Office rental income growth of 10% helped cushion pandemic impact even as H1 profits registered 34% drop
Megaworld, the country’s leading developer of integrated urban townships, posted a 34% drop in its net income during the first half of the year, from P8.9-billion to P5.9-billion. Consolidated revenues for the first six months declined by 25% year-on-year to P23.8-billion from P31.7-billion last year.
The company, on the other hand, recorded P2.1-billion net profit during the second quarter this year, a 56% decline from P4.8-billion during the same period last year, as the country was reeling from the impact of the nationwide lockdown that affected most businesses.
“Just as the pandemic began in the last month of the first quarter, we already anticipated a decline in our earnings in the second quarter, but what actually surprised us was the fact that the drop wasn’t as bad as we have expected it to be, and it remains manageable. Our strategic decision of further strengthening our office leasing business way before the pandemic started is now evidently making us more resilient,” says Kevin L. Tan, chief strategy officer, Megaworld.
Leasing revenues from Megaworld Premier Offices, the company’s office leasing arm, was up 10% during the first six months from P5.1-billion last year to P5.6-billion during the same period this year. Contribution of Megaworld Premier Offices now stands at 78% of the company’s total rental income, which mitigated the impact of partial operations of Megaworld Lifestyle Malls due to the pandemic.
Megaworld to construct five offices
This year, the company is set to complete construction of five new office developments in its various townships, particularly in Iloilo Business Park in Iloilo City, Arcovia City in Pasig City, Westside City in Parañaque City, McKinley West and Uptown Bonifacio in Taguig City, adding around 213,000 square meters of completed projects in the company’s leasable office portfolio. To date, these projects are already 90% pre-leased on the average.
“Business process outsourcing (BPO) companies and traditional offices such as corporate headquarters of multinational companies still occupy around 90% of our spaces, which still continued their operations even at the height of the lockdown. We are closing some deals from many Metro Manila-based BPO companies that require an immediate expansion in our provincial townships due to eased quarantine rules there. Our current portfolio of active BPO tenant partners is still huge, and these are our first-line takers in our provincial developments,” Tan points out.
Megaworld is expected to end the year with 70 completed office developments covering 1.4 million square meters of leasable office inventory, excluding those that have already been sold.
Megaworld’s rental income for the first half of 2020 declined by only 11% at P7.2-billion, while hotel revenues were down 29% to P917.9-million from P1.3-billion. Megaworld Hotels, which currently operates 10 hotel properties with around 3,500 rooms under its homegrown brands of Richmonde, Belmont, Savoy, Hotel Lucky Chinatown, and Twin Lakes Hotels, continued serving pre-booked guests from BPO companies as well as balikbayans during the lockdown.
Even as the lockdown limited selling activities for residential projects, Megaworld’s reservation sales during the first half of the year reached P38-billion, which peaked during the second quarter when most parts of the country was placed under ‘enhanced community quarantine.’
Real estate sales during the first six months reached P14.3-billion, reflecting a 29% decline from P20.2-billion during the same period last year, as the company implemented ‘more flexibility’ in payment terms during the quarantine period.
To date, Megaworld has 26 masterplanned integrated urban townships, integrated lifestyle communities, and lifestyle estates across the country./PR
Photo: One Le Grand Tower