Dear Fellow Stockholders,

The Philippines experienced dramatic economic growth in 2012 despite the continued struggle of the US and European economies. Defying the global economic downdraft, the Philippines posted an inspiring and unexpected progress – becoming the fastest growing economy in Southeast Asia. Cited as one of the global highlights of 2012, the country’s economic growth reached 6.6 percent, second only to China in Asia, and almost double its 3.9 percent growth in 2011.

Driven by tourism and Business Process Outsourcing (BPO), the real estate industry saw a revenue growth rate of 18.8 percent in the third quarter of 2012, making it the fastest growing of all industries.

Well known for its economic stability amidst crisis and calamities, Cebu in particular, has benefitted from the positive economic landscape of the Philippines. It has been cited as one of the fastest growing cities in Asia, ranking 8th among the Top 10 Asian Cities of the Future in a list compiled by the Foreign Direct Investments (FDI) magazine of the Financial Times Group.

The increased number of real estate projects, constructions for hotels, shopping malls, condominiums and subdivisions, among other industries in the city doubled in number in the past year, and is seen to continue its trajectory in 2013. 

Cebu Holdings, Inc. (CHI) capitalized on this economic wave and adjusted our strategies to maximize growth and revenue for your Company.  Focusing on the region’s growth drivers and emerging trends, we fast-tracked plans and forged partnerships to meet growing market needs in the office, retail and residential fronts.

We ended the year with another record-breaking performance with revenues up by 13 percent to P1.6 billion. Net income was also up by four percent to P441 million, the highest bottomline in the Company’s 24-year history.

Cebu Park District positioning as the center of economic growth

Majority of our developments are concentrated within the Cebu Park District. As the unified brand of Cebu Business Park and Cebu I.T. Park, it is the preferred address of many of the region’s corporate headquarters and home to a critical mass of locators in the spheres of business, banking, finance, IT and tourism services among others. These large-scale, master planned, mixed-use economic zones are the benchmark of urban developments south of Luzon, providing our markets the opportunity to experience the convenience of an integrated community.

We have continued to strengthen the brand of Cebu Park District as Cebu’s premier district for business, leisure and living through various communications, environmental graphic design, infrastructure and events. Today, it maintains its position as the address for residential, business or commercial purposes.

Accelerated build-up is evident even in your Company’s centerpiece project, Cebu Business Park. Combined construction development of all Cebu Business Park locators in the past two years reached about 245,000 square meters of gross floor area – almost approximating the total build-up of 330,000 square meters within more than twenty years since we first started.

Today, there are currently 13 ongoing constructions in Cebu Business Park which will bring in over 185,000 square meters of floor area, and seven ongoing constructions in Cebu I.T. Park, which will add another 130,000 square meters of floor area.

Addressing the high demand for a variety
of residential options

With a generally confident economy, low interest rates, increasing disposable income and record-high OFW remittances, more and more Filipinos are looking to own homes. This is evident in the spike of residential condominium build-up in the city’s skyline.

Realizing the limited available land within the city coupled with the need to deliver products faster to a wider market, your Company had earlier partnered with parent company, Ayala Land, Inc. (ALI) and its subsidiaries. These partnerships allowed us to develop products across various market categories at a more competitive and much faster pace.

In the last two years, we launched eight residential towers across the three Ayala brands, with a surprisingly enthusiastic take-up in the Cebuano market which is relatively new to high-rise living.

With the success of Ayala Land Premier’s 1016 Residences launched in 2011, we subsequently introduced Park Point Residences last year. This project, which will be built on top of the Ayala mall, is the first of its kind outside Manila and defines the height of subtle elegance and luxurious living.

Providing innovative living solutions for the needs of Cebu’s urban achievers, Alveo Land also launched its initial development, Sedona Parc, in 2011. Inspired by this market’s response, the multi-tower Solinea residences were introduced in 2012. Two towers of this resort-inspired living address were launched to the public last year. Upon completion, Solinea will be a pocket mixed-use community in itself with multiple residential towers, a wide range of amenities for residents and various retail options at the ground level.
Perhaps the most successful among the high-rise residential offerings are the Avida Land developments. Because of its affordability, while maintaining the Ayala standards of development, Avida Towers 1 and 2 were sold out in 2012. In the same year, we then launched the multi-tower Avida Towers Riala, also within the dynamic Cebu I.T. Park community.

Increasing our leasing portfolio parallel to the growth
of industries that drive the economy of Cebu

Being a favorite service provider for top global markets, Cebu has become one of the key players in the Philippine BPO industry. The growing BPO industry led your Company to invest more in office spaces to meet the continuing demand. In 2012, we completed eBloc Tower 2 and started construction on the third installment of this state-of-the-art BPO office buildings. The eBloc Towers join the growing number of BPO buildings in Cebu I.T. Park and Cebu Business Park, the two largest Philippine Economic Zone Authority accredited I.T. parks outside Luzon.

According to the Department of Trade and Industry, domestic retail sales grew by 10 percent in 2012 due to the improvement of the spending power of consumers, as well as a strong domestic economy. With the Cebuanos’ evolving lifestyle and increasing spending power, we had earlier embarked on the biggest expansion yet of Ayala Center Cebu in 2011. Set to be completed by the end of 2013, this expansion brings in over 35,500 square meters of additional leasable space and some of the biggest international retail brands and successful local concepts.

To enhance the live-work-play dynamics within our flagship project, the Cebu Business Park, the City Sports Club Cebu, also underwent a major renovation, allowing it to cater to more events and patrons, and re-establishing its position as the premier urban resort in the city.

Cebu City Marriott Hotel also underwent renovation of its grand ballroom and function rooms in 2012. The hotel, which is owned by an associate, enjoyed a 74 percent occupancy in 2012.

As a response to the strong BPO industry and the resulting high spending power of the market, subsidiary Cebu Property Ventures and Development Corporation (CPVDC) is also pursuing major redevelopment at flagship project, Cebu I.T. Park. We are currently finalizing plans to introduce a strong new commercial component on a 5-hectare area at the heart of the IT Park to enhance the integrated, mixed-use experience in the area. Within the design of this new development will be a retail complex, a hotel and multiple office buildings to maximize prime property, while taking advantage of the increasing traffic flow of the area.

Furthermore, with the approved 100 percent acquisition of Asian i-Office Properties, a special purpose vehicle between CHI and ALI, we will be strengthening CPVDC’s commercial business line with the increased number of office spaces.

To enhance the live-work-play dynamics within our flagship project, the Cebu Business Park, the City Sports Club Cebu also underwent a major renovation, allowing it to cater to more events and patrons, and re-establishing its position as the premier urban resort in the city.

All these developments will enhance the dynamism of Cebu Park District at a much faster pace, defining it as the preferred place to be. Robust build-up of integrated components, coupled with quality property management, will ensure continued value appreciation of properties within the parks. The two parks also continue to contribute to employment and the local economy, generating over 50,000 jobs and thousands of downstream industries which serve this growing population.

Creating an agile organization to
enable faster growth

With the growing magnitude of projects, your Company has undergone an organizational transformation to align competencies and synergize seamlessly within the Ayala Land subsidiaries in Cebu. Our construction management and property management functions were transferred to Makati Development Corporation and Ayala Property Management Corporation respectively as outsourced services. This shared services scheme is designed to allow the Company to focus on its core competencies and increase operational efficiencies as we continue to bring in even more developments in the coming years.

To complement this transformation, we have also strengthened the organization by providing the employees more training and develoment programs. To maintain competitiveness in an increasingly global market, your Company continues to be certified to the triple ISO standards for quality, environment, and health and safety. We adhere to best practices in corporate governance, and continue to adopt the Balanced Scorecard (BSC) as the Company’s strategic management system and report according to the parameters set by the Global Reporting Initiative (GRI).

The major changes in terms of business strategies and organizational strengthening redefine CHI as it reaches 25 years by December of 2013. Your Company is poised to take a faster, bolder and more aggressive stance parallel to the thriving Cebu economy and even beyond.

Moving even faster ahead

In 2013,  we will be completing the full circle expansion of the mall, as well as start construction on our first BPO building within Cebu Business Park. This effectively builds up our leasing portfolio as we increase recurring income to generate capital for even bigger development opportunities in the next few years.

On the residential front, we are poised to launch at least two more high-rise towers as well as a new development designed to cater to the underserved demand for even more affordable homes for the Filipino family.

In 2013, your Company will be spending an estimated P3.4 billion in new and existing projects and land acquisition. Together with our sister companies in Ayala Land, we will be investing an estimated total of P5.4 billion for new developments in Cebu.

As we continue to develop two of the most prime areas in the city, negotiations for acquisition are currently underway to increase our existing land bank. We also continue to look for strategic properties which will expand our portfolio, as well as complement our existing developments.

Your Company’s revenue mix as of the end of 2012 is a good balance of steady recurring income from our solid leasing portfolio representing 52 percent , as well as residential unit sales which drives high revenue. By the end of the year, total assets reached P9.7 billion, a 37 percent increase from the previous year.
Your Company’s revenue mix today is a good balance of steady recurring
With your Company’s strong balance sheet, we are now more flexible enough to look at opportunities beyond Cebu which will strategically strengthen our presence as the premier real estate company outside Luzon.

As we move towards our silver year, all these strategic changes will strengthen the Company to allow us to respond faster to the growing needs of the market, thus growing the business for you, our stockholders, while contributing to the growth of the community as a whole.

As always, we are grateful for your continued support and trust in the Company. We would also like to thank our employees, the Board of Directors, and all our partners in business who continue to drive the business towards bigger and better opportunities.