Why Philippines Now?

KMC MAG Group January 2014

The Opportunity for Real Estate Investors

Presentation Structure

1

KMC MAG Group & Savills Introduction

2

The Investment Horizon

3

The Market Performance

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

About KMC MAG Group

KMC MAG Group key facts

Over 100 staff employed

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

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

International Network

PHILIPPINES Manila

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, hotel and mixed use development schemes

Service lines overview

Valuation

Investments

Consulting & Research

Tenant Representation Asset Management

Property Management

Facilities Management

Residential Services

Hotels and Leisure

Project Marketing Project Management

Research & Development Construction Operation

Serviced Offices

Offshore Corporate Services

The Investment Horizon

More opportunities for global investors

Philippine key facts

100,000,000 2013 Philippine population

93.5 % Employment Rate as of

Oct 2013 95.4 % Literacy rate

108th 30 notches up in World

Bank International Finance Doing Business

2nd Fastest growing

economy in Asia after China in 2013

94th 11 notches up in

Transparency International Corruption Perception

Index

Scored its

1st investment grade

rating ever Fitch Rating last March 2013

129th 6 notches up in Global

Peace Index

Identified as the

5th hottest stock market

in the world in April 2013

Stable exchange rate since 2012

Philippine economy key figures

7.0% GDP growth

for Q3 2013

US$ 23.6B

Remittances projection for 2014

258 Companies

registered in PSE

US$ 3.4B

Total FDI Inflows for 2013

PHP 1.5 T Total retail sales

for 2013

258 Companies

registered in PSE

Gross domestic product (GDP)

0 2 4 6 8 10

China

Hong Kong

India

Indonesia

Korea

Malaysia

Philippines

Singapore

Taiwan

Thailand

Vietnam

Japan

Source: Trading Economics

%

GDP growth (%) 2013 - Placed 2nd after China

GDP Growth

0%

2%

4%

6%

8%

10%2

00

4

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

H1

Source: National Statistical Coordination Board, NSCB

FDI attraction

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2010 2011 2012 2013

In M

illio

n U

S $ Source: Central Bank of the Philippines

Private Consumption

*Q1-Q3 2013 Private Consumption YoY, Growth rate

Source: Central Bank of the Philippines

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*

In B

illio

n Pe

sos

Percentage (%)

0

1

2

3

4

5

2009 2010 2011 2012 2013

Inflation Rate

Source: Central Bank of the Philippines

T-Bill 91-day rates and T-Bond 10-year rates

Credit ratings from international rating agencies lowered the cost of debt

0

1

2

3

4

5

6

7

8

9

2009 2010 2011 2012 Q3 2013 T-Bill 91-day rates

In P

erce

nt (

%)

Source: Central Bank of the Philippines

T-Bond 10-year rates

Bank Lending Rates

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%2

00

0

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Source: BSP

Banks and their industry exposure

0

1

2

3

4

5

6

2009 2010 2011 2012 2013

Mill

ions

Tourist Arrivals Source: Department of Tourism

Department of tourism projects 10 million tourist arrivals by 2016

Tourism Awards & Recognitions for Philippines in 2013

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

Tourist Arrivals

Exchange Rate

40

41

42

43

44

45

12

-Jul

12

-Jul

12

-Aug

12

-Oct

12

-Nov

12

-Dec

13

-Jan

13

-Feb

13

-Mar

13

-Apr

13

-May

13

-Jun

13

-Jul

13

-Aug

Source: BSP

Peso per US Dollar

Philippine Stock Exchange Index

4,000

5,000

6,000

7,000

8,0001

2-J

ul

12

-Jul

12

-Aug

12

-Oct

12

-Nov

12

-Dec

13

-Jan

13

-Feb

13

-Mar

13

-Apr

13

-May

13

-Jun

13

-Jul

13

-Aug

Source: BSP, Philippine Stock Exchange (PSE)

Market Performance

Residential Market

0

5

10

15

20

25

Mon

thly

Ren

t (U

SD) p

er S

QM

Main CBDs are still significantly

more expensive than emerging

districts

High End locations such as

Rockwell, the lease rates can be

double the ones in emerging

markets like Quezon City which is

the largest city in Metro Manila

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Cap

ital V

alue

(U

SD) p

er S

QM

Average Residential Rent Levels and Capital Values (by Submarket)

Source: KMC MAG Group Research

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

2013 2014 2015 2016

New Supply

Eastwood City

Rockwell Center

Ortigas CBD

BGC

Makati CBD

Residential New Supply Forecast

Location END-2012 2013 2014 2015 2016 Total Makati CBD 16,228 2,081 1,596 2,812 779 23,496 Rockwell Center 3,718 - 441 - - 4,159 BGC 15,491 3,798 1,276 2,977 3,741 27,283 Ortigas CBD 10,987 934 792 1,560 405 14,678 Eastwood City 6,830 440 278 - 988 8,536 Total 53,254 7,253 4,383 7,349 5,913 78,152

Source: KMC MAG Group Research

Market Performance

Office Market

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%

Upcoming Commercial

Developments V Tower

RCBC Savings Bank Corporate Center,

SM Aura

Cyberscape Alpha & Beta

Makati City is the prime

central business district,

having the highest

concentration of the

country’s commercial

establishments

Bonifacio Global City

(BGC) is becoming the

most active business

district, generating

almost 50% of the

growth in the property

market

Source: KMC MAG Group Research

CBD’s: Stock, new supply and vacancy rates

CBD Office New Supply

Currently, there is

only one ongoing

office developments

in Makati

Developers are

mainly looking to

open projects in

BGC, four projects in

the pipeline at the

moment

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2008 2009 2010 2011 2012 2013 F2014

Prime Office Space (sqm)

Makati CBD

BGC

Ortigas CBD

Source: KMC MAG Group Research

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Q1 08

Q3 Q1 09

Q3 Q1 10

Q3 Q1 11

Q3 Q1 12

Q3 Q1 13

Q3

Vacancy rate increased

temporarily due to the

addition in supply but is

expected to decrease

Source: KMC MAG Group Research

Makati CBD Vacancy Rate

CBD Prime Office Rent Levels

Premium and Grade A Office Asking Rent Levels

District Grade Average Net Rent (Q4 2013)

Average Net Rent (Q2 2014F)

Monthly Dues

Average Escalation Rate

In PHP Makati CBD Premium 1,065.6 1,143.2 191.6 6.1% Makati CBD Grade A 759.4 747.6 148.3 7.7% BGC Grade A 735.3 790.5 146.1 6.0% Ortigas CBD Grade A 571.5 595.3 93.0 8.2% In USD* Makati CBD Premium 25.2 26.0 4.4 6.1% Makati CBD Grade A 16.3 17.0 3.4 7.7% BGC Grade A 17.4 18.0 3.3 6.0% Ortigas CBD Grade A 13.0 13.5 2.1 8.2% *Exchange rate: 1USD = 44PHP

Source: KMC MAG Group Research

-

20

40

60

80

100

120

140

160

Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13

Makati CBD BGC Ortigas CBD

Locations Prime Office Rental Index (2010Q2=100) Strong demand keeps rents

rising, which is backed by

high escalation rates

2013 Q4 QoQ growth was

recorded at 1.8% and 6.5%

YoY in Makati CBD

Rent levels will reach the

before financial crisis level

on the latter half of the year

CBD Prime Office Rent Levels

Source: KMC MAG Group Research

Prime Regional Benchmarking

Total

Hong Kong 1,023.5

Singapore 629.6 Taipei 262.0 Seoul 172.9

Hanoi 142.6

HCMC 126.6

Manila 61.5

0

200

400

600

800

1,000

1,200

HongKong Singapore Taipei Seoul Hanoi HCMC Manila

US$

per

sqm

/m

onth

Prime Retail

Source: Savills Research and KMC MAG Group Research

0

50

100

150

200

250

HongKong Singapore Seoul Taipei HCMC Hanoi Manila

US$

per

sqm

/m

onth

Total

Hong Kong 199.3

Singapore 113.2

Taipei 66.0

Seoul 89.1

Hanoi 49.1

HCMC 50.9

Manila 28.0

Prime Office Benchmark

Source: Savills Research and KMC MAG Group Research

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

0

100

200

300

400

500

600

Hong Kong Singapore Seoul Taipei HCMC Hanoi Manila

US$

per

roo

m p

er n

ight

Prime Hotels Benchmark

Source: Savills Research and KMC MAG Group Research

Total

Hong Kong 119.3

Singapore 114.6

Taipei 46.7

Seoul 108.4

Hanoi 39.9

HCMC 30.4

Manila 49.7

0

20

40

60

80

100

120

140

HongKong Seoul Singapore Taipei Hanoi HCMC Manila

US$

per

sqm

/m

onth

Luxury Serviced Apartments Benchmark

Source: Savills Research and KMC MAG Group Research

Looking to invest in the Philippines? Contact us today! kmcmaggroup.com (02) 403-5519