we prefer these office spaces to be leased out. So in Eastwood, we're basically giving back around two to three years' worth of escalation to secure the renewals.
Speaker #5: But that being said, the renewed contracts have similar escalation mechanisms. So in two years' time, we'll be back to those levels.
Speaker #7: Understood. And then, is it correct that you completed an office building in the second quarter?
Speaker #5: No, that's just rounding. But no, no office completion in the second quarter.
Speaker #7: Got it. Yeah, so I'd like to ask about your outlook on the residential segment for reservation sales. Okay, so you're targeting ₱125 billion in reservation sales.
Speaker #7: I do want to check that the outlook is very different between provincial and Metro Manila. Would that be fair? At least for many of the developers, they are—say, Metro Manila's supply-demand situation for the residential segment isn't very good.
Speaker #7: Would you say that's also true for you guys?
Speaker #5: Well, so far, no. The provincial launches have been high. That's why the reservation sales on the pre-selling side are also high on the provincial side.
Speaker #5: But for Metro Manila, our RFO projects or our RFO sales have been doing very well. Actually, it's part of the drivers of the growth in reservation sales.
Speaker #5: So that's the same that we're expecting for the full year. For the provincial pre-selling units, it's going to be driven by that. For Metro Manila, our RFO sales will still be high.
Speaker #7: Understood. So it's fair to say that you feel your RFO promotions and discounts are being well received by the market.
Speaker #5: Yes, it's well received. So, our promotions on the RFO side are heavily focused on the extended down payment or extended payment terms, rather than on discounts.
Speaker #5: And as can be seen in our results, it's really what the market wants. It's really what the market needs—making homeownership easier and having lower monthly payments.
Speaker #7: Understood. Thank you. Those are all of my questions.
Speaker #5: Thanks, Carl.
Speaker #6: Okay, Carl. Are there any participants who would like to ask their questions live? Okay, we have Jolene. Jolene, you may go ahead.
Speaker #2: Good afternoon. Just a quick note.
Speaker #6: Hi, Jolene.
Speaker #2: Question. I might have missed it because I joined late. How much were launches? Do I see launches as a first half? And do you have a renewed guidance for the full year?
Speaker #6: Yes. So the first half was ₱16 billion. No renewed guidance, because our project launches for the full year are really skewed towards the second half.
Speaker #6: So, we're still maintaining the 50 billion pesos.
Speaker #2: Okay. How about your planned next installment, similar to Embassy Hills? When can we expect that? Will it still be in Metro Manila, or will your new launches also be geared towards the provinces?
Speaker #6: We'll have one project in the ultra-luxury segment, so it's part of the target launches for the remainder of the year. It's always a target to have at least one each year under the 'lux' category.
Speaker #6: As to go ahead.
Speaker #7: Yeah, to add color to that, Jolene, we're looking outside Metro Manila for our next project in the Ultra Lux department in our residential. While we're also looking to launch one per year—so, similar to this year, we want to do one project this year—we're also quite, we're also quite flexible.
Speaker #7: If demand is there, then we will launch it. But I don't think anything is stopping us from delaying that to when the market is more amenable to such a launch.
Speaker #7: Outside Metro Manila for this type of project.
Speaker #2: Okay, understood. May I please know the current leasehold levels of Uptown Modern?
Speaker #7: It's still around 70 to 80 percent.
Speaker #2: Still 70, so it's a bit stagnating.
Speaker #7: Yes.
Speaker #2: Okay, understood. And then lastly, on Eastwood, how much more expiry is expected for this particular location in the next 12 months? And would you say that after the timing of those renewals, rental reversion portfolio-wide could recover?
Speaker #2: Any guidance on that would be most helpful. Thank you.
Speaker #6: Sure. So the bigger chunk—probably Sir Roland or Sir Eric can also chime in—but I understand the bigger chunk of expiries in Eastwood has already happened, at least for the year; it has already happened in the first half.
Speaker #6: Is that correct, Sir Roland?
Speaker #7: Yeah, we're not expecting any more expiries coming up. Not much anymore, for the second half.
Speaker #6: Yeah. Thank you, Sir Roland. So to your question, Jill, with that, the drag into our rental reversions, which is Eastwood, would somehow be abated already.
Speaker #2: That's fair to you. Thanks, Jeff, Sir Roland, and Andy.
Speaker #7: Thank you, Jolene.
Speaker #6: Thanks, Jolene. Next, we have Gabrielle—Gabe Matrader. Yeah.
Speaker #5: Hi, Gabe.
Speaker #1: Hey, good afternoon, Jeff. Two questions on my end. First, zooming in on the unsold inventory—I understand the total unsold inventory is about $119 billion.
Speaker #1: I wanted to ask, what percent of that is Metro Manila, and what percent of the Metro Manila inventory is RFO? As you mentioned, RFO is the driver for pre-sales in this geography.
Speaker #5: Yeah, so the bigger part of the Metro Manila remaining inventory is the RFO. Let me get back to you on the exact figure. Before the end of the briefing, I think we can give you the figure.
Speaker #5: Probably, Apes, if you can type in the figure here. But yeah, we can proceed with your second question.
Speaker #1: Okay, thanks for that. Second question is on the increased dividend payout. I understand that the payout increased from 16 to 18. Given your gearing level of about 0.24 times, I'm almost wondering how much higher you think this could go?
Speaker #1: Could management give any guidance on this?
Speaker #5: That's the general direction. So, Gabe, before, the increases in our dividend per share have largely only been driven by one side, which is the income increase of Megaworld.
Speaker #5: But now, we're really targeting to increase our dividend payout ratio as well, including moving forward.
Speaker #1: Could you perhaps give any guidance as to how much higher this is?
Speaker #5: Percentage? Not yet, but maybe within the year we'll be able to give that out.
Speaker #1: Okay, clear. Thank you. Thank you very much.
Speaker #7: Gabe, to answer your question on unsold inventory, about a third is in Metro Manila.
Speaker #1: Okay. That's clear. Thanks, Andy.
Speaker #7: Sure.
Speaker #6: Gabe? Next, we have—oh, okay. Are there any participants who would like to ask their questions live? Okay, we have Francis. Please go ahead.
Speaker #5: Jeff, hi Andy. Good afternoon. This is Paul from BPI Sec. I have two questions. My first question is about something related to government policies.
Speaker #5: So there were reports coming from real estate brokers and even from some developers about the delays in the approval of licenses to sell from the DHUSD.
Speaker #5: Can you provide us a color on how these recent developments unfolded? And did it affect Megaworld in any way? Did it have any impact on Megaworld?
Speaker #5: Particularly on your Resi UE segment and launches for the first half.
Speaker #6: Yeah. So for us, we haven't heard this yet from our project development teams. So the launches are lower in terms of the ₱50 billion budget, but it's really scheduled that way.
Speaker #6: So the second half—it's really skewed towards the second half, where we'll have the bulk majority of the launches for the year.
Speaker #5: Understood. Got it. Thanks, Jeff. For my follow-up question, this is also related to your RFO promos. Can you refresh our understanding once again about the promos that you are offering to your buyers?
Speaker #5: How much discount, any ballpark figure on the discount that you are giving right now? Both here in Metro Manila and in the provinces.
Speaker #6: So for the RFO, what's new is the extended payment terms. Before, this was only up to two to three years, but now we have up to five years.
Speaker #6: For very select projects, on the discount level, this only applies to cash purchases. And the very maximum that we're able to give is a 25% cash discount.
Speaker #6: It hasn't increased since then. All the new promotions right now are on the extended payment terms.
Speaker #5: Got it, Jeff. Sorry, just to clarify, up to a 20% discount for cash?
Speaker #6: Up to 25% discount for cash only on select projects.
Speaker #5: Only for select projects.
Speaker #6: Yeah. Not in provincial though.
Speaker #5: Okay, sorry, last question. Can you provide us any guidance, or any figure, on how much of your total pre-sales were paid in cash?
Speaker #6: No, it's not that high. The spot payment—because what's really driving this is the extended payment schemes. So, the higher component of those pre-sales is with these extended payment schemes.
Speaker #5: Got it. Thanks, Jeff. That's all of my questions.
Speaker #6: Thank you.
Speaker #7: Thank you, Paul.
Speaker #6: Are there any participants who would like to ask their questions live? Amy also used our Q&A box if you want to type in your questions.
Speaker #6: And we'll just read it. Okay. So, we have a question here for Hotels. So far, up until August, how has the Terra campaign performed?
Speaker #6: Which areas and hotels in the portfolio have seen a significant uptick in bookings?
Speaker #2: Thank you, JC. We're very encouraged by the first month results of our Travel Away and Reignite Adventure campaign. It's a value-driven promotion that Megaworld Hotels and Resorts is very proud of.
Speaker #2: And the highest gains are actually coming from the destinations. Topping that would be our Twin Lakes Hotels in Batangas. And, of course, there's always the winner for us every time we put out a promotion that spreads across all our properties.
Speaker #2: Other destinations, like Mactan, have also gained traction. Our Mercure Hotel and our Savoy Hotel Mactan have also gotten a number. And we're also very proud that our Boracay properties have been a favorite for our Terra campaign users.
Speaker #2: And we will continue to do this, given that this is very much aligned with the Department of Tourism's campaign, which is also trying to drive more of our domestic travelers to use our local hotels in answer to the crisis that we're actually currently going through.
Speaker #6: Thank you, Ms. Cleo. Still on hotels—for the international market, how are you positioning to capture demand?
Speaker #2: As a homegrown brand, we know that our brand positioning has to be more hardworking for global recognition. We do partner with B2B bed banks.
Speaker #2: We position ourselves to deepen our partnerships with distribution alliances like the HBX Group or Hotelbeds. Hotelbeds has 60,000 travel distributor partners and over 170 source markets.
Speaker #2: This is really a lot of help for Megaworld Hotels and Resorts to be present in areas where we do not have reach, or where we want to be introduced.
Speaker #2: This allows us to create high-value packages and bookings, and gives us some wiggle room to be able to attract markets that are difficult to penetrate.
Speaker #2: We're also targeting Asian feeder markets. Strategic partnerships with OTAs in the region are very, very critical for us. And that includes the likes of Trip.com, which is very strong in China.
Speaker #2: So that's where we are, and we will continue to target China, India, and the other Asian feeder markets.
Speaker #6: Okay. So we have a question here from our Q&A box from Isabel. For residential, what provinces reflect significant real estate growth? Why their Villa Escala percentage sold?
Speaker #5: No, in general, the provincial markets have grown. So for the pre-selling side, Villa Escala is one of the strong performers. Also, projects in Paragua Coast Town, as well as in Elocandia.
Speaker #6: Thank you. Sir Jeff?
Speaker #7: Villa Escala was launched towards the end of the second quarter, and hence, because of that, it's still about 15 to 20 percent sold as of the end of June.
Speaker #6: Thank you, Sir Andy. So, before we proceed, we'd like to acknowledge the presence of Mr. Javi Hernandez, First Vice President, Megaworld Lifestyle Malls, who will also be joining us today as one of the panelists.
Speaker #8: Afternoon, everyone. Hi, Sir Javi.
Speaker #6: Okay, so we have a question for Malls from Isabel: What are some anchor retail tenants?
Speaker #8: Sorry, could you repeat that? I got—
Speaker #6: What are some anchor retail tenants, sir?
Speaker #8: So our anchor tenants are normally the large occupants of our shopping malls. So anchors would be anywhere from a supermarket or a department store, appliance center, hardware, and those large-space category users.
Speaker #8: So you would have an anchor in a toy store. You would have an anchor in retail, which would be your large format. So an anchor is really a tenant that is a large space user, that will draw a lot of traffic to your shopping center.
Speaker #8: So we have anchors, and then we have junior anchors. But basically, they draw in a crowd to your mall.
Speaker #6: Thank you, sir. Another question for Malls: Average daily spend declined, but average daily sales remain strong. Could you discuss what happened? Which tenants performed better?
Speaker #8: Sure. Thank you for that question. In one half of 2026, we saw cautious spending from shoppers and diners alike—both people who came to our malls to shop and people who came to our malls to unwind, dine, and get entertained.
Speaker #8: Given geopolitical conditions and the inflationary pressures experienced in the first half of the year, mall patrons spent a little less money on retail. We likewise also saw that quite a few restaurants were aggressively offering promos.
Speaker #8: Their own within their restaurant chain, as well as a lot with credit card companies. We saw that in the first half of this year, there were a lot of credit card companies that did a lot of promos with the restaurants.
Speaker #8: Because we have a diversified mall tenant base, our malls were able to capture the increased volume of transactions that tempered the lower basket spend.
Speaker #8: So people are a little more cautious in their spend, but all in all, our total sales grew. So, lower basket size due to cautious spending, but higher in terms of volume as a result of our increased foot traffic and the marketing activities that we did to continue to engage with shoppers even during difficult times.
Speaker #6: Thank you for that, Sir. We have a question here for Office. How much were total office transactions in the first half of 2025? The same period last year—wasn't it higher?
Speaker #5: Hi, Carl. In the first half of 2025, it was 188,000 square meters, so it's a bit lower. But renewals—the 123,000 square meters—is around 40 percent higher year on year.
Speaker #5: The new leases are down by over 40 percent, but that's only because we didn't have new office openings in the first half of 2026. In the first half of 2025, we had new office openings in Iloilo Business Park and even in Capitol Town, Pampanga.
Speaker #6: Thank you, sir. We have a question here from Lance Soledad, on hotels. What is MEG’s typical management fees and commercial arrangements when partnering with international hotel brands?
Speaker #2: We wish we could say that here, but even for the two conversions that we have had for both Mercure, we have tiered fees, and we are very glad that Accor has provided us with a very supportive fees scheme that's tiered from first-tier up until the ramp-up period, where we get to really put across the brand of the conversion that we are doing for both Mercure.
Speaker #2: And we look forward to the move and pick. Of course, we do have current discussions for more conversions, and we will definitely have to leverage on the relationships that we're creating with the international brands. I think our conversion, being the first in the total group of Megaworld Hotels and Resorts, has also opened interest from many other hotel chains that are internationally hinged and anchored to be our future partners in the future.
Speaker #2: So, it's tiered, and we are very proud of where we are in terms of the license and management fees of the partners that we have acquired.
Speaker #6: Thank you, Ms. Cleo. We have a question here for the Office team. Meg previously mentioned that the decision cycle for upcoming tenants has taken longer since the Middle East crisis.
Speaker #6: But the negotiations have not stopped. Are these negotiations still on the table? Sir Roland?
Speaker #5: There are still negotiations going on; very little went away. And we're hoping that when the crisis dies down, the action take-ups would pick up.
Speaker #5: During the crisis, the take-ups have slowed down, but actually, there was a slight uptick in June and July.
Speaker #6: Thank you, Sir Roland. So, for Office's tale, aside from the Middle East crisis, what other macro developments are you watching out for?
Speaker #5: Probably Sir Eric or Sir Roland. Actually, for locally—actually, domestically—we're looking out for the time when the PEZA work-from-home percentage, which was increased during the crisis...
Speaker #5: Excuse me. It was increased by the government during the crisis from 50 percent to 90 percent. So, we're actually hoping that this would later be reduced when the Middle East crisis goes down.
Speaker #5: In the meantime, the moratorium that was imposed during the time of President Duterte, wherein PEZA accreditations were put on hold, was lifted during the quarter.
Speaker #5: So we're very happy with that.
Speaker #6: Thank you, sir. We have a question here for the Mall team: What percentage of our portfolio is retail today? Do you expect this figure to either increase or decrease moving forward?
Speaker #5: So currently, we are at 27 percent food and 73 percent non-food. We would like to grow the food category a little more, maybe up to, in the short term, maybe up to 30 percent, to bring our patrons more dining options and more entertainment options.
Speaker #5: We've also seen that when the economic cycle downturns, people might put a hold on spending for shopping in terms of clothes, shoes, jewelry, and things like that.
Speaker #5: But they always go out and eat, so being able to contribute a little bit more to that category will help everybody.
Speaker #6: Thank you, Sir. Sir, to clarify, the 73 percent non-food already includes the services and others?
Speaker #5: Yes, that includes services, fashion, and basics, yeah.
Speaker #6: Okay, thank you, Sir. So, we have a question here for hotels. For the rest of the year and for next year, where do you expect growth in bookings to come from—domestic or international?
Speaker #2: We'll continue to have focus in both markets, as with what happened during the crisis, when flights were not readily available and some of our partners really decreased their contribution to our distribution.
Speaker #2: Domestic will have to remain a priority for our marketing efforts and our sales missions. But we will also continue to really target potential markets like India, China, and areas where we see there would be potential to really capture more, including Australia.
Speaker #2: We're very glad that our Muslim-friendly offerings are also a big contributor to incremental revenue for us. And it's not just about the domestic and international call, we are also very keen on making sure that our leisure packages are in place, like what we're trying to offer with Dara, and that our MICE offerings are also really going to be solid.
Speaker #2: We've just hosted the ASEAN Summit in May, and that was a big contribution to how we performed in the first half. We have also requested the government to lift the ban on meetings from government agencies, and that will be a lot of help as well.
Speaker #2: Because the government agencies' MICE contribution to our hotels is really substantial, we will continue to focus on that one. Another sub-priority would be sustainability, and of course, experiential marketing will also be very critical.
Speaker #2: Like the way we're adding more amenities to our new Coast township in Boracay, and adding more family-friendly amenities would entice new markets that have not been able to have the opportunity to enjoy our destination hotels.
Speaker #6: Kim is clear. So, we have a question here from Danielo: How much of current RFO inventory is being sold under financing schemes, cash discount, and/or extended payment terms?
Speaker #6: And are realized margins for these RFO sales still broadly in line with normal residential margins after factoring in discounts and financial terms or financing terms?
Speaker #5: Hi, Danielo. The majority is under extended payment terms, so since we're opting for extended payment terms rather than discounts, the residential margins are being protected.
Speaker #6: To add to that, even with a 25% cash discount, we typically still get a larger margin compared to year one pre-selling. Because an RFO unit has already enjoyed maybe at least five years of price escalations already.
Speaker #6: And what we do is we never go below our margins that we set when we first planned for this residential project, which is the initial margin we expected during year one, during pre-selling.
Speaker #6: Which is why sometimes it's also good to sell towards the RFO market, because the RFO market is a different market altogether versus those that are buying pre-selling units.
Speaker #6: Because we can still, you know, I guess, squeeze out some better margins compared to pre-selling when selling straight cash—even a straight cash. Yes, sir.
Speaker #6: And the answer, Jeff? Another question from Danielo: Can you update us on the pre-leasing rates of your office projects currently in the pipeline? And may I know at what rental rates these transactions are being locked in?
Speaker #6: For example, what's the discount rate?
Speaker #5: So, the pre-leasing is not that substantial, but there are some pre-leasing activities. However, it's not yet substantial enough to be able to provide a general picture on this.
Speaker #6: Thank you, Sir Jeff. Are there any participants who would like to ask their questions? Okay, it seems that we've addressed all the questions for today's session.
Speaker #6: And as we wrap up, we'd like to express our sincere gratitude to everyone for taking the time to join this briefing. If you have any further questions, please feel free to reach out to us via email.
Speaker #6: Stay safe and dry, and we hope to see you again in our next one. Goodbye, everyone.
Speaker #5: Thank you everyone.
Speaker #2: Thank you and bye.
Speaker #6: Thank you.
