President's Report 2011

2011 Regular Annual Stockholders’ Meeting

Mr. Chairman, members of the Board, fellow stockholders, ladies and gentlemen, good afternoon.

As a real estate developer, we make our mark not just with the number of units we have produced and sold, but more importantly, by the impact we have made in the communities where we operate.

Twenty years ago, the expanse of flatland in the middle of the city that used to be the old Lahug Airport served as the gateway to Cebu – welcoming residents and tourists to what was then an emerging metropolis south of Manila.

Cebu Property Ventures and Development Corporation came into the picture with a vision of helping Cebu realize its potential as an IT hub in the country. Seeing the prospects of this multi-billion dollar industry in other parts of the world, CPVDC strategically repositioned what was then planned to be a trade center, into a state-of-the-art I.T. park.

In March of 2001, CPVDC joined the Cebu local government, the Cebu Chamber of Commers and other other industry stakeholders in the 1st Cebu IT Summit to launch Cebu’s ‘bid to be the foremost investment destination for I.T. and I.T.-related industries in the Philippines. The summit gave birth to a unique collaboration between the industry players and academic institutions in the form of an entity called CEDF-IT or the Cebu Educational Foundation for Information Technology.

As the first PEZA-accredited IT park outside Luzon then, flagship project Asiatown I.T. Park was a pioneering development. This placed CPVDC in a prime position to capitalize on an industry which, at that time, was still in a stage of infancy in this side of the globe.

In recent years, Cebu’s business process outsourcing industry has gained international attention. This was capped by Tholons’ upgrading of Cebu’s status from the top emerging destination to one of the top ten emerged BPO destinations in the world.

The BPO industry was one of the engines that propelled Cebu’s economy despite the economic slowdown in recent years. It generated jobs for thousands of Cebuanos, as well as those from neighboring provinces. In fact, employment within Asiatown I.T. Park, host to 70 percent of the BPO industry in Cebu, grew by 54 percent to more than 20,000 last year.

Shifting Strategies to Deliver Sustained Growth
Your Company continues to harness this potential by capitalizing on strengths and exploring new opportunities. To ensure long-term growth, we increased our sources of recurring income and embarked on projects which will ensure value appreciation for our properties.

As we accelerated the pace of development, we partnered with Ayala Land to bring the best products to the local market. With this we are able to leverage on brand and product expertise, as well as become part of the growth portfolio of one of the largest developers in the country.

Generating Economic Value
These strategic endeavors generated total revenues of P263 million for the Company, 21 percent higher than the previous year’s performance. With efficient operations and prudent spending initiatives, net income was also up by an impressive 43 percent at P164.4 million by yearend.

The Company’s financial position remained strong with total assets standing at P= 1.5 billion as of December 2010. Current assets stood at P= 694 million, P= 463 million of which is cash while total liabilities stood only at P= 155.9 million. Current ratio registered at 472 percent while debt-to-equity ratio stood at 12 percent.

With last year’s strong performance, CPVDC declared cash dividends in December 31 amounting to a total of P112.8 million. At P0.12 per share this is higher than the P0.10 dividend per share declared the previous year. Stock price increased by 10 percent to P2.00 per share in 2010.

Revenue in 2010 was derived from the sale of commercial lots at Asiatown I.T. Park, income from the lease of retail and office spaces, equity in net earnings of an associate and interest and other income.

The sale of a commercial lot at Asiatown I.T. Park contributed P92 million in revenue. As part of our strategy, we reinvested the proceeds of the sale to projects that will increase our leasing portfolio as we take advantage of the continuing demand for office and residential space. Modular office building, eOffice, contributed P49.4 million to revenue.

Equity take-up of CPDVC in associate Asian i-Office Properties or AiO contributed P11.8 million to the Company’s bottomline. AiO derives income primarily from the leasing of eBloc Tower, a mid-rise office building. eBloc Tower is fully leased-out to two giant multi-national companies – NCR Cebu Development Center, Inc. and JP Morgan Chase and Co.

Since it was first opened in 2008, retail center The Walk has become a popular destination especially in Cebu’s brewing night scene. The Walk posted total revenues of P= 19.5 million, 15 percent higher than last year. The Walk ended the year with 92.7 percent lease occupancy as we continue to keep the retail mix fresh and relevant to the changing demands of the market.

In 2010, CPVDC through AiO, partnered with Avida Land Corporation to develop Avida Towers Cebu. Avida Land, the affordable residential developer of Ayala Land, Inc., brings years of experience in building quality developments at a price which average Filipinos can afford.

As was expected, the entry of an Ayala Land affordable residential brand created much excitement in Cebu. The first tower, launched in June of 2010, was practically sold out in just a few months, prompting the accelerated launch of the second tower a year ahead of schedule.

The dynamic growth of the BPO industry in Cebu has also paved the way for more investments in real estate. This is shown in the continued bullish build-up at Asiatown I.T. Park. Three office buildings started construction in 2010. Upon completion, these will bring in additional 71,000 square meters in leasable space within the IT Park. Also under construction are four residential towers which will bring the total area up to more than 143,000 square meters for office, residential and commercial purposes.

Strengthening our Management Systems
To be sustainable as a company, strategic business acumen must be complemented by effective management systems within the organization.

The Company strives to uphold best practices in good governance by establishing the vision, strategic objectives, key policies and procedures for the management, as well as the mechanism for monitoring and evaluating performance.

Together with mother company, Cebu Holdings, the Company is governed by an integrated management system. Here, the needs of the customer are assessed, developed and delivered via the Value Delivery Chain. Targets are also set and monitored using the Balanced Scorecard which ensures sustainable growth in financial, process, customer and organizational aspects.

As an organization dealing with global customers, it is essential that our products and services are at par with the international community. To ensure this, we continue to be certified to the triple international standards for quality, environment and health and safety.

Partnering with our Stakeholders
These programs and initiatives strengthen the business as CPVDC strives to contribute to nation building. To boost investments and drive the local economy, the current administration is making a push for more public-private partnerships. CPVDC’s venture with the provincial government in the early development of Asiatown I.T. Park has been cited as a successful model for this concept.
 
But perhaps beyond this partnership, CPVDC has been successful because of the collaboration with various stakeholders who had the common objective of putting Cebu in the BPO map. This includes the local government, the business community, our neighboring barangays, our customers and suppliers, the academe and the community in general.

One of the important partnerships we have established is our involvement with stakeholders in the Cebu Educational Development Foundation for Information Technology or CEDF-IT. As one of the founding members of Cedf-IT, CPVDC shares the vision of transforming Cebu into a major IT hub in the country through a proactive intervention in the IT human resource sector. Now on its 10th year, the organization continues to find ways to bridge the gap between the skills of our graduates and what the IT companies need. 

Enhancing our Sustainability Management
As a responsible corporate citizen, we are also conscious of minimizing the environmental and social impacts of our operations while we secure financial growth for our shareholders. As a truly integrated organization, sustainability across all fronts has become part of the way we work.

On our second year now, we have been documenting our performance against the triple bottomline framework of Global Reporting Initiative.

At level B, our report this year covers 51 indicators. This gives a snapshot of our operations for the past two years and allows us to measure our performance against set targets to become more sustainable in the long term.

Looking Forward
We foresee that the demand for leasable spaces will become more complex as Cebu upgrades resources along with its improved status as a mature emerged BPO destination. With its balance of resort island ambiance and the improvement of infrastructure and resource support, Cebu is seen as an ideal as a satellite location or even prime venue for the headquarters of international organizations.

Last year, we saw accelerated build-up at the IT Park to address the continuing demand for office space. In 2011, we are looking at even more buildings which will soon rise in the area. Among them, eBloc Tower 2 which started construction after the first tower was fully leased out.

The remaining undeveloped land within the I.T. Park will be the Company’s major source of growth as CPVDC turns its strategy towards growing its leasing portfolio. The Company is also finalizing negotiations for possible expansion of Asiatown I.T. Park.

With the brisk take-up of affordable residential condominium Avida Towers Cebu, more residential units will be offered within the IT Park to complete the live-work-play lifestyle within the area. With the on-going developments in the IT Park, CPVDC also eyes at expanding the retail components to accommodate the changing needs of its growing population.

As with all Ayala landmarks, in Asiatown I.T. Park, we strive not just to develop a project, but to create a community. Here we have a community that is dynamic and integrated – providing jobs for many, fueling the local economy, and helping make a mark for Cebu in the international BPO scene.

What used to be the old airport has now become a global gateway for communications and technology, cutting through thousands of miles at break-neck speed and showcasing the Filipino talent to the rest of the world.

I would like to thank the community, our customers and our partners in business who has always been supportive even in the early days of this trail-blazing concept.  I would also like to thank the members of the Board of Directors for constant guidance, and our shareholders for their trust and confidence. I am confident that with your continued support, CPVDC will remain to be at the forefront of this thriving industry in the many years to come.

Thank you and good day.