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Why Philippines Now?

The Opportunity for
Real Estate Investors
KMC MAG Group
January 2014
Presentation Structure
1

KMC MAG Group & Savills Introduction

2

The Investment Horizon

3

The Market Performance
About KMC MAG Group


Incorporated in 2009



Has offices in two major business
districts:
 New Headquarters: Sun Life
...
KMC MAG Group key facts

Strong Media
Exposure

600,000+
square feet of commercial &
residential properties which were
lea...
International Network



KMC MAG Group is an international Associate of Savills



Savills is a leading international re...


KMC MAG Group is an international Associate of Savills



Savills is a leading international real estate services grou...
Service lines overview
Research &
Development
Consulting
& Research

Construction

Operation

Tenant
Representation

Asset...
The Investment Horizon
More opportunities for global investors
Philippine key facts

100,000,000
2013 Philippine population

2nd

Fastest growing
economy in Asia after
China in 2013

th...
Philippine economy key figures

7.0%
GDP growth
for Q3 2013

258
Companies
registered in PSE

US$
23.6B

Remittances
proje...
Gross domestic product (GDP)
GDP growth (%) 2013 - Placed 2nd after China
Source: Trading Economics

Japan
Vietnam
Thailan...
GDP Growth
10%

8%

6%

4%

2%

Source: National Statistical Coordination Board, NSCB

2013H1

2012

2011

2010

2009

200...
In Million US $

FDI attraction

Source: Central Bank of the Philippines

4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
...
Private Consumption
In Billion Pesos

Source: Central Bank of the Philippines

0.07

5,000
4,500

0.06

4,000

0.05

3,500...
Inflation Rate
Percentage (%)

Source: Central Bank of the Philippines

5

4

3

2

1

0
2009

2010

2011

2012

2013
In Percent (%)

T-Bill 91-day rates and T-Bond 10-year rates
Source: Central Bank of the Philippines

9
8
7
6
5
4
3
2
1
0
...
Bank Lending Rates
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%

Source: BSP

2013

2012

2011

2010

2009

2008

2007

2006

200...
Banks and their industry exposure
Tourist Arrivals

Millions

Tourist Arrivals

Source: Department of Tourism

6

Tourism Awards & Recognitions
for Philippi...
Source: BSP

13-Aug

13-Jul

13-Jun

13-May

13-Apr

13-Mar

13-Feb

13-Jan

12-Dec

12-Nov

12-Oct

12-Aug

12-Jul

12-Ju...
Philippine Stock Exchange Index
8,000
7,000
6,000
5,000

Source: BSP, Philippine Stock Exchange (PSE)

13-Aug

13-Jul

13-...
Market Performance
 Residential Market
Monthly Rent (USD) per SQM

Average Residential Rent Levels
and Capital Values (by Submarket)
25
20
15

 Main CBDs are st...
Residential New Supply Forecast
90,000
80,000
70,000
New Supply

60,000

Eastwood City

50,000

Rockwell Center

40,000

O...
Market Performance
 Office Market
CBD’s: Stock, new supply and vacancy rates


central business district,
having the highest
concentration of the
country’s...
CBD Office New Supply
Prime Office Space (sqm)

1,400,000



Currently, there is
only one ongoing

1,200,000

office deve...
Makati CBD Vacancy Rate

12.0%

 Vacancy rate increased
temporarily due to the

10.0%

addition in supply but is

8.0%

e...
CBD Prime Office Rent Levels

District

Premium and Grade A Office Asking Rent Levels
Average Net Average Net Rent Monthly...
CBD Prime Office Rent Levels
Locations Prime Office Rental Index (2010Q2=100)

 Strong demand keeps rents

160

rising, w...
Prime Regional Benchmarking
Prime Retail
1,200

Total
Hong Kong

US$ per sqm /month

142.6

HCMC

126.6

Manila

200

172.9

Hanoi

400

262.0

Seoul
...
Prime Office Benchmark
250

Total
Hong Kong

US$ per sqm /month

200

Singapore
Taipei

150

Seoul
Hanoi

100

HCMC
50

Ma...
Prime Hotels Benchmark

Room rate
(US$/Room/Night)
Hong Kong 509.8
Singapore
418.5
Taipei
325.0
Seoul
386.9
Hanoi
126.6
HC...
Luxury Serviced Apartments Benchmark

140

Total
Hong Kong

US$ per sqm /month

39.9

HCMC

30.4

Manila
40

108.4

Hanoi
...
Looking to invest in the Philippines?
Contact us today!
kmcmaggroup.com
(02) 403-5519
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Transcript of "Why Philippines Now"

  1. 1. Why Philippines Now? The Opportunity for Real Estate Investors KMC MAG Group January 2014
  2. 2. Presentation Structure 1 KMC MAG Group & Savills Introduction 2 The Investment Horizon 3 The Market Performance
  3. 3. About KMC MAG Group  Incorporated in 2009  Has offices in two major business districts:  New Headquarters: Sun Life Centre, Bonifacio Global City  Branch Office: Rufino Pacific Tower, Makati  Has a pipeline of over 1 million square feet  1.5 Billion (Php) in Capital Markets transactions in 2013
  4. 4. KMC MAG Group key facts Strong Media Exposure 600,000+ square feet of commercial & residential properties which were leased and sold for 2013 300+ companies assisted in the last few years in their business set up in the Philippines Recognized globally. #1 Best in Real Estate Agency awarded Over 100 staff employed
  5. 5. International Network  KMC MAG Group is an international Associate of Savills  Savills is a leading international real estate services group listed on the London Stock Exchange  Savills has approximately 25,000 employees and 500 offices worldwide  The services of Savills include residential, office, industrial, retail, leisure, healthcare, hotel and mixed use development schemes
  6. 6.  KMC MAG Group is an international Associate of Savills  Savills is a leading international real estate services group PHILIPPINES listed on the London Stock Exchange Manila  Savills has approximately 25,000 employees and 500 offices worldwide  The services of Savills include residential, office, industrial, retail, leisure, hotel and mixed use development schemes
  7. 7. Service lines overview Research & Development Consulting & Research Construction Operation Tenant Representation Asset Management Residential Services Property Management Hotels and Leisure Facilities Management Project Marketing Project Management Investments Valuation Serviced Offices Offshore Corporate Services
  8. 8. The Investment Horizon
  9. 9. More opportunities for global investors
  10. 10. Philippine key facts 100,000,000 2013 Philippine population 2nd Fastest growing economy in Asia after China in 2013 th 108 30 notches up in World Bank International Finance Doing Business 95.4 % Literacy rate Scored its 1st investment grade rating ever Fitch Rating last March 2013 129th 6 notches up in Global Peace Index 93.5 % Employment Rate as of Oct 2013 94th 11 notches up in Transparency International Corruption Perception Index
  11. 11. Philippine economy key figures 7.0% GDP growth for Q3 2013 258 Companies registered in PSE US$ 23.6B Remittances projection for 2014 US$ 3.4B Total FDI Inflows for 2013 PHP 1.5 T Total retail sales for 2013 258 Companies registered in PSE Identified as the 5th hottest stock market in the world in April 2013 Stable exchange rate since 2012
  12. 12. Gross domestic product (GDP) GDP growth (%) 2013 - Placed 2nd after China Source: Trading Economics Japan Vietnam Thailand Taiwan Singapore Philippines Malaysia Korea Indonesia India Hong Kong China % 0 2 4 6 8 10
  13. 13. GDP Growth 10% 8% 6% 4% 2% Source: National Statistical Coordination Board, NSCB 2013H1 2012 2011 2010 2009 2008 2007 2006 2005 2004 0%
  14. 14. In Million US $ FDI attraction Source: Central Bank of the Philippines 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2010 2011 2012 2013
  15. 15. Private Consumption In Billion Pesos Source: Central Bank of the Philippines 0.07 5,000 4,500 0.06 4,000 0.05 3,500 3,000 0.04 2,500 0.03 2,000 1,500 0.02 1,000 0.01 500 0 2000 2001 2002 2003 2004 2005 Private Consumption 2006 2007 2008 2009 YoY, Growth rate 2010 2011 2012 2013* *Q1-Q3 2013
  16. 16. Inflation Rate Percentage (%) Source: Central Bank of the Philippines 5 4 3 2 1 0 2009 2010 2011 2012 2013
  17. 17. In Percent (%) T-Bill 91-day rates and T-Bond 10-year rates Source: Central Bank of the Philippines 9 8 7 6 5 4 3 2 1 0 2009 2010 T-Bill 91-day rates 2011 2012 Q3 2013 T-Bond 10-year rates  Credit ratings from international rating agencies lowered the cost of debt
  18. 18. Bank Lending Rates 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% Source: BSP 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 0.0%
  19. 19. Banks and their industry exposure
  20. 20. Tourist Arrivals Millions Tourist Arrivals Source: Department of Tourism 6 Tourism Awards & Recognitions for Philippines in 2013  5 4  3  2 1  0  2009 2010 2011 2012 2013  Department of tourism projects 10 million tourist arrivals by 2016 Best Tourist Destination, China’s Oriental Morning Post – World Travel-Special Trips Awards New Frontiers Award, Middle East’s Arabian Travel Market Best Tropical Island Destination, Shanghai Morning Post Tourism Awards No. 8 in CNN Travel’s World’s 50 Best Dive Sites Ranked 8th in Lonely Planet’s Best in Travel 2013
  21. 21. Source: BSP 13-Aug 13-Jul 13-Jun 13-May 13-Apr 13-Mar 13-Feb 13-Jan 12-Dec 12-Nov 12-Oct 12-Aug 12-Jul 12-Jul Exchange Rate Peso per US Dollar 45 44 43 42 41 40
  22. 22. Philippine Stock Exchange Index 8,000 7,000 6,000 5,000 Source: BSP, Philippine Stock Exchange (PSE) 13-Aug 13-Jul 13-Jun 13-May 13-Apr 13-Mar 13-Feb 13-Jan 12-Dec 12-Nov 12-Oct 12-Aug 12-Jul 12-Jul 4,000
  23. 23. Market Performance  Residential Market
  24. 24. Monthly Rent (USD) per SQM Average Residential Rent Levels and Capital Values (by Submarket) 25 20 15  Main CBDs are still significantly 10 5 more expensive than emerging 0 districts Capital Value (USD) per SQM  High End locations such as 4,000 3,500 3,000 2,500 2,000 1,500 1,000 Rockwell, the lease rates can be double the ones in emerging markets like Quezon City which is the largest city in Metro Manila 500 0 Source: KMC MAG Group Research
  25. 25. Residential New Supply Forecast 90,000 80,000 70,000 New Supply 60,000 Eastwood City 50,000 Rockwell Center 40,000 Ortigas CBD 30,000 BGC 20,000 Makati CBD 10,000 0 2013 Location Makati CBD Rockwell Center BGC Ortigas CBD Eastwood City Total 2014 END-2012 16,228 3,718 15,491 10,987 6,830 53,254 2015 2013 2,081 3,798 934 440 7,253 2014 1,596 441 1,276 792 278 4,383 2016 2015 2,812 2,977 1,560 7,349 2016 779 3,741 405 988 5,913 Total 23,496 4,159 27,283 14,678 8,536 78,152 Source: KMC MAG Group Research
  26. 26. Market Performance  Office Market
  27. 27. CBD’s: Stock, new supply and vacancy rates  central business district, having the highest concentration of the country’s commercial establishments  Makati BGC Ortigas Current Stock 1,100,000 650,000 450,000 Increase 70,000 140,000 100,000 Vacancy Rate 5.6% 2.9% 2.5% Prime Yield 7.5% - 11.0% 6.5% - 8.5% 5.0% - 9.0% Makati City is the prime Bonifacio Global City (BGC) is becoming the Upcoming Commercial Developments V Tower RCBC Savings Bank Cyberscape Alpha Corporate Center, & Beta SM Aura most active business district, generating almost 50% of the growth in the property market Source: KMC MAG Group Research
  28. 28. CBD Office New Supply Prime Office Space (sqm) 1,400,000  Currently, there is only one ongoing 1,200,000 office developments 1,000,000 in Makati 800,000 Makati CBD BGC 600,000 Ortigas CBD  Developers are 400,000 mainly looking to 200,000 open projects in BGC, four projects in 0 2008 2009 2010 2011 2012 2013 F2014 the pipeline at the moment Source: KMC MAG Group Research
  29. 29. Makati CBD Vacancy Rate 12.0%  Vacancy rate increased temporarily due to the 10.0% addition in supply but is 8.0% expected to decrease 6.0% 4.0% 2.0% 0.0% Q1 08 Q3 Q1 09 Q3 Q1 10 Q3 Q1 11 Q3 Q1 12 Q3 Q1 13 Q3 Source: KMC MAG Group Research
  30. 30. CBD Prime Office Rent Levels District Premium and Grade A Office Asking Rent Levels Average Net Average Net Rent Monthly Average Grade Rent (Q4 2013) (Q2 2014F) Dues Escalation Rate In PHP Premium Makati CBD Grade A Makati CBD Grade A BGC Grade A Ortigas CBD In USD* Premium Makati CBD Grade A Makati CBD Grade A BGC Grade A Ortigas CBD *Exchange rate: 1USD = 44PHP 1,065.6 759.4 735.3 571.5 1,143.2 747.6 790.5 595.3 191.6 148.3 146.1 93.0 6.1% 7.7% 6.0% 8.2% 25.2 16.3 17.4 13.0 26.0 17.0 18.0 13.5 4.4 3.4 3.3 2.1 6.1% 7.7% 6.0% 8.2% Source: KMC MAG Group Research
  31. 31. CBD Prime Office Rent Levels Locations Prime Office Rental Index (2010Q2=100)  Strong demand keeps rents 160 rising, which is backed by 140 high escalation rates 120  2013 Q4 QoQ growth was 100 recorded at 1.8% and 6.5% 80 YoY in Makati CBD 60  Rent levels will reach the 40 before financial crisis level on the latter half of the year 20 Q1 08 Q1 09 Q1 10 Makati CBD Q1 11 BGC Q1 12 Q1 13 Ortigas CBD Source: KMC MAG Group Research
  32. 32. Prime Regional Benchmarking
  33. 33. Prime Retail 1,200 Total Hong Kong US$ per sqm /month 142.6 HCMC 126.6 Manila 200 172.9 Hanoi 400 262.0 Seoul 600 629.6 Taipei 800 1,023.5 Singapore 1,000 61.5 0 HongKong Singapore Taipei Seoul Hanoi HCMC Manila Source: Savills Research and KMC MAG Group Research
  34. 34. Prime Office Benchmark 250 Total Hong Kong US$ per sqm /month 200 Singapore Taipei 150 Seoul Hanoi 100 HCMC 50 Manila 199.3 113.2 66.0 89.1 49.1 50.9 28.0 0 HongKong Singapore Seoul Taipei HCMC Hanoi Manila Source: Savills Research and KMC MAG Group Research
  35. 35. Prime Hotels Benchmark Room rate (US$/Room/Night) Hong Kong 509.8 Singapore 418.5 Taipei 325.0 Seoul 386.9 Hanoi 126.6 HCMC 155.8 Manila 248.8 600 US$ per room per night 500 400 300 200 100 0 Hong Kong Singapore Seoul Taipei HCMC Hanoi Manila Source: Savills Research and KMC MAG Group Research
  36. 36. Luxury Serviced Apartments Benchmark 140 Total Hong Kong US$ per sqm /month 39.9 HCMC 30.4 Manila 40 108.4 Hanoi 60 46.7 Seoul 80 114.6 Taipei 100 119.3 Singapore 120 49.7 20 0 HongKong Seoul Singapore Taipei Hanoi HCMC Manila Source: Savills Research and KMC MAG Group Research
  37. 37. Looking to invest in the Philippines? Contact us today! kmcmaggroup.com (02) 403-5519
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