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Friday, June 9, 2017

Ayala Land's Real Estate Receivables Problem Has Gotten Worse, Not Better

At around this time last year, in a blog post entitled "The Philippine Real Estate Bubble Has Also Burst For... Ayala Land!", we wrote about how the company's past due installment contract receivables (ICRs) for real estate have quadrupled in 2015 from Php 1.95 billion in 2014 to Php 8.80 billion in 2015. Much of the past due ICRs were severely past due - over 120 days past due.

Total past due ICRs comprised as much as 13.4% of the entire Real Estate ICR portfolio in 2015.

Today, that figure is even higher. As of year-end 2016, 14.63% of Real Estate ICRs are now past due. More than one in seven Real Estate ICRs is now past due.

The credit quality has gotten worse, not better.

The amount of severely past due Real Estate ICRs (over 120 days past due) has grown by almost 80% in just one year, from Php 3.58 billion in 2015 to Php 6.43 billion in 2016.

Real Estate ICRs over 120 days past due now comprise 8.11% of total Real Estate ICRs in 2016.

Past Due But Not Impaired Real Estate ICRs now comprise 6.72% of the company's Stockholder's Equity as of 2016, up from 5.88% in 2015 and more than four times the 1.60% level the company posted in 2014.

Despite this, the company's Impaired Real Estate ICRs have dwindled to zero in 2016. Around Php 9.55 million of Impaired ICRs, which have been impaired since at least 2012, were written off in 2016.

Sooner or later, the company will have to recognize these past due Real Estate ICRs as impaired and the impairments will have to be written off... someday. We just don't know when. But if Ayala Land, one of the country's most prestigious and largest real estate companies, cannot handle its growing Real Estate ICR problem amid a booming economy, this does not bode well for the rest of the industry.

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