IMPORTANT NOTICE

You must read the following disclaimer before continuing. The following disclaimer applies to the attached prospectus, whether downloaded,
printed, received by email or otherwise received, whether as a result of electronic communication or otherwise. You are advised to read this
disclaimer carefully before accessing, reading or making any other use of the attached prospectus. In accessing the attached prospectus, you agree
to be bound by the following terms and conditions, including any modifications to them from time to time, each time you receive any information
from us as a result of such access.

The attached document has been made available on DoubleDragon Properties Corp.’s (the “Company”) website in electronic form. You are
reminded that documents accessed or transmitted via this medium may be altered or changed during the process of transmission and consequently
none of the Company, BPI Capital Corporation, Credit Suisse (Singapore) Limited, Maybank ATR Kim Eng Capital Partners, Inc., Maybank
Kim Eng Securities Pte. Ltd. and UBS AG, Singapore Branch (collectively, the “Bookrunners”), nor any person who controls them, nor any of
their directors, officers, employees, representatives or affiliates accepts any liability or responsibility whatsoever in respect of any discrepancies
between the document distributed to you in electronic format and any hard copy version.

NOTHING IN THIS ELECTRONIC TRANSMISSION OR DOCUMENT CONSTITUTES AN OFFER OF SECURITIES FOR SALE
IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. ANY SECURITIES
MENTUIONED HEREIN HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT, OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT AND APPLICABLE STATE OR LOCAL
SECURITIES LAWS.

Nothing in this electronic transmission constitutes an offer or an invitation by or on behalf of any of the Company or any of the Bookrunners to
subscribe for or purchase any of the securities described in the attached prospectus, and access has been limited so that it shall not constitute in
the United States or elsewhere directed selling efforts (within the meaning of Regulation S under the U.S. Securities Act).

Actions that You May Not Take: If you receive this document by e-mail or other electronic transmission, you should not reply by e-mail to
such transmission, and you may not purchase any securities by doing so. Any reply e-mail communications, including those you generate by
using the ‘‘Reply’’ function on your e-mail software, will be ignored or rejected.

YOU ARE NOT AUTHORIZED AND YOU MAY NOT FORWARD OR DELIVER THE ATTACHED PROSPECTUS,
ELECTRONICALLY OR OTHERWISE, TO ANY OTHER PERSON OR REPRODUCE SUCH PROSPECTUS IN ANY MANNER
WHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT AND THE ATTACHED
PROSPECTUS IN WHOLE OR IN PART IS UNAUTHORIZED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT
IN A VIOLATION OF THE U.S. SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.

You are responsible for protecting against viruses and other destructive items. If you receive this document by e-mail or by other electronic
transmission, your use of this document is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses
and other items of a destructive nature.
 DoubleDragon Properties Corp.
(incorporated in the Republic of the Philippines)

Primary Offer of 135,000,000 Common Shares at an Offer Price of ₱30.00 per Offer Share, with an
Over-allotment Option of up to 15,000,000 Common Shares to be listed and traded on the Main Board
of The Philippine Stock Exchange, Inc.

International Bookrunners and Lead Managers

Domestic Lead Underwriters and Bookrunners

THE PHILIPPINE SECURITIES AND EXCHANGE COMMISSION HAS NOT

APPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE AND SHOULD BE REPORTED IMMEDIATELY TO THE
PHILIPPINE SECURITIES AND EXCHANGE COMMISSION.

The date of this Prospectus is June 28, 2018

#4820-0962-9519v70
DoubleDragon Properties Corp.
DD Meridian Park Bay Area
Brgy. 76 Zone 10, San Rafael
Pasay City, Metro Manila
Philippines
Telephone Number: +632 856 7111
Corporate Website: www.doubledragon.com.ph

This Prospectus relates to the offer and sale of 135,000,000 common shares at an Offer Price of
₱30.00 per share (the “Firm Offer,” and such shares, the “Firm Shares”), with a par value of
₱0.10 per share (the “Common Shares”), of DoubleDragon Properties Corp., a corporation
organized under Philippine law (the “Company” or the “Issuer”). The Firm Shares will be issued
and offered by the Company by way of a primary offer. See “Plan of Distribution.”

The Company has appointed BPI Capital Corporation to act as the stabilizing agent (the
“Stabilizing Agent”), with an option exercisable in whole or in part to purchase up to an
additional 15,000,000 Common Shares at the Offer Price (the “Optional Shares”, and together
with the Firm Shares, the “Offer Shares”), on the same terms and conditions as the Firm Shares
as set forth in this Prospectus, solely to cover over-allotments, if any, and effect price
stabilization transactions (the “Over-allotment Option”), from time to time for a period which
shall not exceed 30 calendar days from and including the Listing Date. The Option Shares shall
comprise 15,000,000 new Common Shares. The offer of the Offer Shares, including the Optional
Shares, is referred to as the “Offer”. See “Plan of Distribution.”

Pursuant to its Articles of Incorporation as amended on April 14, 2016, the Company has an
authorized capital stock of ₱20,500,000,000, divided into 5,000,000,000 Common Shares with a
par value of ₱0.10 per share and 200,000,000 preferred shares with a par value of ₱100.00 per
share (“Preferred Shares”), of which 2,229,730,000 Common Shares and 100,000,000 Preferred
Shares are outstanding as of the date of this Prospectus. The Offer Shares are Common Shares
of the Company.

The Offer Shares will be offered at a price of ₱30.00 per Offer Share (the “Offer Price”). The
determination of the Offer Price is further discussed on page 100 of this Prospectus. Assuming
full exercise of the Over-allotment Option, a total of 2,379,730,000 Common Shares will be
outstanding after the Offer, and the Offer Shares will comprise 6.3% of the outstanding Common
Shares after the Offer.

The total proceeds to be raised by the Company from the sale of the Firm Shares at the Offer
Price will be approximately ₱4,050.0 million. The estimated net proceeds to be raised by the
Company from the sale of the Firm Shares (after deducting fees and expenses payable by the
Company of approximately ₱90.8 million) will be approximately ₱3,959.2 million. The
Company intends to use the net proceeds it receives from the Firm Offer for (i) its expansion in
the industrial leasing and the hospitality businesses, which are expected to add an additional
200,000 sq. m. of leasable space to its leasing portfolio by 2020, and (ii) general corporate
purposes. Assuming full exercise of the Over-allotment Option, the estimated net proceeds to be
received by the Company from the sale of the Offer Shares (after deducting fees and expenses
payable by the Company of approximately ₱98.1 million) will be approximately ₱4,401.9

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million. The Company will not use any net proceeds from the Offer to repay any indebtedness to
the International Bookrunners and Lead Managers and the Domestic Lead Underwriters and
Bookrunners. For a more detailed discussion on the proceeds from the Firm Offer and the
Company’s proposed use of proceeds, please see “Use of Proceeds” beginning on page 84 of this
Prospectus.

The International Bookrunners and Lead Managers (as defined below) and the Domestic Lead
Underwriters and Bookrunners (as defined below) will receive a transaction fee from the
Company equivalent to 1.5% of the gross proceeds from the sale of the Institutional Offer Shares
(as defined below). The Domestic Lead Underwriters and Bookrunners (as defined below) will
receive a transaction fee from the Company equivalent to 1.5% of the gross proceeds from the
sale of the Trading Participants and Retail Offer Shares (as defined below), inclusive of the
selling fees to be paid to the PSE Trading Participants. For a more detailed discussion on the
fees to be received by the International Bookrunners and Lead Managers and the Domestic Lead
Underwriters and Bookrunners, see “Plan of Distribution” beginning on page 252 of this
Prospectus.

Each holder of the Common Shares will be entitled to such dividends as may be declared by the
Company’s Board of Directors (the “Board”), provided that any stock dividend declaration
requires the approval of shareholders holding at least two-thirds of the Company’s total
outstanding capital stock. The Corporation Code of the Philippines, Batas Pambansa Blg. 68
(the “Philippine Corporation Code”), has defined “outstanding capital stock” as the total shares
of stock issued, whether paid in full or not, except treasury shares. The Company’s current
dividend policy provides that at least 30% of the preceding fiscal year’s net income after tax will
be declared as dividends, subject to (i) the availability of Unrestricted Retained Earnings, (ii)
implementation of business plans, (iii) contractual obligations, and (iv) working capital
requirements. There can be no guarantee that the Company will pay any dividends in the future.
See “Dividends and Dividend Policy” beginning on page 97 of this Prospectus.

At least 27,000,000 of the Offer Shares (or 20% of the Firm Shares) (the “Trading Participants
and Retail Offer Shares”) are (subject to re-allocation as described below) being offered and sold
by BPI Capital Corporation and Maybank ATR Kim Eng Capital Partners, Inc. (together, the
“Domestic Lead Underwriters and Bookrunners”) at the Offer Price in the Philippines (the
“Trading Participants and Retail Offer”). BPI Capital Corporation and Maybank ATR Kim Eng
Capital Partners, Inc. will act as the domestic lead underwriters and bookrunners of the Trading
Participants and Retail Offer. Details regarding the commission to be received by the Domestic
Lead Underwriters and Bookrunners can be found under “Plan of Distribution” beginning on
page 252 of this Prospectus. The Trading Participants and Retail Offer Shares are (subject to re-
allocation as described below) are being offered to each of the trading participants of the PSE
(the “PSE Trading Participants” or “Selling Agents”). Each Trading Participant shall initially be
allocated 204,500 Offer Shares and subject to reallocation as may be determined by the
Domestic Lead Underwriters and Bookrunners. The remainder of the 6,000 Offer Shares, plus
any Offer Shares allocated to the PSE Trading Participants but not taken up by them, will be
distributed by the Domestic Lead Underwriters and Bookrunners to their clients, retail investors
or the general public. Trading Participants and Retail Offer Shares not taken up by the Selling
Agents and the Domestic Lead Underwriters and Bookrunners’ clients or the general public shall
be purchased by the Domestic Lead Underwriters and Bookrunners.

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Up to 108,000,000 of the Offer Shares (or 80% of the Firm Shares) (the “Institutional Offer
Shares”) are (subject to re-allocation as described below) being offered and sold (i) outside the
Philippines to persons outside the United States, by Credit Suisse (Singapore) Limited, Maybank
Kim Eng Securities Pte. Ltd. and UBS AG, Singapore Branch (the “International Bookrunners
and Lead Managers”) and (ii) to certain qualified buyers in the Philippines by the Domestic Lead
Underwriters and Bookrunners, each in reliance on Regulation S (“Regulation S”) under the
United States Securities Act of 1933, as amended (the “U.S. Securities Act”) (the “Institutional
Offer”). Any Institutional Offer Shares allocated to buyers within the Philippines will be re-
allocated to the Trading Participants and Retail Offer for distribution by the Domestic Lead
Underwriters and Bookrunners, based on mutual agreement between the International
Bookrunners and Lead Managers, the Domestic Lead Underwriters and Bookrunners and the
Company. The International Bookrunners and Lead Managers will not be involved in the offer
of, or underwrite, any Offer Shares in the Philippines.

All of the Common Shares issued and to be issued or sold pursuant to the Offer have identical
rights and privileges. The Common Shares may be owned by any person or entity regardless of
citizenship or nationality, subject to the nationality limits under Philippine law. The Philippine
Constitution and related statutes set forth restrictions on foreign ownership for companies
engaged in certain activities. Because the Company is engaged in real property ownership and
development, its foreign shareholdings may not exceed 40.0% of its issued and outstanding
capital stock entitled to vote, and 40.0% of its total issued and outstanding capital stock, whether
or not entitled to vote. See “Philippine Foreign Exchange and Foreign Ownership Controls”
beginning on page 249 of this Prospectus.

The allocation of the Offer Shares between the Trading Participants and Retail Offer and the
Institutional Offer is subject to adjustment as agreed between the Company, the International
Bookrunners and Lead Managers and the Domestic Lead Underwriters and Bookrunners. The
International Bookrunners and Lead Managers and the Domestic Lead Underwriters and
Bookrunners will underwrite, on a firm commitment basis, the Offer Shares.

Before making an investment decision, investors should carefully consider the risks associated
with an investment in the Common Shares. These risks include:

• risks relating to the Company’s business;

• risks relating to the Philippines;

• risks relating to the Offer and the Offer Shares; and

• risks relating to certain statistical information in this Prospectus.

Please refer to the section entitled “Risk Factors” beginning on page 47 of this Prospectus,
which, while not intended to be an exhaustive enumeration of all risks, must be considered in
connection with a purchase of the Offer Shares.

The Common Shares are (and, upon close of the Offer, the Firm Shares will be) listed on The
Philippine Stock Exchange, Inc. (the “PSE”) under the trading symbol “DD”. On June 19, 2018,

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the closing price of the Common Shares on the PSE was ₱25.25. The Offer Price will be
determined by the Company, the International Bookrunners and Lead Managers, and the
Domestic Lead Underwriters and Bookrunners through a book building process and not by
reference to the historical trading price of the Common Shares on the PSE. Investors should not
rely on the historical market price of the Common Shares on the PSE as an indicator of the value
of the Common Shares. See “Determination of the Offer Price” beginning on page 100 of this
Prospectus.

The listing of the Offer Shares is subject to the approval of the PSE. An application to list the
Offer Shares was approved on May 28, 2018 by the board of directors of the PSE, subject to
fulfillment of certain listing conditions by the Company. However, such an approval for listing is
permissive only and does not constitute a recommendation or endorsement by the PSE or the
Securities and Exchange Commission of the Philippines (the “Philippine SEC”) of the Offer
Shares. The PSE assumes no responsibility for the correctness of any of the statements made or
opinions expressed in this Prospectus. Furthermore, the PSE makes no representation as to the
completeness and expressly disclaims any liability whatsoever for any loss arising from or in
reliance upon the whole or any part of the contents of this Prospectus.

An application has been made to the Philippine SEC to register the Offer Shares under the
provisions of the Securities Regulation Code of the Philippines (Republic Act (“R.A.”) No.
8799) (the “SRC”).

ALL REGISTRATION REQUIREMENTS HAVE BEEN MET AND ALL

INFORMATION CONTAINED HEREIN ARE TRUE AND CURRENT.

The Offer Shares are offered subject to the receipt and acceptance of any order by the Company
and subject to the Company’s right to reject any order in whole or in part. It is expected that the
Offer Shares will be delivered in book-entry form against payment thereof to the Philippine
Depository and Trust Corporation (the “PDTC”).

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The information contained in this Prospectus relating to the Company and its operations has been
supplied by the Company, unless otherwise stated herein. To the best of its knowledge and
belief, the Company, which has taken reasonable care to ensure that such is the case, together
with BPI Capital Corporation and Maybank ATR Kim Eng Capital Partners, Inc. have exercised
diligence, and the Company confirms that the information contained in this Prospectus relating to
the Company and its operations is correct, and that there is no material misstatement or omission
of fact which would make any statement in this Prospectus misleading in any material respect
and that the Company hereby accepts full and sole responsibility for the accuracy of the
information contained in this Prospectus with respect to the same.

Unless otherwise indicated, all information in this Prospectus is as of the date of this Prospectus.
Neither the delivery of this Prospectus nor any sale made pursuant to this Prospectus shall, under
any circumstances, create any implication that the information contained herein is correct as of
any date subsequent to the date hereof or that there has been no change in the affairs of the
Company since such date.

No representation or warranty, express or implied, is made by the Company, International

Bookrunners and Lead Managers, and the Domestic Lead Underwriters and Bookrunners,
regarding the legality of an investment in the Offer Shares under any legal, investment or similar
laws or regulations. No representation or warranty, express or implied, is made by the
International Bookrunners and Lead Managers, and the Domestic Lead Underwriters and
Bookrunners as to the accuracy or completeness of the information herein and nothing contained
in this Prospectus is, or shall be relied upon as, a promise or representation by the International
Bookrunners and Lead Managers, and the Domestic Lead Underwriters and Bookrunners. The
contents of this Prospectus are not investment, legal or tax advice. Prospective investors should
consult their own counsel, accountant and other advisors as to legal, tax, business, financial and
related aspects of a purchase of the Offer Shares. In making any investment decision regarding
the Offer Shares, prospective investors must rely on their own examination of the Company and
the terms of the Offer, including the merits and risks involved. Any reproduction or distribution
of this Prospectus, in whole or in part, and any disclosure of its contents or use of any
information herein for any purpose other than considering an investment in the Offer Shares is
prohibited.

THE OFFER SHARES ARE BEING OFFERED ON THE BASIS OF THIS

PROSPECTUS ONLY. ANY DECISION TO PURCHASE THE OFFER SHARES MUST
BE BASED ONLY ON THE INFORMATION CONTAINED HEREIN.

The Offer Shares have not been and will not be registered under the U.S. Securities Act. The
Offer Shares may be subject to certain transfer restrictions as described herein.

No person has been authorized to give any information or to make any representations other than
those contained in this Prospectus and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company, the International
Bookrunners and Lead Managers, and the Domestic Lead Underwriters and Bookrunners. This
Prospectus does not constitute an offer to sell or the solicitation of an offer to purchase any
securities other than the Offer Shares or an offer to sell or the solicitation of an offer to purchase
such securities by any person in any circumstances in which such offer or solicitation is

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unlawful. Neither the delivery of this Prospectus nor any sale of the Offer Shares offered hereby
shall, under any circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained herein is correct as
of any time subsequent to the date hereof.

Market data used throughout this Prospectus has been obtained from market research, reports and
studies, publicly available information and industry publications. Industry publications generally
state that the information that they contain has been obtained from sources believed to be reliable
but that the accuracy and completeness of that information is not guaranteed. Similarly, industry
forecasts, market research and the underlying economic assumptions relied upon therein, while
believed to be reliable, have not been independently verified, and none of the Company, the
International Bookrunners and Lead Managers, and the Domestic Lead Underwriters and
Bookrunners makes any representation as to the accuracy of that information. This Prospectus
also contains industry information that was prepared from available public sources and
independent market research conducted by KMC Savills, Inc. (“Savills”) to provide an overview
of the real estate industries in which the Company’s businesses operate. However, there is no
assurance that such information is accurate or complete.

The operating information used throughout this Prospectus has been calculated by the Company
on the basis of certain assumptions made by it. As a result, this operating information may not
be comparable to similar operating information reported by other companies.

The distribution of this Prospectus and the offer and sale of the Offer Shares in certain
jurisdictions may be restricted by law. The Company, the International Bookrunners and Lead
Managers, and the Domestic Lead Underwriters and Bookrunners require persons into whose
possession this Prospectus comes to inform themselves about and to observe any such
restrictions. This Prospectus does not constitute an offer of, or an invitation to purchase, any of
the Offer Shares in any jurisdiction in which such offer or invitation would be unlawful. Each
prospective purchaser of the Offer Shares must comply with all applicable laws and regulations
in force in any jurisdiction in which it purchases, offers, sells or resells the Offer Shares or
possesses and distributes this Prospectus and must obtain any consents, approvals or permissions
required for the purchase, offer, sale or resale by it of the Offer Shares under the laws, rules and
regulations in force in any jurisdiction to which it is subject or in which it makes such purchases,
offers, sales or resales, and none of the Company, the International Bookrunners and Lead
Managers, and the Domestic Lead Underwriters and Bookrunners shall have any responsibility
therefor.

In connection with the Offer, the Stabilization Agent or any person acting on its behalf may
over-allot Optional Shares or effect transactions with a view to supporting the market price of the
Offer Shares at a level higher than that which might otherwise prevail for a limited period after
the Listing Date. However, there is no assurance that the Stabilizing Agent (or any person acting
on behalf of the Stabilizing Agent) will undertake stabilization activities. Any stabilization
activities may begin on or after the Listing Date and, if begun, may be ended at any time, but
must end no later than 30 calendar days from and including the Listing Date. Any stabilization
activities shall be done in compliance with all applicable laws, regulations and rules. The total
number of Offer Shares which the Stabilizing Agent or any of its agents may buy to undertake
any stabilization activities shall not exceed 11.11% of the aggregate number of Firm Shares.

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The Company reserves the right to withdraw the offer and sale of Offer Shares at any time, the
International Bookrunners and Lead Managers and the Domestic Lead Underwriters and
Bookrunners reserve the right to reject any commitment to subscribe for the Offer Shares in
whole or in part and to allot to any prospective purchaser less than the full amount of the Offer
Shares sought by such purchaser. If the Offer is withdrawn or discontinued, the Company shall
subsequently notify the Philippine SEC and the PSE. The International Bookrunners and Lead
Managers, the Domestic Lead Underwriters and Bookrunners and certain related entities may
acquire for their own account a portion of the Offer Shares.

Each offeree of the Offer Shares, by accepting delivery of this Prospectus, agrees to the
foregoing.

Conventions which apply to this Prospectus

In this Prospectus, unless otherwise specified or the context otherwise requires, all references to
the “Company” are to DoubleDragon Properties Corp. and its Subsidiaries on a consolidated
basis. All references to the “Philippines” are references to the Republic of the Philippines. All
references to the “Government” are to the national government of the Philippines. All references
to the “BSP” are references to Bangko Sentral ng Pilipinas, the central bank of the Philippines.
All references to “United States” are to the United States of America. All references to
“Philippine Peso,” “PhP,” “Pesos” and “₱” are to the lawful currency of the Philippines, and all
references to “U.S. dollars” and “U.S.$” are to the lawful currency of the United States. The
Company publishes its financial statements in Pesos.

This Prospectus contains translations of certain Peso amounts into U.S. dollar amounts at
specified rates solely for the convenience of the reader. These translations should not be
construed as representations that the Peso amounts represent such U.S. dollar amounts or could
be, or could have been, converted into U.S. dollars at the rates indicated or at all. Unless
otherwise indicated, all translations from Pesos to U.S. dollars from amounts as of and for the
year ended December 31, 2017 have been made at rate of ₱49.92 = U.S.$1.00, the closing spot
rate quoted on the Philippine Dealing System (the “PDS”) on December 29, 2017, while all
translations from Pesos to U.S. dollars from amounts as of and for the three months ended March
31, 2018 have been made at rate of ₱52.21 = U.S.$1.00, the closing spot rate quoted on the PDS
on March 28, 2018. Pursuant to the Bankers Association of the Philippines (“BAP”) Advisory
dated March 16, 2018, the publication of the PDS USD/PHP FX Spot Summary ceased on April
1, 2018. On June 8, 2018, the BAP closing spot rate was ₱52.70 = U.S.$1.00. See “Exchange
Rates” for further information regarding the rates of exchange between the Peso and the
U.S. dollar.

The items expressed in the Glossary of Terms may be defined otherwise by appropriate
Government agencies or regulations from time to time, or by conventional or industry usage.

Presentation of Financial Information

The Company’s financial statements are reported in Philippine Pesos and are prepared based on
its accounting policies, which are in accordance with the Philippine Financial Reporting
Standards (“PFRS”) issued by the Financial Reporting Standards Council of the Philippines.

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PFRS include statements named PFRS, Philippine Accounting Standards and Philippine
Interpretations of International Financial Reporting Interpretations Committee.

The financial information for the Company as of and for the years ended December 31, 2017,
2016 and 2015 and as of and for the three months ended March 31, 2017 and 2018 represent the
accounts of the Company on a consolidated basis. Unless otherwise stated, all financial
information relating to the Company contained herein is stated in accordance with PFRS.

Figures in this Prospectus have been subject to rounding adjustments. Accordingly, figures
shown in the same item of information may vary, and figures which are totals may not be an
arithmetic aggregate of their components.

The Company’s fiscal year begins on January 1 and ends on December 31 of each year. R.G.
Manabat & Co. (“RGM”), a member firm of KPMG International, has audited and rendered an
unqualified audit report on the Company’s consolidated financial statements as of and for the
years ended December 31, 2017, 2016 and 2015 and has reviewed and rendered an unqualified
review report on the Company’s consolidated financial statements as of and for the three months
ended March 31, 2018.

This Prospectus includes certain non-PFRS financial measures for the Company, including
EBITDA, EBITDA margins and other related EBITDA or EBIT ratios, and certain non-PFRS
operating measures for the Company. EBIT and EBITDA are not measurements of financial
performance under PFRS and investors should not consider them in isolation or as an alternative
to profit or loss for the year, income or loss from operations, an indicator of the Company’s
operating performance, cash flow from operating, investing and financing activities, or as a
measure of liquidity or any other measures of performance under PFRS. Because there are
various EBIT and EBITDA calculation methods, the Company’s presentation of this measure
may not be comparable to similarly titled measures used by other companies. EBIT and EBITDA
figures and related ratios, and other non-PFRS operating measures included in this Prospectus
are unaudited.

Forward-Looking Statements

This Prospectus contains forward-looking statements that are, by their nature, subject to
significant risks and uncertainties. These forward-looking statements include, without limitation,
statements relating to:

• known and unknown risks;

• uncertainties and other factors that may cause the Company’s actual results, performance
or achievements to be materially different from expected future results; and

• performance or achievements expressed or implied by forward-looking statements.

Such forward-looking statements are based on numerous assumptions regarding the Company’s
present and future business strategies and the environment in which the Company will operate in
the future. Important factors that could cause some or all of the assumptions not to occur or

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cause actual results, performance or achievements to differ materially from those in the forward-
looking statements include, among other things:

• the Company’s ability to anticipate and respond to market trends;

• the Company’s ability to successfully implement its current and future strategies;

• the Company’s ability to successfully manage its growth;

• the Company’s ability to begin construction of its projects without delays due to
regulatory or other causes;

• the Company’s ability to successfully manage its future business, financial condition,
results of operations and cash flow;

• general political, social and economic conditions in the Philippines;

• any future political instability in the Philippines;

• the condition of and changes in the Philippine, Asian or global economies;

• changes in interest rates, inflation rates and the value of the Peso against the U.S. dollar
and other currencies;

• changes to the laws, including tax laws, regulations, policies and licenses applicable to or
affecting the Company;

• competition in the Philippine commercial real estate and hospitality industries;

• legal or regulatory proceedings in which the Company is or may become involved; and

• uncontrollable events, such as war, civil unrest or acts of international or domestic

terrorism, the outbreak of contagious diseases, accidents and natural disasters.

Additional factors that could cause the Company’s actual results, performance or achievements
to differ materially from forward-looking statements include, but are not limited to, those
disclosed under “Risk Factors” and elsewhere in this Prospectus. These forward-looking
statements speak only as of the date of this Prospectus. The Company, the International
Bookrunners and Lead Managers, and the Domestic Lead Underwriters and Bookrunners
expressly disclaim any obligation or undertaking to release, publicly or otherwise, any updates or
revisions to any forward-looking statement contained herein to reflect any change in the
Company’s expectations with regard thereto or any change in events, conditions, assumptions or
circumstances on which any statement is based.

This Prospectus includes statements regarding the Company’s expectations and projections for
future operating performance and business prospects. The words “aim”, “anticipate”, “believe”,
“consider”, “continue”, “estimate”, “expect”, “going forward”, “intend”, “ought to”, “plan”,
“target”, “potential”, “predict”, “project”, “propose”, “seek”, “may”, “might”, “can”, “could”,

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“will”, “would”, “shall”, “should”, “is/are likely to”, the negative form of these words and other
similar words identify forward-looking statements. In addition, all statements other than
statements of historical facts included in this Prospectus are forward-looking statements.
Statements in the Prospectus as to the opinions, beliefs and intentions of the Company accurately
reflect in all material respects the opinions, beliefs and intentions of its management as to such
matters as of the date of this Prospectus, although the Company gives no assurance that such
opinions or beliefs will prove to be correct or that such intentions will not change. This
Prospectus discloses, under the section “Risk Factors” and elsewhere, important factors that can
cause actual results to differ materially from the Company’s expectations. All subsequent written
and oral forward-looking statements attributable to the Company or persons acting on its behalf
are expressly qualified in their entirety by the above cautionary statements.

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 TABLE OF CONTENTS

Page

GLOSSARY OF TERMS ............................................................................................................. 14

SUMMARY .................................................................................................................................. 19
SUMMARY OF THE OFFER...................................................................................................... 33
SUMMARY FINANCIAL AND OPERATING INFORMATION ............................................. 42
RISK FACTORS .......................................................................................................................... 47
EXCHANGE RATES ................................................................................................................... 83
USE OF PROCEEDS ................................................................................................................... 84
DIVIDENDS AND DIVIDEND POLICY ................................................................................... 97
DETERMINATION OF THE OFFER PRICE ........................................................................... 100
CAPITALIZATION AND INDEBTEDNESS ........................................................................... 101
DILUTION ................................................................................................................................. 102
SELECTED FINANCIAL AND OPERATING INFORMATION............................................ 104
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.......................................................................................... 109
BUSINESS .................................................................................................................................. 143
INDUSTRY ................................................................................................................................ 198
REGULATORY AND ENVIRONMENTAL MATTERS ........................................................ 203
BOARD OF DIRECTORS AND SENIOR MANAGEMENT .................................................. 210
PRINCIPAL SHAREHOLDERS ............................................................................................... 218
RELATED PARTY TRANSACTIONS ..................................................................................... 221
MARKET PRICE ....................................................................................................................... 224
DESCRIPTION OF THE SHARES ........................................................................................... 225
THE PHILIPPINE STOCK MARKET ...................................................................................... 237
PHILIPPINE TAXATION.......................................................................................................... 244
PHILIPPINE FOREIGN EXCHANGE AND FOREIGN OWNERSHIP CONTROLS ........... 249
PLAN OF DISTRIBUTION ....................................................................................................... 252

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LEGAL MATTERS .................................................................................................................... 257
INDEPENDENT AUDITORS.................................................................................................... 258
INDEX TO FINANCIAL STATEMENTS ................................................................................. F-I
PHILIPPINE MARKET STUDY ................................................................................... ANNEX 1

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 GLOSSARY OF TERMS

In this Prospectus, unless the context otherwise requires, the following terms shall have the
meanings set forth below.

Application the documents to purchase or subscribe to the Offer Shares

Banking Day or Business Day a day on which commercial banks are open for business in
Makati City, Metro Manila

BIR Bureau of Internal Revenue

Board of Directors or Board the Board of Directors of the Company

BSP Bangko Sentral ng Pilipinas, the central bank of the

Philippines

CityMalls The community malls developed and operated by CMCCI

CMCCI CityMall Commercial Centers Inc., a subsidiary of the

Company. CMCCI is 66% owned by the Company and 34%
owned by SM Investments Corp.

Common Shares common shares of the Company with a par value of ₱0.10 per
share

Company, Issuer, DoubleDragon Properties Corp., a corporation incorporated

DoubleDragon or DD with limited liability in the Philippines; references to the
Company include references to its Subsidiaries, unless the
context otherwise requires

CUSA Common usage service area

DD Majority Shareholders Honeystar Holdings Corp. and Injap Investments Inc.

Director(s) the director(s) of the Company

Domestic Lead Underwriters BPI Capital Corporation and Maybank ATR Kim Eng Capital
and Bookrunners Partners, Inc.

Exchange Act United States Securities Exchange Act of 1934, as amended

Firm Offer the offer and sale of 135,000,000 new Common Shares of the
Company

Firm Shares the Common Shares relating to the Firm Offer

GDP gross domestic product

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Grade A Grade A buildings are premier office buildings with rents
above average for the area. Buildings have modern amenities,
high quality standard finishes, exceptional accessibility and a
defined market presence.

Greenshoe Agreement an agreement between the Issuer and the Stabilizing Agent
granting the latter the Over-Allotment Option and authority to
conduct stabilizing activities in connection with the Offer.

Government the national government of the Republic of the Philippines

Gross Margin the Company’s gross income divided by sales as described in

the Consolidated Financial Statements included in this
Prospectus

hospitality arm the business segment of the Company involved in the

hospitality business

IFRS International Financial Reporting Standards

industrial centers industrial estates to be developed by the Company, which

comprise standardized multi-use warehouses suited for
commissaries, cold storage, manufacturing, logistics and
distribution centers, some of which will be built to the
specifications of large locators

industrial leasing the leasing of standardized multi-use warehouses suited for

commissaries, cold storage, manufacturing, logistics and
distribution centers, some of which will be built to the
specifications of large locators

International Bookrunners Credit Suisse (Singapore) Limited, Maybank Kim Eng

and Lead Managers Securities Pte. Ltd. and UBS AG, Singapore Branch

Institutional Offer the offer for sale of the Institutional Offer Shares (i) outside
the Philippines to persons outside the United States, and (ii) to
certain qualified buyers in the Philippines, each in reliance on
Regulation S

Institutional Offer Shares up to 108,000,000 of the Offer Shares that are (subject to re-
allocation as described in “Plan of Distribution”) being
offered (i) outside the Philippines to persons outside the
United States by the International Bookrunners and Lead
Managers, and (ii) to certain qualified buyers in the
Philippines by the Domestic Lead Underwriters and
Bookrunners pursuant to the Institutional Offer

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IRO Investor Relations Officer

IRRs Implementing Rules and Regulations of the SRC, as amended

IT information technology

JFC Jollibee Foods Corporation

Listing Date the date on which trading of the Offer Shares commence on
the Philippine Stock Exchange, expected to be July 13, 2018

Offer the offer and sale of the Offer Shares

Offer Price ₱30.00 per Offer Share

Offer Shares the Firm Shares and the Optional Shares

OFs OFWs and Filipino expatriates

OFWs Overseas Filipino workers

Optional Shares the Common Shares relating to the Over-allotment Option

Over-allotment Option the option granted by the Company to the Stabilizing Agent,
exercisable on and within 30 calendar days of the Listing
Date, to purchase up to an additional 15,000,000 Offer Shares

PDTC the Philippine Depository & Trust Corporation

Pesos, Philippine Pesos, PhP, ₱ the legal currency of the Republic of the Philippines
and Philippine currency

PFRS Philippine Financial Reporting Standards

Philippine Constitution the 1987 Constitution of the Philippines, the supreme law of
the Republic of the Philippines

Philippine Corporation Code Batas Pambansa Blg. 68, also known as the Corporation Code
of the Philippines

Philippine SEC Philippine Securities and Exchange Commission

POGO Philippine offshore gaming operators

Preferred Shares preferred shares of the Company with a par value of

₱100.00 per share

PSA Philippine Standards on Auditing

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PSE the Philippine Stock Exchange, Inc.

PSE Trading Participants the trading participants of the PSE in the Philippines

Receiving Agent Rizal Commercial Banking Corporation – through its Trust

and Investments Group, with address at 7/F Yuchengco
Tower, RCBC Plaza, Ayala Avenue, Makati City, Philippines

Regulation S Regulation S under the U.S. Securities Act

SEC U.S. Securities and Exchange Commission

Selling Agents PSE Trading Participants

Sia family the principal shareholders of Injap Investments Inc.

sq. m. square meter

SRC Republic Act No. 8799, also known as the Securities

Regulation Code of the Philippines

Stabilizing Agent BPI Capital Corporation, a duly licensed investment house in

the Philippines, with address at 8/F BPI Building, Ayala
Avenue corner Paseo de Roxas, Makati City, Philippines

Subsidiaries DoubleDragon Sales Corp., DoubleDragon Property

Management Corp., Iloilo-Guimaras Ferry Terminal Corp.,
DD Meridian Park Development Corp., DD HappyHomes
Residential Centers Inc., Hotel of Asia, Inc. (and its
consolidated subsidiaries), CityMall Commercial Centers Inc.
(and its consolidated subsidiaries), Piccadilly Circus Landing,
Inc. and CentralHub Industrial Centers Inc.

Tan and Ang families the principal shareholders of Honeystar Holdings Corp.

Transfer Agent Rizal Commercial Banking Corporation – Stock Transfer

Processing Section

Trading Participants and the offer for sale of the Trading Participants and Retail Offer
Retail Offer Shares to the Selling Agents and other investors in the
Philippines

Trading Participants and up to 27,000,000 of the Offer Shares that are (subject to re-
Retail Offer Shares allocation as described in “Plan of Distribution”) being
offered by the Domestic Lead Underwriters and Bookrunners
in the Philippines pursuant to the Trading Participants and
Retail Offer

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Unrestricted Retained currently defined by the Philippine SEC as “the amount of
Earnings accumulated profits and gains realized out of the normal and
continuous operations of the Company after deducting
therefrom distributions to stockholders and transfers to capital
stock or other accounts, and which is: (1) not appropriated by
the Board of Directors for corporate expansion projects or
programs: (2) not covered by a restriction for dividend
declaration under a loan agreement; and (3) not required to be
retained under special circumstances obtaining in the
Company such as when there is a need for a special reserve
for probable contingencies”; see “Dividend and Dividend
Policy — Limitations and Requirements”

U.S. Securities Act United States Securities Act of 1933, as amended

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 SUMMARY

The following summary is qualified in its entirety by, and is subject to, the more detailed
information presented in this Prospectus, including the Company’s audited consolidated
financial statements and related notes included elsewhere in this Prospectus. Capitalized terms
not defined in this summary are defined in the “Glossary of Terms,” “Risk Factors,” “Business”
or elsewhere in this Prospectus.

OVERVIEW

DoubleDragon Properties Corp. is an emerging real estate company in the Philippines,

principally engaged in the ownership and operation of a portfolio of leasable properties through
its four principal business segments: retail leasing, office leasing, hospitality and industrial
leasing, with the aim of becoming one of the leading property players in the Philippines with the
highest percentage of recurring revenue. The Company’s two principal shareholders are Injap
Investments Inc., controlled by the Sia family, and Honeystar Holdings Corp. controlled by the
Tan and Ang families, who also control Jollibee Foods Corporation (“JFC”), the largest fast food
company in the Philippines.

As of December 31, 2017, through its subsidiary, CityMall Commercial Centers Inc.
(“CMCCI”), the Company owns and operates 25 CityMalls, with a total leasable area of
147,806.0 sq. m., primarily located in the provincial areas of the Philippines. The Company also
has 21 CityMalls under construction, with an additional land bank for 17 CityMalls. CMCCI is
66% owned by the Company and 34% owned by SM Investments Corp. (“SMIC”), the holding
company for one of the largest conglomerates in the Philippines.

The Company’s office leasing segment primarily consists of two key projects under
development, DD Meridian Park and Jollibee Tower. DD Meridian Park, a 4.8 hectare project
located in the Manila Bay area of Pasay City, and which is 70%-owned by the Company, is
expected to consist of 280,000 sq. m. of leasable space. The space will primarily be used for
BPO, outsourcing and support service offices, and corporate offices and is to be constructed in
four phases. The first phase, DoubleDragon Plaza, was inaugurated and unveiled on May 7,
2018, while the second phase is expected to be completed in the fourth quarter of 2018. Jollibee
Tower is a Grade A 41-storey commercial and office tower with 47,909 sq. m. of leasable space
and is situated in the heart of the Ortigas central business district in Metro Manila. The project,
which is expected to be completed in 2018, is a joint venture between the Company and JFC,
who will serve as the building’s anchor tenant.

The Company’s hospitality segment is operated through its subsidiary, Hotel of Asia, Inc.
(“HOA”), which is 70%-owned by the Company, and HOA’s wholly owned subsidiary, Hotel
101 Management Inc. The hospitality operations comprise 866 operating hotel rooms, including
the Company’s own hotel brand, “Hotel 101”, which currently has one operating hotel in the Bay
Area near the Mall of Asia. CSI Hotels, Inc., a 50%-owned subsidiary of HOA, is the
Philippines’ master franchisee of the “Jinjiang Inn” brand, with two hotels in operation in
Ortigas and Makati, Metro Manila primarily targeted at Chinese tourists. Hotel 101 Management
Corporation, a wholly owned subsidiary of HOA, operates Injap Tower, a 21-storey condotel
located in Iloilo City. As of December 31, 2017, the Company had one hotel under construction,

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Hotel101 Fort, and five more hotels in the planning and development stage, specifically
Hotel101 Bohol, Hotel101 Davao, Hotel101 Boracay, Jinjiang Inn Boracay (Newcoast) and
Jinjiang Inn Cagayan de Oro which are estimated to be completed in 2020. The Company
recently announced the entry by HOA into a joint venture for the development of Hotel 101
Resort-Boracay in Megaworld’s Boracay Newcoast estate. See “Business—Hospitality—Future
Hotel Developments”. The Company aims to have 5,000 rooms under management by 2020. The
Company also intends to subfranchise its “Jinjiang Inn” brand in the future.

The Company’s latest venture into the growing industrial leasing segment is through its wholly
owned subsidiary, CentralHub Industrial Centers Inc. (“CHICI”). The Company, through CHICI,
recently acquired a 6.2 hectare parcel of land in Luisita Industrial Park, Tarlac and a 3.9 hectare
parcel of land in Iloilo for industrial leasing, and the Company intends to acquire six additional
sites strategically located across Luzon, Visayas and Mindanao. See “Business—Industrial
Leasing”. The industrial centers will contain standardized, multi-use, and industrial quality
warehouses suited for commissaries, cold storage and logistics centers to be leased to locators
operating nationwide.

For the years ended December 31, 2015, 2016 and 2017, the Company had total revenues of
₱1,929.0 million, ₱3,711.8 million and ₱6,611.9 million (U.S.$132.4 million), respectively. The
Company also had net income of ₱622.8 million, ₱1,470.3 million and ₱2,526.3 million
(U.S.$50.6 million), respectively, over the same periods. For the three months ended March 31,
2017 and 2018, the Company had total revenues of ₱649.0 million and ₱1,830.3 million,
respectively. The Company’s recurring revenue, consisting of its rental income and income from
hotel operations, was 6.0%, 9.4%, 19.8%, 29.9% and 29.0% of its total revenues for the years
ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018,
respectively.

RECENT DEVELOPMENTS

On April 6, 2018, CMCCI entered into 10-year lease contracts for an additional 22 SM
Savemore Supermarkets in CityMall sites slated for opening in 2018 and located in various parts
of Luzon, Visayas and Mindanao.

COMPETITIVE STRENGTHS

Fast growing real estate property group transitioning to a business that will be supported by a
diversified recurring income platform from four property pillars across retail, office,
hospitality and industrial segments
The Company is predominantly a developer and owner of a portfolio of investment properties
with a total leasable area of 191,106.5 sq. m. as of December 31, 2017. The Company continues
to ramp up its pace of growth and widen its presence and deepen penetration across the
Philippines, with plans to increase its portfolio’s leasable area to 1.2 million sq. m., spanning
across the retail, office, hospitality and industrial segments by 2020. The Company is moving
towards a business model which is expected to derive a significant majority of its revenues from
recurring income streams. For the year ended December 31, 2017 and for the three months ended
March 31, 2018, 19.8% and 29.0%, respectively, of its total revenue was contributed by the retail
and hospitality business segments.

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As of December 31, 2017, the Company has 25 operational CityMalls with a total leasable area
of approximately 147,806.0 sq. m. and an occupancy of 95.3%. As of December 31, 2017, 21
CityMalls are under construction, and the Company has additional land bank for 17 new
CityMalls. The Company intends to establish a nationwide presence of 100 CityMalls with a
total leasable area of 700,000 sq. m. by 2020. All CityMall sites are in prime locations within the
natural daily movement of the general population that the Company serves. CityMall sites are
secured in areas located along main roads to increase visibility and maximize exposure and
accessibility to its target market.
The Company believes that there remains significant organic growth within its CityMalls
business model. Same-store sales growth for FoodWorld which comprises brands owned by
Jollibee Foods Corp. in the first five operational CityMalls which were completed in 2015 was
approximately 12.3% from the year ended December 31, 2016 to the year ended December 31,
2017, underpinned by positive market reversions and fixed annual escalation ranging from 5% to
10%. Moreover, there is potential for further upside with the transition to a turnover rent
structure from the base rent structure, as its business scales up and its tenants’ retail sales
continue to increase.
DD Meridian Park is being developed as an office-led mixed-use development with leasable area
of 280,000 sq. m. DoubleDragon Plaza, which comprises phase 1 of the DD Meridian Park
project, opened in December 2017 and was inaugurated and unveiled on May 7, 2018.
DoubleDragon Center East and DoubleDragon Center West, which comprise phase 2 of the DD
Meridian Park project, are 23.3% complete as of December 31, 2017. Further, as of December
31, 2017, towers one, two, three and four of DoubleDragon Plaza are 89.8%, 100.0%, 100.0%
and 100.0% pre-committed, while the retail area of DoubleDragon Plaza is 61.7% pre-
committed. Complementing DD Meridian Park is Jollibee Tower, a premium-grade office
building which will be the future headquarters of JFC. As of December 31, 2017, the building is
14.2% completed and 30.0% pre-committed. Construction is estimated to be completed within
the fourth quarter of 2018.
Through the Company’s three star hotel chains – Hotel 101, Jinjiang Inn and Injap Tower –
under the Company’s Subsidiary, HOA, the Company expects to benefit from the strong growth
of the Philippine economy and the expected healthy tourism sector performance. CSI Hotels,
Inc., a 50% subsidiary of HOA, is the exclusive master franchisee of the Chinese hotel chain
Jinjiang Inn in the country – awarded the Best Local Hotel Brand in 2016 / 2017 by City
Traveler. With Jinjiang Inn’s strong mainland China customer base and familiarity with the
brand, the Company believes that it is well positioned to benefit from the growing inbound
Chinese tourists which is expected to increase to 1 million in 2017 according to Savills.
According to the Department of Tourism, there were 675,700 arrivals from China in 2016,
making China the third largest source of foreign tourists in the Philippines.
All of the hotels under both brands are strategically located in areas which are in close proximity
to one or all of the following: business hubs, shopping malls, and dining options. As of
December 31, 2017, Hotel 101 Manila, Jinjiang Inn Ortigas, Jinjiang Inn Makati and Injap
Tower have 518, 95, 59 and 194 rooms, respectively, with a target to grow the hotel portfolio to
5,000 rooms with a leasable area of 100,000 sq. m. by 2020, offering investors the opportunity to
gain exposure to one of the largest potential portfolios of hospitality assets in the Philippines by
room count.

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In addition, the Company formed its wholly owned subsidiary CentralHub Industrial Centers Inc.
(“CHICI”) as its industrial leasing arm. The Company envisions CHICI to be a branded modern
institutional quality logistics facility suited for commissaries, cold storage and logistic centers.
The Company has secured a 6.2 hectare site in Tarlac and a 3.9 hectare lot in Iloilo, as part of its
plan to build eight industrial centers by 2020 (two in North Luzon, two in South Luzon, two in
Visayas and two in Mindanao), adding 100,000 sq. m. to its leasing portfolio.
Finally, the Company believes that its recurring income stream is underpinned by a portfolio of
quality assets that will likely appreciate in value given their location. The Company believes that
these assets, collectively, will generate strong cash flows and a well-capitalized balance sheet.

Well-defined execution capability with proven track record of delivering growth

Leveraging the Company’s end-to-end capabilities as a real estate developer and owner,
encompassing site identification, master planning, development, marketing, leasing, events,
client relationship management, data analytics, the Company believes that it has the ability and
resources to create a market leading business model.

• Standard project blueprint enables a highly cost efficient rapid roll-out strategy across
its business segments. The Company remains focused on growing its business segments to
achieve economies of scale and drive cost efficiencies. For example, with its aim to be the
largest community mall player in first class municipalities and second and third class cities,
the rollout of its expansion plans allows the Company to achieve operational efficiencies as it
has the optionality to offer multiple CityMall construction projects to the contractors within
the same province. As a result of repeated transactions with the local contractors, not only
does the Company have direct interaction with workers who have better on-the-ground
experience in sourcing labor and local materials, the Company believes that it gains
familiarity with the execution process to ensure that its development timelines are met.
Similar to CityMalls, the Company plans to scale up significantly to dominate and be the
largest player in the Philippines hospitality and industrial segments to benefit from
economies of scale. To ensure rapid roll-out to achieve economies of scale, the Company has
developed and adopted a standardized approach to the development and marketing of its
business segments. For example, the timeline for the start of development to stabilized
operations for each of its CityMalls is approximately 18 months (construction permit to
opening of 12 months and a further six months to stabilize), which has enabled the Company
to deliver new malls to the market in an expedited manner – delivered 25 operational
CityMalls as of December 31, 2017. Similarly, the Company is adopting a standardized
approach in developing its hotels and industrial leasing businesses to shorten the
development-to-cash generating cycle.

• Proven execution ability in delivery. The Company believes that it has an established
execution track record. Just over three years since listing, the Company has managed to build
up an investment property portfolio with a leasable area of 191,106.5 sq. m. as of December
31, 2017, representing 19.1% of the Company’s initial planned 1.0 million sq. m. of leasable
space.

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 Given the pace of the Company’s growth and success in sourcing and securing new sites, the
Company has increased its leasable area target to 1.2 million sq. m. by 2020. As of December
31, 2017, the Company believes it has also secured 77% of its land bank needs for its
enhanced 2020 plan of 1.2 million sq. m. leasable area. The Company’s confidence in
raising its target is also due to its standardized and scalable operational model, which enables
it to establish a track record of timely delivery of its projects. In addition, the Company has
also displayed a track record of delivering high committed occupancies for its investment
properties:
o Average committed occupancy for its 25 operational CityMalls as of December 31,
2017, is approximately 90% at opening; and
o as of December 31, 2017, towers one, two, three and four of DoubleDragon Plaza are
89.8%, 100.0%, 100.0% and 100.0% pre-committed, while the retail area of
DoubleDragon Plaza is 61.7% pre-committed, and Jollibee Tower is 30.0% pre-
committed.

• Strategic acquisitions to enter into new business segments. In line with a revised target
leasable portfolio from 1.0 million sq. m. to 1.2 million sq. m. by 2020, the Company has
already made swift and strategic acquisitions to enter into the hospitality and industrial
leasing businesses. In October 2016, the Company acquired 70% of HOA, an existing hotel
business contributing approximately 19,064.5 sq. m. to the leasable portfolio as of December
31, 2017, with plans to expand HOA to eventually contribute 100,000 sq. m. of leasable
space through the operation of 5,000 rooms by 2020. In August 2017, the Company
announced its acquisition of a 6.2 hectare industrial lot expected to contribute approximately
32,000 sq. m. of industrial leasing area, with a target to acquire more sites to eventually
contribute 100,000 sq. m. towards the Company’s leasable portfolio by 2020. Recently, the
Company has also announced its new joint venture on the development of Hotel 101 Resort-
Boracay on Megaworld’s Boracay Newcoast development, and its acquisition of a 3.9
hectare industrial lot in Iloilo for its second CentralHub site. See “Business—Hospitality—
Future Hotel Developments” and “Business—Industrial Leasing” for more information.

• Proven ability to raise funding. The Company has demonstrated a strong ability to secure
funding, raising approximately ₱40 billion in capital in the last four years, the majority of
which was used to ensure that the Company’s initial target plan of 1.0 million sq. m. of
leasable area was fully funded. The Company has also been able to diversify sources of funds
which include bank borrowings, and issuance of Preferred Shares and fixed-rate corporate
bonds, which enhance the Company’s financial flexibility in raising capital. Importantly, this
has allowed the Company to react faster to growth and any potential inorganic opportunities
that is value accretive for its business, such as the acquisition of HOA and CHICI.

Leading community mall business model in first class municipalities and second and third
class cities
The Company believes that it is currently the dominant player in the modern format branded
community mall segment across Philippines. As of December 31, 2017, the Company has
secured 63 CityMall sites.

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According to Savills’ estimates, the Company is expected to hold approximately 37.9% of the
community mall stock in first class municipalities and second and third class cities by 2020. The
Company believes that it is one of the first movers at the forefront of retail modernization in first
class municipalities and second and third class cities, and has created a business model that is
positioned to significantly benefit from the transition from traditional retail to modern retail,
attributed to high barriers of entry for foreign players and varying strategic focus of local players.
Foreign players face issues including the following: (i) constitutional restrictions, which limit
foreign ownership to not more than 40% for companies that own land and retail businesses,
among others, and (ii) a lack of local relationships, existing local network and knowledge,
preventing them from gaining access to land bank and expanding on a similar scale. Based on
Savills’ research, there is little competition from foreign developers present in the market. Other
domestic entrants in the community malls segment include Waltermart Supermarket, Inc.,
Gaisano Grand Group, Gaisano Capital, Robinsons and Vista Land, but the pace of their
expansion and existing network across first class municipalities and second and third class cities
has not been as extensive as CityMall’s. In addition, most of these companies’ business models
focus on supermarkets, unlike a typical CityMall which seeks to offer the all-in-one modern
shopping retail format (e.g. cinema, shopping, food and beverage, and grocery shopping). Even
for the larger local players, the focus remains on Metro Manila and bigger cities.

Well-positioned to benefit from positive macroeconomic fundamentals, political tailwinds and

emerging opportunities within the industry sectors
The Philippines’s positive macroeconomic fundamentals support its strong growth story
trajectory. Philippine 2016 GDP growth of 6.9% was the highest witnessed in the last three
years, and its 2017 GDP growth of 6.7%, continued to exhibit strength. According to Savills, the
Philippines is expected to have one of the strongest real GDP growth outlook forecast for 2018 in
ASEAN with a GDP growth rate of approximately 6.8%, and continues to be one of the largest
economy in the region, after Indonesia and Thailand.
The Philippine retail market is currently evolving from unorganized retail formats to multi-
tenanted malls, the latter providing a compelling alternative to traditional retail pathways such as
wet markets and provision shops, and introducing the modern shopping experience to the local
communities. According to Savills, the modern retail format is attractive to customers as this
provides them a one-stop platform for both discretionary and non-discretionary consumption. In
particular, the presence of a clean, air-conditioned indoor one-stop mall in first class
municipalities and second and third class cities is expected to be highly attractive to the cities’
population. Savills also believes that this is also attractive to tenants given significantly higher
footfall and sales per sq. m. achieved compared to unorganized retail, and this format provides
quality control with guaranteed infrastructure and logistics that helps to build brand equity. The
Company believes this trend is only starting to occur in first class municipalities and second and
third class cities, and its entry into these markets is well-timed to take advantage of this shift.
President Duterte’s administration plans to refocus development towards the agriculture,
manufacturing and trade industries in the countryside and disperse economic opportunity across
all socioeconomic levels. In addition, initiatives are being put in place to minimize red tape and
streamline regulatory procedures in order to accelerate development. This could accelerate
economic growth in first class municipalities and second and third class cities, increasing

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populations as more businesses entering such areas, and potentially prompting increased demand
for retail space in such areas given stronger expected foot traffic amid new population migrating
for jobs, and increased disposable income. According to Savills, the current political thrust to
decentralize economic growth is also expected to benefit the Company’s CityMalls in first class
municipalities and second and third class cities.
Moreover, the Philippine economy has been expanding by greater than 6% per annum for the last
five years based on publicly available data from the Philippine Statistics Authority. The robust
growth reflects not just the sustained dynamism of the BPO-led services sector but also the
expansion of other key economic sub-sectors such as construction, telecommunications, banking
and finance, warehousing and logistics, and manufacturing. Companies engaged in these
businesses were compelled to expand and thus occupy larger and high-quality office space.
Demand for office real estate is also expected to benefit from the growing trend of offshore
gaming in the Philippines given similar space and infrastructure requirements as BPO offices.
The Philippine Amusement and Gaming Corp. (PAGCOR) has been granting recently
established POGO licenses for foreign nationals, as revenues from online gaming is expected to
eventually match revenues from traditional casinos.
According to Savills, inbound tourism expenditure grew 2.3% in 2016 compared to 2015, and
tourist arrivals are estimated to increase to 10 million by 2020 compared to 5.8 million in 2016.
The growth of the Philippine tourism sector is expected to be sustained by the influx of visitors
from the country’s traditional markets such as South Korea, USA, Japan, and China. The four
economies account for nearly 60% of annual tourist arrivals in the country. Warming relations
between the Chinese and Philippine governments should also result in more Chinese tourists. In
late 2016, the Philippine and Chinese governments signed an agreement on tourism cooperation
that includes exploring a possible increase in capacity entitlements in air services and
encouraging airlines to open new flights between Philippine cities in the Visayas and Mindanao
regions and Chinese cities. The sector should also benefit from the spillover impact of the
successful hosting of major international events in the past two years such as APEC Summit,
ASEAN Tourism Forum, Routes Asia, and Miss Universe. With robust international arrivals and
sustained rise in visitor receipts (₱230 billion in 2016 from ₱227.6 billion in 2015), hotel
occupancy in Metro Manila increased by two-percentage points from 69% in the first half of
2016 to 71% by end-2016. There are also major tourism-related infrastructure projects under the
public-private partnership (PPP) program. For example, the government is working on a
comprehensive international airport development plan that covers the expansion and
privatization of Ninoy Aquino International Airport (NAIA); development of another
international airport in Bulacan or Sangley Point, Cavite; and expansion of Clark airport. This is
expected to bridge the country’s infrastructure gaps and enable the government to meet or even
surpass its visitor arrival target and entice more foreign and local businessmen to invest in the
country’s travel and tourism sector.
The Philippines’ favorable macroeconomic dynamics is expected to translate into strong and
sustainable demand for logistics facilities underpinned by limited stock of logistics facilities, in
particular modern logistics facilities in the Philippines. Strong real GDP growth, private
consumption, as well as a large and rapidly growing middle-income population is expected to
boost the Philippine consumer market. Notably, most of the Company’s current CityMall tenants
are heavy users of logistics space. However, a majority of the current stock of logistics
warehouses is old generation properties and fragmented, which provide less efficient

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warehousing conditions. In contrast, modern logistics warehouses carry features such as large
floor areas, high ceilings of 14 meters high, high load tolerances, wide column spacing within the
warehousing area, modern loading docks and enhanced safety systems which provide greater
accessibility and efficiency. According to Savills, demand for logistics facilities and
warehousing facilities is expected to grow with the expansion of the modern retailing format in
the Philippines and the growth of the manufacturing sector, together with the improved
infrastructure in the Philippines as a result of Government-initiated infrastructure projects
nationwide.

Strong shareholders and partnerships with Philippines’ leading business groups validate the
Company’s vision and business model
The ability to attract and establish strategic relationships with the JFC, SM, and ABS-CBN
Groups validates its vision, positioning and execution capabilities as the leading owner, operator,
and developer of branded community malls across first class municipalities and second and third
class cities in the Philippines. The SM Group’s “SaveMore” supermarket brand is the anchor
tenant in a majority of CityMalls, along with several best-in-category SM brands represented in
various CityMall branches. The JFC Group food brands anchor the “FoodWorld” section of
every CityMall and the Company consider this to be an irreplaceable advantage of the
partnership and highly attractive for its consumers. In addition, the Company has also teamed up
with broadcasting giant ABS-CBN to roll out cinemas in CityMalls branches nationwide.
Together, these strategic partnerships are expected to solidify the dominance of CityMalls all
over the Philippines.
Its partnerships with other business groups have also provided it with the ability to rapidly and
significantly expand into the hospitality and office sectors and gain access to valuable land sites.
The Company acquired a 70% stake in HOA, which will now serve as its hospitality arm through
three star hotels Hotel 101, Jinjiang Inn and Injap Tower located in prime locations across key
cities in the Philippines. Its strategic partnership with JFC also includes the establishment of a
joint venture to develop Jollibee Tower, a 40-storey commercial and office tower on a prime
commercial lot in Ortigas. DD Meridian Park, a joint venture between DD (70%) and the initial
land owner (30%), is strategically located as it is situated in the corner of EDSA, Roxas
Boulevard and Macapagal Avenue, main thoroughfares in Metro Manila close to the
Entertainment City and the SM Mall of Asia complex.

Experienced board and management team with strong corporate governance

The Company’s board of directors is highly experienced, with an average of 30 years of
experience in the Philippine real estate and commercial sectors. The board is led at the helm by
its Chairman and Chief Executive Officer, Edgar “Injap” Sia, whose experience stems from
growing the Mang Inasal chain from one branch in his hometown of Iloilo City in 2003 to over
338 branches nationwide by 2010. Its Co-Chairman Tony Tan Caktiong opened his first ice
cream parlor at the age of 22, and since then, Jollibee has grown to become the largest fast food
chain in the Philippines. Injap’s and Tony’s foresight in entering the quick service restaurants
business ahead of competitors and the knowledge they have obtained from expanding their
businesses in first class municipalities and second and third class cities will be instrumental in
growing the Company and enabling it to achieve its targets.

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Similarly, the Company’s senior management team has a proven track record in developing,
investing in, managing, and enhancing commercial real estate, possessing an average of 12 years
of experience on average in the Philippine real estate and commercial sectors. The team covers
the entire value chain of the business, including asset development and enhancement, asset
management, and commercial operations.
The Company has also adopted governance policies and mechanisms to serve as its foundation
and guiding principle for good governance. The Company also continues to adopt policies and
mechanisms in accordance with established rules and best practices.

BUSINESS STRATEGIES

A nationwide expansion plan to grow recurring income stream across 4 property pillars:
retail, office, industrial and hospitality
The Company is working towards building a strong base of recurring revenue through the
accumulation of 1.2 million sq. m. of leasable space nationwide by 2020, across the retail, office,
industrial and hospitality property segments. The Company has established a successful track
record of expansion by accumulating an investment property portfolio with a leasable area of
191,106.5 sq. m. as of December 31, 2017, representing 19.1% of the Company’s initial planned
1.0 million sq. m. of leasable space. The significant pace of execution was achieved through two
key success factors:
• Direct access to land bank opportunities, and a high level of familiarity with first class
municipalities and second and third class cities resulting in the ability to transact quickly; and
• Adaptable approach to site acquisition by entering into joint ventures or strategic alliances
with landowners, which contribute land to the joint venture while the Company provides its
development expertise.
The Company believes that it remains on track to achieve the 2020 target, with the Company
raising its 2020 leasable area target from 1.0 million sq. m. to 1.2 million sq. m. Of its 2020
leasable area target, 1.0 million sq. m. of leasable area has been funded by capital raised to date,
and the diversified business model that the Company is building out will broaden its earnings
base and provide stable and recurring sources of cash flows to fund its next stage of growth.
The Company intends to establish a nationwide footprint through strategically selected projects
that are located in prime locations both in Metro Manila and the different provinces in the
Philippines. The Company believes that the combination of macroeconomic factors and sector
trends across the country is expected to support a robust outlook in the near and medium term
period. This would allow the Company to diversify its recurring income source through a
balance of stable growth and high growth industries. Specifically, while the Metro Manila office
leasing space provides a stable base of income stream, the Company believes that the remaining
portfolio is well positioned for upside given exposure to the following trends:
• Transition of traditional retail to modern retail. According to Savills, modern retail is still
in its early stages in first class municipalities and second and third class cities, which,
coupled with the significant GDP and population growth the Philippines, indicates that the
Philippine retail market is geared towards significant growth.

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• Strong and sustainable demand for logistics facilities underpinned by limited supply, in
particular modern logistics facilities in the Philippines. According to Savills, the current
supply of quality logistics facilities in the Philippines is fragmented, as there is no one major
owner of logistics facilities across the country.
• Tourism sector expected to remain a key contributor of the Philippines economy.
According to Savills, inbound tourism expenditure grew 2.3% in 2016 compared to 2015,
and tourist arrivals are estimated to increase to 10 million by 2020 compared to 5.8 million in
2016.

Identifying shifts and capitalizing on real estate segments where it can be a leading player
Prior to entering a segment, the Company put in significant effort to conduct in-depth market
research and analysis to help it identify markets where the Company has the resources and ability
to dominate either now, or over a period of time.
One of the transitions that the Company had observed earlier was the evolution of traditional
retail into modern retail in first class municipalities and second and third class cities –
particularly notable in the supermarket segment, which is relevant to the its business model since
the supermarket typically occupies one-third of the leasable space of CityMalls. To leverage on
this trend, the Company conceptualized CityMalls such that it was able to utilize the growing
shift of retailers from traditional to modern formats, offering select retail stores in addition to its
anchor hardware, appliance and supermarket stores, among others. The Company continues to
reinforce that CityMall is a replacement to traditional retail, tapping its existing demand. Given
its success in this segment, one of the focus points is to entrench its market-leading position as
the largest and fastest-growing retail developer, owner and operator of community malls in
provincial areas of the Philippines
• The Company’s target is to achieve a portfolio of 100 CityMalls across first class
municipalities and second and third class cities by 2020. Its key strategy is to continue to
develop, own and operate a nationwide retail mall network, funding further expansion by
using recurring income from its operating malls as well as profits from the sale of its
development properties, supported by additional debt funding if required.
• The Company will continue to innovate, to implement optimal tenant mixes best suited to the
Philippine consumer, to introduce new retail experiences adapted to market dynamics, and to
adapt best practices and concepts from retail leaders elsewhere in Southeast Asia; and
• Outside capitalizing on the Jollibee and SM brands, the Company will also continue to create
barriers into the community mall segment, by targeting underserved lower tier areas. The
Company chooses such sites based on the following criteria: (i) sites that give the Company a
first-mover advantage in areas where there is less operational baggage from costs, but also
(ii) sites where the Company are familiar with and (iii) sites with scarce presence of
competitors and suitably sized lots within and in surrounding prime city center areas.
The Company continues to believe that the tourist segment will be an important economic sector
for the country. For example, according to Savills, tourist arrivals from China for the first half of
2017 surged by 33.4% to 455,000 compared to 341,000 for the same period in 2016, and the
Philippine Department of Tourism estimates that visitors from China will hit the one million
mark in 2017. As of December 31, 2017, the Company had a total of 866 operational hotel rooms
and plans to increase this to 5,000 rooms under its Jinjiang and Hotel 101 brands – essentially

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giving it a market dominating position over other major real estate players which have around
3,000 hotel rooms.
Another major observation is that warehousing in the Philippines is currently fragmented, and
there remains favorable local macroeconomic dynamics to translate into strong and sustainable
demand for logistics facilities and underpinned by limited stock of existing logistics facilities.
Given the significant overlap of tenants in its retail mall business and their corresponding needs
for industrial space, the Company believes that it is in a position to not only tap into this existing
demand but to also help its tenants achieve operating efficiencies. The current industrial
landscape is such that majority of the current stock of logistics warehouse is old generation and
fragmented properties that often provide less efficient warehousing conditions – existing
warehouses are not suitable for distribution needs as one of the key specifications requires the
floor-to-ceiling height to be 14 meters high, while most of the current facilities are only six
meters high.
The Company’s industrial business model is focused on providing modern logistics warehouses
with features to drive greater accessibility and efficiency, and its ability to execute this strategy is
underpinned by its shareholders who have experience in food and beverage, commissaries, cold
storage logistics – a large part of each industrial center’s leasable space is catered to these
specific segments. The Company sees its CentralHub industrial centers as the first branded
modern industrial center chain in the Philippines, and like CityMall and Hotel 101, all industrial
centers will look the same and will be located in strategic locations around the country. The
Company believes that through this segment, it will be able to provide an additional layer of
service to its retail tenants, and increase their level of stickiness to its overall ecosystem, thus
allowing the Company to dominate in this segment.
The Company believes that its overall business model is highly sustainable. The Company is
positioned to capitalize on emerging industry trends, and more importantly, its businesses are
setup to serve the “sweet-spot” of the demographics i.e. the low to middle income population.
The Company intends to leverage its leading market position, exploit economies of scale and its
local market knowledge to consolidate and continue to grow its market share over time.

Focus on building recurring revenue based on a foundation of appreciating assets and operate
a capital efficient business model
The Company is focused on developing properties that will create a steady stream of cash flows
backed by a string of appreciating assets. The Company believes that cash flows sourced from
recurring revenue streams are of greater quality than cash flows generated from sale of properties
which are non-recurring in nature and are dependent on continued reinvestment. The Company
has successfully grown its recurring revenues as a percentage of total revenues from 6.0% and
9.4% in 2015 and 2016, respectively, to 19.8% in 2017. As of March 31, 2018, the Company’s
recurring revenues as a percentage of total revenues was 29.0%.
The Company’s envisioned 1.2 million sq. m. of leasable space by 2020 is expected to generate
cash flows and project yields that will organically grow without continuous capital outlay,
primarily driven by the embedded escalation rates in its lease contracts with its tenants.
The Company books its assets held for lease as investment property. As the Company has
adopted the fair value method, its investment property is generally revalued on an annual basis

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by a third party appraiser based on comparable market transactions relative to the location of its
properties held for lease. Generally, the Company’s investment property has seen substantial
gains from revaluation on top of cash flows contributed from leasing operations.
The Company’s business model is also geared to be highly capital efficient in deployment of
capital once it achieves scale in its CityMalls expansion, coupled with the completion of other
developments that are earmarked to provide recurring income. This is mostly driven by
CityMall’s relatively quick churn rate, with an estimated time to completion of 12 months and a
further six months to stabilize, thus ensuring that raised capital is quickly converted into cash-
generating hard assets.
For its Hotel 101 business, the Company has adopted a “sale-and-managed” model, where
individual condotel units are sold to third party investors but the Company continues to manage
the condotel units post-sale. Sale proceeds are consequentially used to fund the development
cost, which reduces its equity requirements for any project. In addition, the Company plans to
subfranchise its Jinjiang Inn brand, and under this model, the capital expenditure for any repairs
of these subfranchised hotels is to be borne by the subfranchisee. Overall, these streams of
income will reduce the equity contribution required from the Company to fund any future capital
expenditure plans.

Maintain a strong balance sheet, prudent risk and capital management and good governance
By maintaining a strong balance sheet, the Company believes that it is in a position to withstand
economic and financial cycles, while allowing it to fund its planned expansion. This will also
give it the flexibility to make acquisitions or fund capital expenditures when opportunities arise.
In addition, the Company believes that its strong balance sheet is reinforced by its cost efficient
business model – rollout of expansion plans for CityMall, Hotel 101 and industrial centers via
the same format allows for economies of scale and reduces any cost inefficiencies that could
result from unnecessities.
The Company intends to take a disciplined approach to the allocation of capital across its
projects, with the strict application of hurdle rates and benchmarks for each investment. Its
planned capital expenditure is principally earmarked for the expansion of its mall network. The
Company plans to fund its capital expenditure plan through its recurring income, pre-sales,
external financing, and its access to diverse sources of funds will increase its financial flexibility.
Of its 2020 leasable area target, 1.0 million sq. m. of leasable area has been funded by capital
raisings raised till date. The Company has been a repeat issuer in the domestic bond market,
including bonds arranged by BPI Capital Corporation, BDO Capital & Investment Corporation,
Maybank ATR Kim Eng Capital Partners Inc., and RCBC Capital Corporation, demonstrating its
established relationships across both domestic and international banks. Besides the domestic
bond market, the Company has also tapped into diversified sources of funding which include
Preferred Shares and bank funding, highlighting its diversified capital base, comprising of retail
and institutional investors.
The Company also plans to manage its debt maturity profile, reduce cost of funding and diversify
its sources of funding, including potentially accessing the capital markets in the future. To
achieve these objectives, its key areas of focus are as follows:

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• Company’s focus on developments with a “for-sale” component, pre-sale proceeds from the
sales can be used to partially fund the development costs of the project components;
• Reduce cost of funding by growing a steady stream of recurring rental income while utilizing
pre-sales to reduce overall funding needs;
• Continue to diversify funding sources and lower its cost of capital by monitoring the markets
for favorable opportunities to build up its capital resources through various financing options
such as equity issuances, loans and public debt issuances, among others; and
• Continue to look at longer-term and fixed rate funding to reduce refinancing risk and ensure
little interest rate volatility. As of March 31, 2018, the debt maturity of the Company’s long-
term debt is 5.6 years, indicating minimal near-term refinancing risk. As of March 31, 2018,
the average cost of funding of the Company’s long-term funding (excluding short-term lines
for working capital) is 6.11%, which is at an approximate spread of 0.058% to the 10-year
Philippines government bond yield to maturity of approximately 6.052% (Source: Bloomberg,
as of March 27, 2018).

RISKS OF INVESTING

Before making an investment decision, investors should carefully consider the risks associated
with an investment in the Offer Shares. These risks include:

• risks relating to the Company’s business;

• risks relating to the Philippines;

• risks relating to the Offer and the Offer Shares; and

• risks relating to certain statistical information in this Prospectus.

Please refer to the section entitled “Risk Factors” which, while not intended to be an exhaustive
enumeration of all risks, must be considered in connection with a purchase of Offer Shares.

CORPORATE INFORMATION

The Company is a Philippine corporation with its registered office at DD Meridian Park Bay
Area, Brgy. 76 Zone 10, San Rafael, Pasay City, Metro Manila, Philippines. The Company’s
telephone number is +632 856 7111 and its fax number is +63 856 9111. Its corporate website is
www.doubledragon.com.ph. The information on the Company’s website is not incorporated by
reference into, and does not constitute part of, this Prospectus.

Investor Relations Office and Compliance Office

The Investor Relations Office is tasked with (a) the creation and implementation of an investor
relations program that reaches out to all shareholders and informs them of corporate activities
and (b) the formulation of a clear policy for accurately, effectively and sufficiently
communicating and relating relevant information to the Company’s stakeholders as well as to the
broader investor community.

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Mr. Jose Desales, the Company’s Investor Relations Officer (“IRO”), serves as the Company’s
designated investor relations manager and head of the Company’s Investor Relations Office.
The IRO is responsible for ensuring that the Company’s shareholders have timely and uniform
access to official announcements, disclosures and market-sensitive information relating to the
Company. As the Company’s officially designated spokesperson, the IRO will be responsible
for receiving and responding to investor and shareholder queries. In addition, the IRO oversees
most aspects of the Company’s shareholder meetings, press conferences, investor briefings,
management of the investor relations portion of the Company’s website and the preparation of its
annual reports. The IRO is also responsible for conveying information such as the Company’s
policy on corporate governance and corporate social responsibility, as well as other qualitative
aspects of the Company’s operations and performance.

Mr. Joselito L. Barrera Jr. currently serves as the Company’s Compliance Officer to ensure that
the Company complies with, and files on a timely basis, all required disclosures and continuing
requirements of the Philippine SEC and the PSE.

The Company’s Investor Relations Office is located at DD Meridian Park Bay Area, Brgy. 76
Zone 10, San Rafael, Pasay City, Metro Manila, Philippines.

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 SUMMARY OF THE OFFER
Issuer ............................................
International Bookrunners and
Lead Managers ............................
Domestic Lead Underwriters and BPI Capital Corporation and Maybank ATR Kim Eng
Bookrunners ................................ Capital Partners, Inc.
Selling Agents ..............................
The Offer......................................
Institutional Offer .......................
Trading Participants and
Retail Offer ..................................
#4820-0962-9519v70
DoubleDragon Properties Corp., a corporation organized
under Philippine law with the trading symbol “DD”.
Credit Suisse (Singapore) Limited, Maybank Kim Eng
Securities Pte. Ltd. and UBS AG, Singapore Branch
PSE Trading Participants
a Firm Offer of 135,000,000 Common Shares to be issued
and offered by the Company, and up to an additional
15,000,000 Option Shares to be issued and offered by the
Company.
up to 108,000,000 Offer Shares (or 80% of the Firm
Shares) are (subject to re-allocation as described below)
being offered and sold (i) outside the Philippines to persons
outside the United States, and (ii) to certain qualified
buyers in the Philippines, each in reliance on Regulation S.
Any Institutional Offer Shares allocated to buyers within
the Philippines will be re-allocated to the Trading
Participants and Retail Offer for distribution by the
Domestic Lead Underwriters and Bookrunners, based on
mutual agreement between the International Bookrunners
and Lead Managers, and the Domestic Lead Underwriters
and Bookrunners, and the Company. The Optional Shares
will form part of the Institutional Offer. The International
Bookrunners and Lead Managers will not be involved in the
offer of, or underwrite, any Offer Shares in the Philippines.
no less than 27,000,000 Offer Shares (or 20.0% of the Firm
Shares) are (subject to re-allocation as described below)
being offered in the Trading Participants and Retail Offer in
the Philippines at the Offer Price. Each PSE Trading
Participant shall initially be allocated 204,500 Offer Shares
and subject to reallocation as may be determined by the
Domestic Lead Underwriters and Bookrunners. The
remainder of 6,000 Offer Shares, plus any Offer Shares
allocated to the PSE Trading Participants but not taken up
by them, will be distributed by the Domestic Lead
Underwriters and Bookrunners to their clients, retail
investors or the general public. Trading Participants and
33

Offer Shares .................................
Offer Price ...................................
Over-allotment Option
Trading Participants and Retail
Offer Period .................................
#4820-0962-9519v70
Retail Offer Shares not taken up by the Selling Agents, the
Domestic Lead Underwriters and Bookrunners’ clients,
retail investors or the general public shall be purchased by
the Domestic Lead Underwriters and Bookrunners, subject
to agreement between the Domestic Lead Underwriters and
Bookrunners and the International Bookrunners and Lead
Managers on any clawback, clawforward or other such
mechanism relating to reallocation of the shares between
the two offers.
the Firm Shares and the Optional Shares
₱30.00 per Offer Share
The Company has granted the Stabilizing Agent and its
relevant affiliates, an option, exercisable in whole or in
part, to purchase up to 15,000,000 Optional Shares at the
Offer Price, on the same terms and conditions as the Firm
Shares as set out in this Prospectus, solely to cover over-
allotments, if any, and effect price stabilization activities.
The Over-allotment Option is exercisable from time to time
for a period which shall not exceed 30 calendar days from
and including the Listing Date. See “Plan of Distribution –
The Over-allotment Option”.
The Trading Participants and Retail Offer Period shall
commence at 9:00 a.m., Manila time, on July 2, 2018 and
end at 12:00 p.m., Manila time, on July 6, 2018. The
Company and the Domestic Lead Underwriters and
Bookrunners reserve the right to extend or terminate the
Trading Participants and Retail Offer Period with the
approval of the Philippine SEC and the PSE.
Applications must be received by the Receiving Agent by
12:00 p.m., Manila time on July 6, 2018, whether filed
through a participating Selling Agent or filed directly with
the Domestic Lead Underwriters and Bookrunners.
Applications received thereafter or without the required
documents will be rejected. Applications shall be
considered irrevocable upon submission to a participating
Selling Agent or the Domestic Lead Underwriters and
Bookrunners, and shall be subject to the terms and
conditions of the Offer as stated in this Prospectus and in
the application. The actual purchase of the Offer Shares
shall become effective only upon the actual listing of the
Offer Shares on the PSE and upon the obligations of the
Domestic Lead Underwriters and Bookrunners under the
34

Eligible Investors .........................
Restrictions on Ownership .........
#4820-0962-9519v70
Domestic Underwriting Agreement becoming
unconditional and not being suspended, terminated or
cancelled on or before the Listing Date in accordance with
the provisions of such agreement.
The Trading Participants and Retail Offer Shares may be
purchased by any natural person of legal age residing in the
Philippines, regardless of nationality, or any corporation,
association, partnership, trust account, fund or entity
residing in and organized under the laws of the Philippines
and/or licensed to do business in the Philippines, regardless
of nationality, subject to the Company’s right to reject an
application or reduce the number of Offer Shares applied
for subscription or purchase if the same will cause the
Company to be in breach of the Philippine ownership
requirements under relevant Philippine laws.
The Institutional Offer Shares are initially being offered
and sold (i) outside the Philippines to persons outside the
United States, and (ii) to certain qualified buyers in the
Philippines, each in reliance on Regulation S. Subscription
to, and purchase of, the Offer Shares in certain jurisdictions
may be restricted by law. Foreign investors interested in
subscribing or purchasing the Offer Shares should inform
themselves of the applicable legal requirements under the
laws and regulations of the countries of their nationality,
residence or domicile, and as to any relevant tax or foreign
exchange control laws and regulations affecting them
personally. Foreign investors, both corporate and
individual, warrant that their purchase of the Offer Shares
will not violate the laws of their jurisdiction and that they
are allowed to acquire, purchase and hold the Offer Shares.
Foreign corporate and institutional applicants who qualify
as Eligible Investors, in addition to the documents listed
under “Procedure for Application for the Trading
Participants and Retail Offer”, are required to represent and
warrant that their purchase of the Offer Shares to which
their application relates will not violate the laws of their
jurisdictions of incorporation or organization, and that they
are allowed, under such laws, to acquire, purchase and hold
the Offer Shares.
The Philippine Constitution and related statutes set forth
restrictions on foreign ownership of companies engaged in
certain activities. Because the Company is engaged in real
property ownership and development, its foreign
shareholdings may not exceed 40% of its issued and
35

Transfer Restrictions ..................
Use of Proceeds ...........................
Minimum Subscription...............
Reallocation .................................
#4820-0962-9519v70
outstanding capital stock entitled to vote, and 40% of its
total issued and outstanding capital stock, whether or not
entitled to vote. For more information relating to
restrictions on the ownership of the Common Shares, see
“Philippine Foreign Exchange and Foreign Ownership
Controls.”
The Institutional Offer Shares are initially being offered
and sold (i) outside the Philippines to persons outside the
United States, and (ii) to certain qualified buyers in the
Philippines, each in reliance on Regulation S. The Offer
Shares have not and will not be registered under the
U.S. Securities Act and, subject to certain exceptions, may
not be offered or sold within the United States. See “Plan
of Distribution — The Institutional Offer.”
The Company intends to use the net proceeds from the Firm
Offer for its expansion in industrial leasing and the
hospitality business, which will add an additional 200,000
sq. m. of leasable space to its leasing portfolio by 2020, and
for general corporate purposes. See “Use of Proceeds” for
details of how the total net proceeds are expected to be
applied.
Each application must be for a minimum of 100 Offer
Shares, and thereafter, in multiples of 100 Firm Shares.
Applications for multiples of any other number of Common
Shares may be rejected or adjusted to conform to the
required multiple, at the Company’s discretion.
The allocation of the Firm Shares between the Trading
Participants and Retail Offer and the Institutional Offer is
subject to adjustment. In the event of an under-application
in the Institutional Offer and a corresponding over-
application in the Trading Participants and Retail Offer, or
in the event that applications for Institutional Offer Shares
are received from buyers within the Philippines, Firm
Shares in the Institutional Offer may be reallocated to the
Trading Participants and Retail Offer (with the consent of
the International Bookrunners and Lead Managers and the
Domestic Lead Underwriters and Bookrunners). If there is
an under-application in the Trading Participants and Retail
Offer and a corresponding over-application in the
Institutional Offer, Firm Shares in the Trading Participants
and Retail Offer may be reallocated to the Institutional
Offer (with the consent of the International Bookrunners
and Lead Managers and the Domestic Lead Underwriters
36

Lock-up .......................................
Listing and Trading ....................
Dividends .....................................
#4820-0962-9519v70
and Bookrunners). The reallocation shall not apply in the
event of over-application in both the Trading Participants
and Retail Offer and the Institutional Offer.
The Company and the DD Majority Shareholders have
agreed with the International Bookrunners and Lead
Managers and the Domestic Lead Underwriters and
Bookrunners that they will not, without the prior written
consent of the International Bookrunners and Lead
Managers and Domestic Lead Underwriters and
Bookrunners, issue, offer, pledge, sell, contract to sell,
pledge or otherwise dispose of (or publicly announce any
such issuance, offer, sale or disposal of) any Common
Shares or securities convertible or exchangeable into or
exercisable for any Common Shares or warrants or other
rights to purchase Common Shares or any security or
financial product whose value is determined directly or
indirectly by reference to the price of the underlying
securities, including equity swaps, forward sales and
options for a period of 180 days after the Listing Date. See
“Principal Shareholders” and “Plan of Distribution —
Lock-Up.”
The Company’s application for the listing of the Offer
Shares was approved by the PSE on May 28, 2018. All of
the Offer Shares in issue or to be issued are expected to be
listed on the PSE under the symbol and company alias
“DD”. See “Description of the Shares.” All of the Offer
Shares are expected to be listed on the PSE on or about July
13, 2018. Trading of the Offer Shares that are not subject
to lock up is expected to commence on July 13, 2018.
Each holder of the Common Shares will be entitled to such
dividends as may be declared by the Board of Directors,
provided that any stock dividend declaration requires the
approval of shareholders holding at least two-thirds of the
Company’s total outstanding capital stock. The Philippine
Corporation Code has defined “outstanding capital stock”
as the total shares of stock issued, whether paid in full or
not, except treasury shares. The Company’s current
dividend policy provides that at least 30% of the preceding
fiscal year’s net income after tax will be declared as
dividends, subject to (i) the availability of Unrestricted
Retained Earnings, (ii) implementation of business plans,
(iii) contractual obligations, and (iv) working capital
requirements. There can be no guarantee that the Company
will pay any dividends in the future. See “Dividends and
37

Refunds for the Trading
Participants and Retail Offer.....
Registration and Lodgment of
Shares with PDTC.......................
Registration of Foreign
Investments ..................................
Tax Considerations .....................
Procedure for Application for
the Trading Participants and
Retail Offer ..................................
#4820-0962-9519v70
Dividend Policy.”
In the event that the number of Offer Shares to be received
by an applicant, as confirmed by the Domestic Lead
Underwriters and Bookrunners, is less than the number
covered by its application, or if an application is rejected by
the Company, then the Domestic Lead Underwriters and
Bookrunners shall refund, without interest, within five
banking days from the end of the offer period, all or a
portion of the payment corresponding to the number of
Offer Shares wholly or partially rejected. All refunds shall
be made through the domestic receiving agent with whom
the applicant has filed the application, at the applicant’s
risk.
The Offer Shares are required to be lodged with the PDTC.
The applicant must provide the information required for the
PDTC lodgment of the Offer Shares. The Offer Shares will
be lodged with the PDTC at least two trading days prior to
the Listing Date. The applicant may request to receive
share certificates evidencing such applicant’s investment in
the Offer Shares through his/her broker after the Listing
Date. Any expense to be incurred by such issuance of
certificates shall be borne by the applicant.
The BSP requires that investments in shares of stock funded
by inward remittance of foreign currency be registered with
the BSP only if the foreign exchange needed to service
capital repatriation or dividend remittance will be sourced
from the Philippine banking system. The registration with
the BSP of all foreign investments in the Offer Shares shall
be the responsibility of the foreign investor. See
“Philippine Foreign Exchange and Foreign Ownership
Controls.”
See “Philippine Taxation” for further information on the
Philippine tax consequences of the purchase, ownership and
disposal of the Offer Shares.
Application forms and signature cards may be obtained
from the Domestic Lead Underwriters and Bookrunners or
from any participating Selling Agent. Applicants shall
complete the application form, indicating all pertinent
information such as the applicant’s name, address,
taxpayer’s identification number, citizenship and all other
information as may be required in the application form.
Applicants shall undertake to sign all documents and to do
38

Payment Terms for the Trading
Participants and Retail Offer.....
#4820-0962-9519v70
all necessary acts to enable them to be registered as holders
of Offer Shares. Failure to complete the application form
may result in the rejection of the application.
If the applicant is a corporation, partnership or trust
account, the application must be accompanied by the
following documents:
• a certified true copy of the applicant’s latest articles
of incorporation and by-laws (or articles of
partnership in the case of a partnership) and other
constitutive documents (each as amended to date)
duly certified by its corporate secretary (or managing
partner in the case of a partnership);
• a certified true copy of the applicant’s Philippine SEC
certificate of registration or certificate of filing
amended articles of incorporation or by-laws, as the
case may be, duly certified by its corporate secretary
(or managing partner in the case of a partnership); and
• a duly notarized corporate secretary’s certificate (or
certificate of the managing partner in the case of a
partnership) setting forth the resolution of the
applicant’s board of directors or equivalent body
authorizing the purchase of the Offer Shares indicated
in the application, identifying the designated
signatories authorized for the purpose, including his
or her specimen signature, and certifying the
percentage of the applicant’s capital or capital stock
held by Philippine Nationals.
The purchase price must be paid in full in Pesos upon the
submission of the duly completed and signed application
form and signature card together with the requisite
attachments. Payment for the Offer Shares shall be made
either by: (i) a personal or corporate check drawn against
an account with a BSP authorized bank at any of its
branches located in Metro Manila; (ii) a manager’s or
cashier’s check issued by an authorized bank; or (iii) a
debit-credit instruction via Real Time Gross Settlement
(RTGS) or direct bank fund transfer in favor of the relevant
underwriter accepting the application. All checks should be
made payable to “DD Follow On Offering”, crossed
“Payee’s Account Only,” and dated the same date as the
application. The applications and the related payments will
be received at any of the offices of the Domestic Lead
39

Acceptance or Rejection of
Applications for the Trading
Participants and Retail Offer ....
Expected Timetable ....................
#4820-0962-9519v70
Underwriters and Bookrunners or the Selling Agents.
“Application to Subscribe” forms are subject to
confirmation by the Domestic Lead Underwriters and
Bookrunners and the final approval of the Company. The
Company and the Domestic Lead Underwriters and
Bookrunners reserve the right to accept, reject or scale
down the number and amount of Offer Shares covered by
any application. The Company and the Domestic Lead
Underwriters and Bookrunners have the right to reallocate
available Offer Shares in the event that the Offer Shares are
insufficient to satisfy the total applications received. The
Offer Shares will be allotted in such a manner as the
Company and the Domestic Lead Underwriters and
Bookrunners may, in their sole discretion, deem
appropriate, subject to distribution guidelines of the PSE.
Applications with checks dishonored upon first presentation
and “Application to Subscribe” forms which do not comply
with terms of the Offer will be automatically rejected.
Notwithstanding the acceptance of any “Application to
Subscribe” forms, the actual subscription of the Offer
Shares by the applicant will be effective only upon the
listing of the Offer Shares at the PSE.
The timetable of the Offer is expected to be as follows:
Pricing Date ................................. June 27, 2018
Notice of final Offer Price to June 28, 2018
the Philippine SEC and PSE .......
Domestic Lead Underwriters
and Bookrunners’ Offer Period ... July 2, 2018 to July 6,
2018
Submission of Firm Order and
Commitments by the PSE Trading July 4, 2018
Participants .................................
Trading Participants and Retail July 6, 2018
Offer Settlement Date..................
Listing Date ................................. July 13, 2018
The dates included above are subject to the approval of the
PSE and the Philippine SEC, market and other conditions,
and may be changed.
40
Risks of Investing ........................ Before making an investment decision, prospective
investors should carefully consider the risks associated with
an investment in the Offer Shares. Certain of these risks
are discussed in the section entitled “Risk Factors” and
include: risks relating to the Company’s business, risks
relating to the Philippines, risks relating to the Offer and the
Offer Shares, risks relating to certain previous disclosures
and risks relating to certain statistical information in this
Prospectus.

41
#4820-0962-9519v70
 SUMMARY FINANCIAL AND OPERATING INFORMATION

The following tables set forth summary consolidated financial information for the Company and
should be read in conjunction with the independent auditors’ reports and the Company’s
consolidated financial statements, including the notes thereto, included elsewhere in this
Prospectus, and the section entitled “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” The summary consolidated financial information as at
and for the years ended December 31, 2017, 2016 and 2015 were derived from the Company’s
audited consolidated financial statements, which were prepared in accordance with PFRS and
were audited by RGM in accordance with the Philippine Standards on Auditing (“PSA”). The
summary consolidated financial information as at and for the three months ended March 31,
2017 and 2018 were derived from the Company’s consolidated financial statements, which were
prepared in accordance with PFRS and were reviewed by RGM in accordance with the PSA. The
summary consolidated financial information below is not necessarily indicative of the results of
future operations. Furthermore, the translation of Peso amounts into U.S. dollars as at and for
the year ended December 31, 2017 and the three months ended March 31, 2018 is provided for
convenience only and is unaudited. For readers’ convenience only, amounts in Pesos as of and
for the year ended December 31, 2017 were converted to U.S. dollars using the BSP Rate as of
December 29, 2017 of ₱49.92 = U.S.$1.00, while amounts in Pesos as of and for the three
months ended March 31, 2018 were converted to U.S. dollars using the BSP rate as of March 28,
2018 of ₱52.21 = U.S.$1.00. As of June 8, 2018, the Peso was at ₱52.70 against the U.S. dollar.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31, For the three months ended March 31,
2015 2016(2) 2017 2017 2017 2018 2018
₱ ₱ ₱ U.S.$ ₱ ₱ U.S.$
(Audited) (Unaudited) (Reviewed) (Unaudited)
(millions, except earnings per share)
REVENUES
Real estate sales.................................................. 641.5 931.9 819.5 16.4 400.0 241.7 4.6
Leasehold rights’ sales ....................................... 139.7 292.7 21.6 0.4 24.1 - -
Rental income .................................................... 116.5 268.7 909.2 18.2 104.5 409.7 7.8
Hotel revenues.................................................... — 78.9 397.5 8.0 89.7 121.7 2.4
Unrealized gains from changes in fair value
of investment property........................................ 811.1 1,830.0 4,174.5 83.6 - 851.9 16.3
Interest income ................................................... 120.9 119.3 128.0 2.6 9.3 119.9 2.3
Other income from forfeiture ............................. 69.3 12.7 12.1 0.2 2.0 2.4 -
Others ................................................................. 30.0 177.6 149.5 3.0 19.4 83.0 1.7
Total Revenues ................................................. 1,929.0 3,711.8 6,611.9 132.4 649.0 1,830.3 35.1
COSTS AND EXPENSES
Cost of real estate sales ...................................... 370.6 495.8 362.2 7.2 165.7 131.4 2.5
Cost of leasehold rights ...................................... 8.4 21.9 4.2 0.1 4.1 - -
Cost of hotel operations...................................... — 61.0 275.5 5.5 62.9 90.9 1.7
Selling and marketing expenses ......................... 113.0 172.7 197.4 4.0 50.3 50.8 1.0
General and administrative expenses.................. 428.6 725.5 1,093.9 21.9 161.9 295.6 5.7
Interest expense .................................................. 114.4 330.2 643.8 12.9 15.8 187.7 3.6
Total Costs and Expenses ................................ 1,035.0 1,807.1 2,577.0 51.6 460.7 756.4 14.5
Income before Income Tax .............................. 894.0 1,904.7 4,034.9 80.8 188.3 1,073.9 20.6
Income Tax Expense ........................................ 271.2 434.4 1,508.6 30.2 22.6 329.3 6.3
Net Income ........................................................ 622.8 1,470.3 2,526.3 50.6 165.7 744.6 14.3
Other Comprehensive Income (Loss)
Item that will never be reclassified to profit

42
#4820-0962-9519v70
or loss
Remeasurement income (loss) on defined
benefit liability ............................................... (3.7) — 6.4 0.1 - - -
Deferred tax effect on remeasurement loss
on defined benefit liability.............................. 1.1 — (1.9) (0.0) - - -
Total Comprehensive Income .......................... 620.2 1,470.3 2,530.8 50.7 165.7 744.6 14.3
Total comprehensive income attributable to:
Equity holders of the Parent Company........... 556.8 1,079.1 1,646.0 33.0 149.4 524.2 10.1
Non-controlling interest ................................. 63.4 391.2 884.8 17.7 16.3 220.3 4.2
Basic earnings (loss) per Common Share
(₱)(1) ................................................................... 0.2509 0.2622 0.4457 (0.0056) 0.1625
Diluted earnings (loss) per Common Share
(₱)(1).................................................................... 0.2509 0.2622 0.4452 (0.0056) 0.1623

Note:
(1) These do not reflect the convertibility option of the 100,000,000 Preferred Shares in April 2018.
(2) The audited financial statements of the Company for 2016 were restated to reflect the adjustment in the fair values of the
identifiable net assets of HOA as a result of its acquisition in 2016. The independent valuation of such assets was made in 2017.
See accompanying notes to the Company’s audited financial statements elsewhere in the Prospectus.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As of December 31, As of March 31,
2015 2016(1) 2017 2017 2017 2018 2018
₱ ₱ ₱ U.S.$ ₱ ₱ U.S.$
(Audited) (Unaudited) (Reviewed) (Unaudited)
(millions)
ASSETS
Current Assets
Cash and cash equivalents................ 960.5 5,466.9 2,100.4 42.1 2,277.9 1,301.7 24.9
Receivables – net ............................. 719.1 1,712.3 3,419.4 68.5 1,747.5 3,719.3 71.2
Inventories ....................................... 2,640.4 3,186.3 3,819.5 76.5 3,253.9 3,929.3 75.3
Due from related parties................... 58.6 101.8 103.5 2.1 407.1 103.4 2.0
Prepaid expenses and other
current assets – net ........................... 1,282.7 3,251.3 4,822.6 96.6 2,959.0 4,299.2 82.4
Total Current Assets .......................... 5,661.3 13,718.6 14,265.4 285.8 10,645.4 13,352.9 255.8
Noncurrent Assets
Receivables – net of current
portion ......................................... 458.7 643.3 230.7 4.6 956.7 304.1 5.8
Property and equipment – net .......... 145.8 863.4 1,009.9 20.2 1,473.6 1,010.4 19.4
Goodwill and intangible assets......... 94.3 1,255.0 1,313.8 26.3 161.0 1,321.7 25.3
Investment property ......................... 19,929.9 32,535.1 46,423.6 930.0 34,864.9 50,075.8 959.1
Deferred tax assets ........................... 418.8 15.5 263.3 5.3 113.2 276.4 5.3
Other noncurrent assets .................... 1,054.5 1,022.6 822.6 16.4 1,776.3 847.3 16.2
Total Noncurrent Assets .................... 22,102.0 36,334.9 50,063.9 1,002.8 39,345.7 53,835.7 1,031.1
Total Assets ......................................... 27,763.3 50,053.5 64,329.3 1,288.6 49,991.1 67,188.6 1,286.9

LIABILITIES AND EQUITY

Current Liabilities
Accounts payable and other
liabilities .......................................... 1,603.2 2,640.0 4,057.6 81.3 2,735.9 4,924.3 94.4
Short-term notes payable ................. 4,274.0 3,486.0 3,452.2 69.2 3,187.6 4,152.1 79.5
Due to related parties ....................... 553.7 1,081.0 944.7 18.9 1,297.0 946.3 18.1
Current portion of customers’
deposits ............................................ 57.8 219.9 125.7 2.5 149.8 438.6 8.4
Dividends payable............................ — 162.0 152.1 3.0 152.4 177.1 3.4
Income tax payable .......................... 0.7 1.1 23.1 0.5 0.6 63.6 1.2

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#4820-0962-9519v70
 As of December 31, As of March 31,
2015 2016(1) 2017 2017 2017 2018 2018
₱ ₱ ₱ U.S.$ ₱ ₱ U.S.$
(Audited) (Unaudited) (Reviewed) (Unaudited)
(millions)
Total Current Liabilities .................... 6,489.4 7,590.0 8,755.4 175.4 7,523.3 10,702.0 205.0
Noncurrent Liabilities
Long-term notes payable – net of
debt issue costs ................................ 11,114.5 15,027.8 14,727.6 295.0 15,036.0 14,662.5 280.8
Bonds payable – net of issue cost..... — 5,217.7 14,795.3 296.4 5,219.4 14,799.3 283.5
Deferred tax liabilities...................... 785.1 1,149.4 2,849.1 57.1 1,076.8 3,142.2 60.2
Retirement benefits liability ............. 5.0 6.1 7.7 0.2 5.9 8.6 0.2
Customers’ deposits – net of - - -
current portion ................................. 111.3 — — —
Other noncurrent liabilities .............. 613.5 844.2 878.4 17.5 891.5 1,000.6 19.1
Total Noncurrent Liabilities .............. 12,629.4 22,245.2 33,258.1 666.2 22,229.6 33,613.2 643.8
Total Liabilities................................... 19,118.8 29,835.2 42,013.5 841.6 29,752.9 44,315.2 848.8
Equity Attributable to Equity
Holders of the Parent Company
Capital stock .................................... 223.0 223.0 223.0 4.5 223.0 223.0 4.3
Preferred shares ............................... — 10,000.0 10,000.0 200.3 10,000.0 10,000.0 191.5
Additional paid-in capital................. 1,358.2 1,358.2 1,358.2 27.2 1,358.2 1,358.2 26.0
Retained earnings............................. 1,174.3 1,578.1 2,571.9 51.5 1,581.8 2,884.2 55.3
Remeasurement gain (loss) on
defined benefit liability – net of
tax .................................................... (2.6) (2.6) 1.9 0.0 (2.6) 1.9 -
2,752.9 13,156.7 14,155.0 283.5 13,160.4 14,467.3 277.1
Non-controlling interests.................... 5,891.6 7,061.6 8,160.8 163.5 7,077.8 8,406.1 161.0
Total Equity ........................................ 8,644.5 20,218.3 22,315.8 447.0 20,238.2 22,873.4 438.1
Total Liabilities and Equity ............... 27,763.3 50,053.5 64,329.3 1,288.6 49,991.1 67,188.6 1,286.9

Note:
(1) The audited financial statements of the Company for 2016 were restated to reflect the adjustment in the fair values of the identifiable
net assets of HOA as a result of its acquisition in 2016. The independent valuation of such assets was made in 2017. See
accompanying notes to the Company’s audited financial statements elsewhere in the Prospectus.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, For the three months ended March 31,
2015 2016 2017 2017 2017 2018 2018
₱ ₱ ₱ U.S.$ ₱ ₱ U.S.$
(Audited) (Unaudited) (Reviewed) (Unaudited)
(millions)

Net cash provided by (used in)

operating activities ...................... (728.3) (2,909.4) (3,492.4) (69.9) 70.5 1,143.3 21.9
Net cash provided by (used in)
investing activities ....................... (9,064.9) (9,774.9) (8,624.1) (172.8) (2,798.9) (2,525.3) (48.4)
Net cash provided by (used in)
financing activities ...................... 6,936.5 17,190.7 8,750.0 175.3 (460.6) 583.3 11.2
Net increase (decrease) in cash
and cash equivalents. ................... (2,856.7) 4,506.4 (3,366.5) (67.4) (3,189.0) (798.7) (15.3)
Cash at beginning of the period ... 3,817.2 960.5 5,466.9 109.5 5,466.9 2,100.4 40.2
Cash at end of the period ............. 960.5 5,466.9 2,100.4 42.1 2,277.9 1,301.7 24.9

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KEY PERFORMANCE INDICATORS

The table below sets forth key performance indicators for the Company for the years ended
December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018.
For the three months
For the years ended December 31, ended March 31,
2015 2016 2017 2017 2018
Net Profit Margin (Net Income to Revenue)(1) ............................. 29.0% 29.1% 24.8% 23.0% 28.6%
Revenue Growth(2) ........................................................................ 12.8% 92.4% 78.1% 110.5% 182.0%
Net Income Growth(3) ................................................................... 0.6% 92.9% 52.1% 282.8% 250.9%
EBITDA (millions)(4).................................................................... ₱1,143.0 ₱2,268.4 ₱4,762.1 ₱216.9 ₱1,296.5
Recurring Revenue (millions)(5) ................................................... ₱116.5 ₱347.6 ₱1,306.6 ₱ 194.2 ₱ 531.4
Recurring Revenue Growth(6) ....................................................... 1,827.6% 198.2% 275.9% 325.7% 173.7%
Recurring Revenue as a Percentage of Total Revenues (7) ............ 6.0% 9.4% 19.8% 29.9% 29.0%
Total Revenues (millions) ............................................................ ₱1,929.0 ₱3,711.8 ₱6,611.9 ₱ 649.0 ₱ 1,830.3
Total Revenue Growth (excluding unrealized gains from
change in fair values of investment property) ............................... (10.9)% 68.3% 29.5% 110.5% 50.8%
Real Estate Sales as a Percentage of Total Revenues ................... 33.3% 25.1% 12.4% 61.6% 13.2%
Rental Income as a Percentage of Total Revenues ....................... 6.0% 7.2% 13.8% 16.1% 22.4%
Hotel Revenues as a Percentage of Total Revenues ..................... - 2.1% 6.0% 13.8% 6.6%
Debt to Equity Ratio (Gross)(8) ..................................................... 1.78 1.17 1.48 1.16 1.47
Debt to Equity Ratio (Net)(9)......................................................... 1.67 0.90 1.38 1.05 1.41
Debt to Assets(10) .......................................................................... 55.4% 47.4% 51.3% 46.89% 50.03%
Net Debt to Assets(11).................................................................... 52.0% 36.5% 48.0% 42.34% 48.09%
Acid Test Ratio(12) ........................................................................ 0.27 0.96 0.64 0.59 0.48
Solvency Ratio(13) ......................................................................... 1.45 1.68 1.53 1.68 1.52
Interest Coverage Ratio(14) ............................................................ 1.38 2.14 2.92 0.58 2.63
_______________
Notes:

(1) Net Profit Margin (Net Income to Revenue) is computed by dividing net income attributable to the owners of the parent company by total
revenue.

(2) Revenue Growth is computed by dividing the current period’s total revenue less the prior period’s total revenue by total revenue for the
prior period.

(3) Net Income Growth is computed by dividing the current period’s net income attributable to owners of the parent company less the prior
period’s net income attributable to owners of the parent company by the prior period’s net income attributable to owners of the parent
company.

(4) EBITDA means the sum of income from operations, depreciation and interest expense. EBITDA is not a measurement of financial
performance under PFRS and investors should not consider it in isolation or as an alternative to profit or loss for the period, income or
loss from operations, an indicator of the Company’s operating performance, cash flow from operating, investing and financing activities,
or as a measure of liquidity or any other measures of performance under PFRS. Because there are various EBITDA calculation methods,
the Company’s presentation of this measure may not be comparable to similarly titled measures used by other companies. EBITDA
above are unaudited figures.

(5) Recurring Revenues means the sum of rental income and hotel revenues for the period.

(6) Recurring Revenue Growth is computed by dividing the current period’s Recurring Revenues less the prior period’s Recurring Revenues
by Recurring Revenues for the prior period.

(7) Recurring Revenue as a Percentage of Total Revenues means the sum of rental income and hotel revenues divided by the total revenues
of the Company.

(8) Debt to Equity Ratio (Gross) is computed by dividing total interest bearing short-term and long-term debt by total equity.

(9) Debt to Equity Ratio (Net) is computed by dividing total interest bearing short-term and long-term debt less cash and cash equivalents by
total equity.

(10) Debt to Assets is computed by dividing total interest bearing short-term and long-term debt by total assets.

45
#4820-0962-9519v70
(11) Net Debt to Assets is computed by dividing total interest bearing short-term and long term debt (less cash and cash equivalents) by total
assets.

(12) Acid Test Ratio is computed by dividing current assets less inventory and prepayments by current liabilities.

(13) Solvency Ratio is computed by dividing total assets by total liabilities.

(14) Interest Coverage Ratio is computed by dividing earnings before interest and taxes (EBIT) by interest charges. EBIT is not a
measurement of financial performance under PFRS and investors should not consider it in isolation or as an alternative to profit or loss
for the period, income or loss from operations, an indicator of the Company’s operating performance, cash flow from operating,
investing and financing activities, or as a measure of liquidity or any other measures of performance under PFRS. Because there are
various EBIT calculation methods, the Company’s presentation of this measure may not be comparable to similarly titled measures used
by other companies.

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#4820-0962-9519v70
 RISK FACTORS

An investment in the Offer Shares involves a number of risks. The price of securities can and
does fluctuate, and any individual security is likely to experience upward or downward
movements and may even become valueless. There is an inherent risk that losses may be
incurred rather than profit made as a result of buying and selling securities. Past performance
is not indicative of future performance and results, and there may be a large difference between
the buying price and the selling price of the Offer Shares. Investors should carefully consider all
the information contained in this Prospectus, including the risk factors described below, before
deciding to invest in the Offer Shares. The occurrence of any of the following events, or other
events not currently anticipated, could have a material adverse effect on the Company’s
business, financial condition and results of operations and cause the market price of the Offer
Shares to decline. All or part of an investment in the Offer Shares could be lost.

This risk factor discussion does not purport to disclose all of the risks and other significant
aspects of investing in the Offer Shares. Investors should undertake independent research and
study the trading of securities before commencing any trading activity. Investors should seek
professional advice regarding any aspect of the securities such as the nature of risks involved in
the trading of securities, and specifically those of high-risk securities. Investors may request
publicly available information on the Common Shares and the Company from the Philippine
SEC.

RISKS RELATING TO THE COMPANY’S BUSINESS

The Company may not be able to successfully manage and implement its growth or expansion
strategies.

The Company intends to continue to pursue a growth strategy for its retail leasing, office leasing,
hospitality, and industrial leasing operations to achieve its 2020 leasable portfolio target of 1.2
million sq. m. comprises plans for 700,000 sq. m. from 100 CityMalls nationwide, 300,000 sq.
m. from its Metro Manila office projects DD Meridian Park and Jollibee Tower, 100,000 sq. m.
from 5,000 planned hotel rooms of Hotel 101 and Jinjiang Inn Philippines, and 100,000 sq. m.
from its CentralHub industrial centers. To this end, as of December 31, 2017 the Company has
25 operational CityMalls and 21 CityMalls under construction, with an additional land bank for
17 CityMalls. It also has four operational hotels with 866 rooms, with one hotel under
construction and expected to add another 606 rooms, and an additional five sites secured for
future construction. The Company is also constructing two office complexes and has recently
acquired land in Luisita Industrial Park and in Iloilo for the development of industrial leasing
estates. The Company’s growth strategy for its retail leasing, office leasing, hospitality
operations and industrial leasing may require the Company to manage additional relationships
with a greater number of customers, suppliers, contractors, service providers, lenders and other
third parties.

There can be no assurance that, in the course of implementing its growth strategy, the Company
will not experience capital constraints, delays in obtaining relevant licenses and permits,
construction delays, operational difficulties at new operational locations or difficulties in
operating existing businesses and training personnel to manage and operate the expanded

47
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business. The Company believes that it has the ability and resources to create a market leading
business model, by leveraging on its end-to-end capabilities as a real estate developer and owner,
encompassing site identification, master planning, development, marketing, leasing, events,
client relationship management, and data analytics. In particular, the Company has developed
standard project blueprint enables a highly cost efficient rapid roll-out strategy across its
business segments. For example, with its aim to be the largest community mall player in first
class municipalities and second and third class cities, the rollout of its expansion plans allows the
Company to achieve operational efficiencies as it has the optionality to offer multiple CityMall
construction projects to the contractors within the same province. The Company also believes
that it has an established execution track record as it has managed to develop an investment
property portfolio with a leasable area of 191,106.5 sq. m. as of December 31, 2017.

The Company may also experience delays resulting from independent contractors who are not
able to complete projects on time, due to various factors, including a lack of available manpower.
See “— Independent contractors may not always be available, and once hired by the Company,
may not be able to meet the Company’s quality standards or to complete projects on time and
within budget.” Any inability or failure to adapt effectively to growth or to becoming a
predominantly recurring income company, including strains on management and logistics, could
result in losses or development costs that are not recovered as quickly as anticipated, if at all.
Further, there is no assurance that the Company will be able to generate enough cash flows to
service, or otherwise not default on any of, its existing loan payables, or any of its future debt
obligations. Any such default may lead to trigger cross defaults and/or subject the Company to
litigation and other proceedings filed by its lenders. These problems could have a material
adverse effect on the Company’s reputation and on its business, financial condition and results of
operations.

In 2016, the Company acquired its subsidiary Hotel of Asia, Inc. which operates Injap Tower
Hotel, Hotel 101 Manila, Jinjiang Inn Ortigas, and Jinjiang Inn Makati through its wholly owned
subsidiary, Hotel 101 Management Corp. With regard to industrial leasing, the Company has
recently acquired, through its wholly owned subsidiary CentralHub Industrial Centers Inc.
(“CHICI”), a 6.2 hectare parcel of land in Luisita Industrial Park, Tarlac and 3.9 hectare parcel of
land in Iloilo, and intends to further acquire land in the Luzon and Visayas-Mindanao regions to
construct multi-use warehouses suited for commissaries, cold storage and logistics centers. The
Company’s strategy to expand these businesses will require the Company to manage additional
relationships with third parties such as potential retailers, suppliers and contractors. Moreover,
historically, the Company does not have a track record in the industrial leasing business. The
Company could encounter various issues that it does not have extensive experience dealing with
associated with this business, such as applicable laws relating to the environment, and different
construction, operational and marketing requirements, among others. The Company however
believes it is in a position to tap into existing demand for industrial space and that it has
shareholders who have experience in food and beverage, commissaries, and cold storage
logistics. There can be no assurance that the Company’s continued expansion into industrial
leasing will be successful. There can also be no assurance that there will be a market for the
Company’s industrial leasing business. As a result, the Company’s decision to pursue such
expansion could have a material adverse effect on the Company’s reputation and its business.

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Although the Company plans to increase the percentage of its recurring income through the
continued expansion of its leasing portfolio, historically the Company’s revenues have been
driven by primarily by real estate sales and increase in fair value of its investment property,
therefore its historical results may not be indicative of its future performance.

The Company is in the process of transitioning to a recurring revenue model, with the intention
of earning a significant majority of its income from its leasing portfolio. In the past three years,
the Company has been steadily building its leasing portfolio and acquisition of suitable sites for
its retail leasing, office leasing, industrial leasing and hospitality operations, with the goal of
developing 1.2 million sq. m. of leasable space by 2020. The Company chooses the locations of
its projects based on specific criteria depending on the type of leasing activity. For example, the
Company plans that all CityMall sites are in prime locations along main roads to increase
visibility and maximize exposure and accessibility to its target market while DD Meridian Park
is strategically located as it is situated in the corner of EDSA, Roxas Boulevard and Macapagal
Avenue, main thoroughfares in Metro Manila close to the Entertainment City and the SM Mall of
Asia complex. The Company’s recurring revenue, consisting of its rental income and income
from hotel operations, was 6.0%, 9.4%, and 19.8% of its total revenues for the years ended
December 31, 2015, 2016 and 2017, respectively, and 29.9% and 29.0% for the three months
ended March 31, 2017 and 2018, respectively.

However, historically, a substantial portion of the Company’s revenue has come from real estate
sales, sales of leasehold rights and unrealized gains from changes in fair values of investment
property. For the years ended December 31, 2015, 2016 and 2017 and the three months ended
March 31, 2017 and 2018, these sources of revenue accounted for, in the aggregate, 82.5%,
82.3%, 75.9%, 65.4% and 59.7% of the Company’s total revenue, respectively. These revenues
are primarily from the sale of units in the Company’s interim projects, sale of leasehold rights in
Dragon8 Mall, and the annual increase in the fair value of DD Meridian Park, which is currently
under construction. (See “Management’s Discussion and Analysis of Financial Condition and
Results of Operation—Valuation of investment properties” for more information.) In addition, as
property values in the area surrounding DD Meridian Park stabilize and several of the properties
of the Company approach completion, the Company may not be able to realize increases in fair
value in the amounts or at such levels the Company has recognized in the past or at all. Further,
the Company may also incur losses in the fair value of its investment property in the future due
to various factors including but not limited to deterioration of the assets, or a decline in property
values in the area where such investment property is located.

The previous results of the Company reflect its interim projects and the increase in fair value of
its projects under construction, and is not reflective the Company’s plans to significantly increase
its retail leasing, office leasing, industrial leasing and hospitality operations. As such, the
Company’s historical results may not be indicative of its future performance or operations, and
there is no assurance that the Company will be able to successfully implement its strategy of
increasing its recurring revenue through its leasing portfolio. Investors should not rely on the
Company’s historical results as an indicator of the Company’s future financial performance.

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Competition for the acquisition of land for new projects and risks relating to the management
of its land bank, including fluctuations in demand and prices, may adversely affect the
Company’s business.

The Company’s future growth and development are dependent, in part, on its ability to acquire
additional tracts of land suitable for the Company’s future real estate projects. There is a high
level of scarcity covering prime commercial property in the Philippines and the Company will
require additional prime properties across the Philippines to achieve its 2020 plan of developing
1.2 million sq. m. of leasable space for its retail leasing, office leasing, industrial leasing and
hospitality businesses. However, the Company is working on its way to achieving its goals
through identification of suitable sites for its projects. The Company believes that the execution
of its previous projects has given it direct access to land bank opportunities, and familiarity with
first class municipalities and second and third class cities resulting in the ability to transact more
effectively, and an adaptable approach to site acquisition by entering into joint ventures or
strategic alliances with landowners, which contribute land to the joint venture while the
Company provides its development expertise. As of December 31, 2017, it has acquired 77% of
the land requirements for its 2020 plan.

When the Company attempts to locate sites for development, it may experience difficulty
locating parcels of land of suitable size in locations and at prices acceptable to the Company,
particularly parcels of land located in urban areas (including first class municipalities and second
and third class cities) throughout the Philippines. Furthermore, land acquired by the Company
may have pre-existing tenants or obligations that prevent immediate commencement of new
developments. In the event the Company is unable to acquire suitable land at prices and in
locations that are attractive to the Company, or at all, its growth prospects could be limited and
its business and results of operations could be adversely affected.

In addition, the risks inherent in purchasing and developing land increase as demand for
commercial real estate decreases. The market value of land can fluctuate significantly as a result
of changing market conditions. There can be no assurance that the measures the Company
employs to manage land inventory risks will be successful. In the event of significant changes in
economic, political, security or market conditions, the Company may be forced to sell land or
lease its properties at significantly lower margins or at a loss. Changes in economic or market
conditions may also require the Company to defer the commencement of its projects. Any of the
foregoing events would have a material adverse effect on the Company’s business, financial
condition and results of operations.

The Company is exposed to risks associated with offering deferred payment schemes,
including the risk of customer default.

The Company provides deferred payment schemes to its customers for Hotel 101 and its interim
residential projects such as the W.H. Taft Residences, The SkySuites Tower, The Uptown Place,
and the projects of its affordable residential housing arm DD HappyHomes Residential Centers
Inc. in Mandurriao, Iloilo and Tanauan Leyte, typically during the construction period, offering
of up to 36 months of amortization. As a result, and particularly during periods when the
unemployment rate rises or when the overall level of overseas remittances decline, the Company
faces the risk that a greater number of customers who utilize the Company’s in-house financing

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facilities will default on their payment obligations, which would require the Company to incur
expenses such as those relating to sales cancellations and eviction of occupants, additional
expenses caused by delinquent accounts, a disruption in cash inflows, risk of holding additional
inventory in its balance sheets and reduced finance income.

Deferred payment schemes are typically offered during the construction period and buyers are
given a grace period and are given appropriate notices to update their payments in accordance
with the law. Nonetheless, the inability of the Company to collect the lump sum balance of the
sales contract upon turnover or any payment when it falls due, could have a material adverse
effect on the Company’s business, financial condition and results of operations.

Historically low interest rates, expansion in overall liquidity, extensive construction of housing
units and other factors could lead to the risk of formation of asset bubbles in real estate.

For the past several years central banks globally, including the BSP, have kept overall interest
rates at historically low levels for an extended period of time. This has occurred in conjunction
with recent high levels of liquidity in the Philippines owing to strong and growing remittances
from OFWs, the expansion of consumer credit provided by banks, the expiry of the BSP’s
requirement for banks to maintain special deposit accounts and strong inflows of foreign
investments, among other factors. In addition, the pace of real estate construction, particularly
for housing in and surrounding Metro Manila and other urban areas, has likewise been strong by
historical standards. All these have increased the risk that rising prices may not be sustainable,
particularly in the real estate sector. If rising prices are not sustained, the result could have a
material adverse effect on the Company’s business, financial condition and results of operations.

Increased inflation, fluctuations in interest rates, changes in Government borrowing patterns

and Government regulations could have a material adverse effect on the Company’s and its
customers’ ability to obtain financing.

The Company obtains long-term financing with fixed interest rates to cover the capital
expenditures needed to develop its projects. There is no assurance that the Company can
continue to raise the additional financing needed to execute its future plans at the current terms.
The Company however believes that it has raised sufficient funds to fully fund capital
expenditures to develop 1 million sq. m. of leasable space. The Company also continues to look
at longer-term and fixed rate funding to reduce refinancing risk and ensure little interest rate
volatility.

Interest rates, foreign exchange rates, and other factors that affect interest rates, such as the
Government’s fiscal policy, could have a material adverse effect on the Company and on
demand for its products. For example:

• Higher interest rates make it more expensive for the Company to borrow funds to finance
ongoing projects or to obtain financing for new projects and will affect the levered return
margins of the Company.

• Because the Company believes that a substantial portion of its customers procure
financing to fund their purchases of condotels or residential units in the Company’s

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 interim projects, higher interest rates make financing, and therefore purchases of real
estate, more expensive, which could adversely affect demand for the Company’s
residential projects.

• If the Government significantly increases its borrowing levels in the domestic currency
market, this could increase the interest rates charged by banks and other financial
institutions and also effectively reduce the amount of bank financing available to both
prospective property purchasers and real estate developers, including the Company.

• The Company’s access to capital and its cost of financing are also affected by
restrictions, such as single borrower limits, imposed by the BSP on bank lending. If the
Company were to reach the single borrower limit with respect to their current or preferred
bank or banks, the Company may have difficulty-obtaining financing on the same or
similar commercial terms from other banks.

• Increased inflation in the Philippines could result in an increase in raw materials costs,
which the Company may not be able to pass on to its customers as increased prices or to
its contractors by having the Company’s contractors absorb raw material cost increases.

The occurrence of any of the foregoing events, or any combination of them, or of any similar
events could have a material adverse effect on the Company’s business, financial condition and
results of operations.

The Company’s rollout of CityMalls may not be successful, and the Company’s existing malls
may not be able to continue to benefit from the current favorable retail environment.

A significant part of the Company’s expansion strategy entails the opening of new CityMalls in
suitable locations in various provincial areas of the Philippines, including in areas where the
Company does not currently have a presence. There can be no assurance that the Company will
be able to identify and procure suitable sites for its new CityMalls. There is also no assurance
that such new CityMalls will be successful or profitable.

The success of the Company’s CityMalls depends on the shift of consumer preference in the
provinces from traditional retailers and local neighborhood stores to a store in a modern retail
format. The Company positions its CityMalls as the modern alternative to traditional retailers
(i.e., local neighborhood store or provincial-branded store with a regional footprint) in first class
municipalities and second and third class cities in the Philippines, and are meant to provide a
venue for modern retail concepts in the provinces. Further, the Company intends to continue
implementing what it believes to be an effective strategy for the selection of sites, and rollout, of
CityMalls. For example, the Company positions its CityMall sites in prime locations along main
roads to increase visibility and maximize exposure and accessibility to its target market.

Further, expansion into new geographical areas will also expose the Company to additional
operational, logistical and other risks. The Company may find it difficult to obtain regulatory or
local government approvals for its new CityMalls in these areas due to differences in local
requirements and processes. The Company may also experience difficulty in building the
“CityMall” brand in these new areas, or maintaining its typical tenant mix or store offerings for

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each CityMall. For example, certain of the Company’s CityMalls may not have a “FoodWorld”
or a grocery store due to the location thereof. The Company’s proposed expansion will also place
increased demands on its managerial, operational, financial and administrative resources. Any
difficulties the Company experiences with respect to developing its business operations in new
geographical areas may materially and adversely affect the Company’s business, financial
condition and results of operations.

In addition, there can be no assurance that the Company’s existing CityMalls will be able to
operate on a profitable basis if the current retail environment becomes less favorable to the
Company and/or its tenants. The surrounding environment the Company’s existing CityMalls
may also change in terms of consumer demographics, or in terms of store mix, as different
businesses move in or out of the surrounding areas. If the Company fails to predict and respond
to changes in the retail environment, the Company’s business, financial condition and results of
operation may be materially and adversely affected.

The Company is exposed to risks relating to the leasing business.

As part of the Company’s retail, office and industrial leasing businesses, the Company has leased
and will lease space to various third parties and affiliates, including operators of food kiosks and
food stalls. There are certain factors concerning the Company’s current and future tenants could
affect the Company’s financial condition, including:

• untimely expiration of leases and vacancies of tenants;

• delays in the payment of rent due to a tenant’s declining sales or slow turnover;

• tenants seeking the protection of bankruptcy laws that could result in delays in the
Company’s receipt of rental payments;

• the Company’s inability to collect rental payments or the early termination of a tenant’s
lease;

• tenants that do not comply with the general terms of the lease; and

• changes in laws and government regulations relating to real estate, including those
governing usage, zoning, taxes and government charges that could lead to an increase in
management expenses or unforeseen capital expenditure to ensure compliance.

Any unfavorable developments with respect to the Company’s tenants could have an adverse
effect on the Company’s business, financial condition and results of operations. The Company’s
leasing policies however include screening applicants carefully and securing appropriate mix of
tenants with respect to its retail spaces, both in terms of the nature of their business and their
size.

The Philippine property market is cyclical.

The Company expects to derive a substantial portion of its revenue from its current and future
portfolio of retail, office, hospitality and industrial development projects. Accordingly, the

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Company is dependent on the state of the Philippine property market. The Philippine property
market has in the past been cyclical and property values have been affected by the supply of and
demand for comparable properties, the rate of economic growth in the Philippines and political
and social developments.

The real estate market is highly competitive, and any inability to effectively compete could
limit the Company’s ability to maintain or increase its market share and profitability.

The Company is subject to significant competition in each of its principal businesses, but
believes that it has the ability and resources to create a market leading business model.

Commercial and Retail

With respect to its office rental properties, the Company competes for tenants primarily based on
quality and location, reputation of the building’s owner, quality of support services provided by
the property manager, and rental and other charges.

The Company’s CityMalls, Dragon8 Mall and other retail centers may face increased
competition from other newly built shopping malls. As the Philippine economy grows, the
Company and its competitors are increasing the total amount of leasable retail space in both
urban and provincial areas of the Philippines. Improved capabilities, diversified product
offerings and quality of products from competitors may make newer shopping malls more
attractive to tenants and customers.

If tenants of the Company’s shopping malls or office rental properties relocate to these newer or
other less expensive spaces and do not renew their leases with the Company, the Company may
struggle to find replacement tenants and be compelled to reduce rental rates or leave spaces
vacant. Should any of these happen, the Company may face a decline in its recurring income
from these investment properties.

Furthermore, attracting and retaining tenants often involves additional expenditures on the
Company’s part, including expenditures related to renovations and marketing. These
expenditures may not result in new or retained tenants, which may have a negative effect on the
Company’s results of operations.

Hotels

Ongoing completion of new hotels and renovations of older competing hotels are increasing the
number of hotel rooms available in the Philippines. In addition, competition from non-
traditional hospitality providers, such as Airbnb, presents a new form of competition for hotel
operators in the country. This increased competition could lead to a decrease in room rates and
overall revenue, thus affecting the Company’s results of operations.

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Industrial

The Company, through its wholly owned subsidiary, CHICI, recently acquired a 6.2 hectare
parcel of land in Luisita Industrial Park, Tarlac and a 3.9 hectare parcel of land in Iloilo for the
development of industrial leasing properties. The industrial property market may be affected by
oversupply, limited industrial expansion and declining foreign investment. There is no assurance
that the Company’s industrial leasing operations will earn attractive rental yields, or be
profitable.

The Company faces risks relating to project cost and completion, including its ability to
generate sufficient cash flow to support its operations and service its debt. Further, the real
estate industry in the Philippines is capital intensive, and the Company may be unable to
readily raise necessary amounts of funding to acquire new land or complete existing projects.

Construction of property projects may take as long as a year or longer before generating positive
net cash flow through sale, leasing or management fees. As a result, the Company’s cash flows
and results of operations may be significantly affected by its project development schedules and
any changes to those schedules. Any delay in the Company’s project development schedules, or
in the event of any the Company’s projects do not generate its expected level of cash flows, the
Company’s business, financial condition and results of operations, and its ability to repay or
refinance its outstanding indebtedness, may be adversely affected.

Further, a substantial percentage of the Company’s projects are currently under construction and
the Company has relied on external sources to finance its operations for the past three fiscal
years. For the year ended December 31, 2017, the Company used ₱3,492.4 million for its
operations and, for the three months ended March 31, 2018, received ₱1,143.2 million from its
operations. In the event of any delay in the Company’s project development schedules, or in the
event any of the Company’s projects do not generate the expected level of cash flows, the
Company’s business, financial condition and results of operations, and its ability to repay or
refinance its outstanding indebtedness, may be adversely affected. The Company however looks
to long-term funding, and its debt maturity as of March 31, 2018 is 5.6 years.

Other factors that could adversely affect the time and the costs involved in completing the
development and construction of the Company’s projects include:

• natural catastrophes and adverse weather conditions;

• changes in market conditions, economic downturns, unemployment rate, and decreases in

business and consumer sentiment in general;

• delays in obtaining government approvals and permits;

• delays in completion of its prior projects, which would create shortages of contractors
and skilled labor due to the Company’s regular use of a limited number of contractors
(see “— Independent contractors may not always be available, and once hired by the
Company, may not be able to meet the Company’s quality standards or to complete
projects on time and within budget.”);

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• changes in laws or in Government priorities;

• timing of commencement of the projects;

• relocation of existing residents and/or demolition of existing constructions;

• shortages of materials and equipment;

• labor disputes with contractors and subcontractors;

• construction accidents;

• errors in judgment on the selection and acquisition criteria for potential sites; and

• other unforeseen problems or circumstances.

Any of these factors could result in project delays and cost overruns, which may harm the
Company’s reputation as a property developer or lead to cost overruns or loss of or delay in
recognizing revenues and lower margins. This may also result in sales and resulting profits from
a particular development not being recognized in the year in which it was originally expected to
be recognized, which could adversely affect the Company’s results of operations for that year.
Furthermore, the failure by the Company to complete construction of a project to its planned
specifications or schedule may result in contractual liabilities to purchasers and lower returns.
The Company cannot provide any assurance that it will not experience any significant delays in
completion or delivery of its projects in the future or that it will not be subject to any liabilities
for any such delays. The Company however believes it has well-defined execution capability
with a proven track record of delivering growth.

Further, the real estate industry in the Philippines is also capital intensive, and market players are
required to incur significant expenditures to acquire land for development, complete existing
projects and commence construction on new developments. For the year ended December 31,
2017 and the three months ended March 31, 2018, the Company spent ₱1.0 billion and ₱0.2
billion, respectively, for land banking expenditures for its real estate development projects.

Historically, the Company has funded a significant portion of its capital expenditure
requirements as well as steady growth from external sources of financing; however, it may also
fund such requirements through other means, such as capital markets transactions, among others,
in the future. For example, in July 2017, the Company issued of ₱9.7 billion fixed rate bonds
under its ₱15 billion domestic debt shelf registration program, its second tranche of debt issuance
under such program. Upon issuance of those bonds, the Company’s total outstanding debt
increased, thereby potentially making it more difficult or expensive for the Company to raise
more funds externally. Although the Company believes that it has raised sufficient funding to
fully fund the capital expenditures required to develop 1 million sq. m. of its targeted leasable
space by 2020, there can be no assurance that, in order to complete its planned projects or satisfy
its other liquidity and capital resources requirements, the Company will be able to obtain
sufficient funds at acceptable rates to fund its capital expenditure requirements, or that it will not
issue Common Shares that may cause dilution, or that it will be able to obtain sufficient funds at

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all. Failure to obtain the requisite funds could delay or prevent the acquisition of land,
completion of existing projects or commencement of new projects and materially and adversely
affect the Company’s business, financial condition and results of operations.

The Company has a number of related-party transactions with affiliated companies, and
transactions with certain affiliates constitute a substantial percentage of the Company’s
revenues.

The companies controlled by the DD Majority Shareholders have a number of commercial

transactions with the Company. The Company had entered into a number of transactions with its
related parties, which primarily consist of advances and reimbursements of expenses and sale
and purchase of real estate properties and development.

The transactions referred to above are described in the section titled “Related Party
Transactions” and the notes to the Company’s consolidated financial statements appearing
elsewhere in this Prospectus. The Company expects that it will continue to enter into
transactions with companies directly or indirectly controlled by or associated with the DD
Majority Shareholders. These transactions may involve potential conflicts of interest which
could be detrimental to the Company and/or its stakeholders. Conflicts of interest may also arise
between the Company and the DD Majority Shareholders in a number of other areas relating to
its businesses, including:

• Major business combinations involving the Company and/or its Subsidiaries;

• Plans to develop the respective businesses of the Company and/or its Subsidiaries; and

• Business opportunities that may be attractive to the DD Majority Shareholders and the
Company.

The Company cannot provide assurance that its related-party transactions will not have a
material adverse effect on its business or results of operations. The Company however believes
that its strong shareholders and partnerships with Philippines’ leading business groups validate
its vision and business model.

Also, CityMall Commercial Centers Inc., a Subsidiary of the Company, is 34%-owned by SM

Investments Corporation (“SMIC”) and 66%-owned by the Company. SMIC holds direct and
indirect ownership in the following brands and businesses, which are also tenants in various
projects of the Company: SaveMore Market, Ace Hardware, China Bank Savings, Simply Shoes,
BDO Unibank, Watsons, and SM Appliance Center.

Further, the Tan and Ang families, through Honeystar Holdings Corporation, owns 37% of the
Company. The Tan and Ang families also has significant direct and indirect ownership in
Jollibee Foods Corporation (“JFC”) which owns and operates several fast food concepts which
are also tenants in various investment projects in which the Company derives rental income.
These fast food concepts include Jollibee, Mang Inasal, Greenwich, Chowking, Highlands
Coffee, and Red Ribbon. Jollibee Foods Corporation is also expected to be the anchor tenant of
Jollibee Tower, and expected to lease a majority of the leasable space allotted to the Company.

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The abovementioned retail brands, businesses and fast food concepts are a significant source of
rental revenues of the Company and occupy a majority of the leasable area in the Company’s
operational CityMalls. Given the current concentration of such tenants in the Company’s
operational CityMalls and the Company’s dependence on rental revenue from such tenants, any
change in the relationship between the Company and SMIC or JFC may adversely affect the
Company’s cash flows, and its financial condition and results of operation. There is also no
assurance that SMIC’s or JFC’s commercial interests (through such tenancy relationships or
otherwise) will be aligned with the Company’s minority shareholders.

Further, the interests of the Company’s related parties which own such brands, businesses and
concepts may differ from the interests of the Company, and there may also be a perceived risk
that such related parties may receive favorable terms from the Company or its Subsidiaries.
Although the Company endeavors to enter into arm’s length transactions with lessees that are
owned either directly or indirectly by parties related to the Company or its Subsidiaries and
although the Company’s Chairman, Mr. Edgar “Injap” Sia II, does not hold any interest in either
SMIC or JFC, there is no assurance that such related-party transactions will not have a material
adverse effect on its business, financial condition and results of operations.

Titles over land owned by the Company may be contested by third parties.

While the Philippines has adopted a system of land registration that is intended to conclusively
confirm land ownership and is binding on all persons (including the Government), it is not
uncommon for third parties to claim ownership of land that has already been registered and over
which a title has been issued. There have also been cases where third parties have produced false
or forged title certificates over land. The Company may have to defend itself against third
parties who claim to be the rightful owners of land that has been either titled in the name of the
persons selling the land to the Company or that has already been titled in the name of the
Company. The Company however generally conducts diligence and assesses risks prior to
purchasing land. In the event a greater number of third-party claims are brought against the
Company or any such claims involves land that is material to the Company’s projects, the
Company’s management may be required to devote significant time and incur significant costs in
defending the Company against such claims. In addition, if any such claims are successful, the
Company may have to either incur additional costs to settle such third-party claims or surrender
title to land that may be material in the context of the Company’s projects. Any of the foregoing
circumstances could have a material adverse effect on the Company’s business, financial
condition and results of operations, as well as on its business reputation.

Further, the Company has projects located on Government-reclaimed land. Government-

reclaimed land forms part of the land of the public domain and is subject to the following
restrictions: (1) lands of the public domain cannot be disposed by the state to any private person
until such reclaimed lands are (a) reclassified as disposable or alienable, and (b) declared to be
no longer needed for public purpose, by law or presidential proclamation; (2) alienable public
lands cannot be disposed of by the state to private persons by sale or lease without public bidding;
and (3) lands of the public domain cannot be disposed to private corporations, except by lease, in
accordance with the constitutional ban on private corporations acquiring lands of the public
domain. Section 3 of Article XII of the Philippine Constitution provides that private corporations
or associations may not hold alienable lands of the public domain except by lease, for a period

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not exceeding 25 years, renewable for not more than 25 years, and not to exceed 1,000 hectares
in area. Citizens, on the other hand, may lease not more than 500 hectares, or acquire not more
than 12 hectares by purchase, homestead or grant. Although the Company believes that the
Government-reclaimed land where certain of its projects are located was acquired from valid
individual title holders, there is no assurance that no third party will question the Company’s title
over the said land, which may require the Company to defend itself and incur additional costs to
settle such claims or surrender title to the land.

Disruptions in the financial markets could adversely affect the Company’s ability to refinance
existing obligations or raise additional financing, including equity financing.

Disruptions in the global financial markets in 2008 and 2009 resulted in a tightening of credit
markets worldwide, including in the Asia Pacific region. Liquidity in the global and regional
credit markets severely contracted as a result of these market disruptions, making it difficult and
costly to refinance existing obligations or raise additional financing, including equity financing.
While liquidity has increased and credit markets have improved since then, there can be no
assurance that such conditions will not reoccur. If such conditions were to reoccur, it may be
difficult for the Company to obtain additional financing on acceptable terms or at all, which may
prevent the Company from completing its existing projects and future development projects and
have an adverse effect on the Company’s results of operations and business plans. If, due to
general economic conditions, the Company is unable to obtain sufficient funding to complete its
projects in a feasible manner, or if management decides to abandon certain projects, all or a
portion of the Company’s investments to date on its existing projects could be lost, which could
have a material adverse effect on the Company’s business, financial condition and results of
operations.

A substantial percentage of the Company’s projects are also currently under construction, and the
Company has relied on external sources to finance its operations for the past three fiscal years.
Any inability of the Company to procure short-term or long-term indebtedness to fund its
operations or the development of its projects, or any delay in the Company’s project schedules or
any failure of its projects to generate expected cash flows may adversely affect the Company’s
financial condition and results of operation, including its ability to repay or refinance its existing
indebtedness. See “—The Company faces risks relating to project cost and completion,
including its ability to generate sufficient cash flow to support its operations and service its
debt.”

Historically, besides the domestic bond market, the Company has also tapped into diversified
sources of funding which include Preferred Shares and bank funding, highlighting its diversified
capital base, comprising of retail and institutional investors. The Company also plans to manage
its debt maturity profile, reduce cost of funding, and diversify its sources of funding.

The incurrence of additional debt to finance the Company’s planned development projects could
also impair the Company’s business, financial condition and results of operations. The Company
may need to incur additional debt to finance its expansion projects and future development
projects. This indebtedness could have important consequences for the Company. For example,
it could:

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• make it more difficult for the Company to satisfy its debt obligations as they become due;

• increase the Company’s vulnerability to general adverse economic and industry

conditions;

• impair the Company’s ability to obtain additional financing in the future for working
capital needs, capital expenditures, development projects, acquisitions or general
corporate purposes;

• require the Company to dedicate a significant portion of its cash flow from operations to
the payment of principal and interest on its debt, which would reduce the funds available
for the Company’s working capital needs, capital expenditures or dividend payments;

• limit the Company’s flexibility in planning for, or reacting to, changes in the business and
the industry in which the Company operates;

• require the Company to comply with financial and other covenants that could impose
significant restrictions on the Company’s existing and future businesses and operations;

• place the Company at a competitive disadvantage compared to competitors that have less
debt; and

• subject the Company to higher interest expense in the event of increases in interest rates
as a significant portion of the Company’s debt is and may continue to be at variable rates
of interest.

Any of the above could have a material adverse effect on the Company’s business, financial
condition and results of operations.

Environmental laws applicable to the Company’s projects and enforcement by Philippine

regulators of environmental regulations and policies could have a material adverse effect on
its business, financial condition and results of operations.

The Company is subject to various environmental laws and regulations relating to the protection
of the environment, health and human safety. These include laws and regulations governing air
emissions, water and waste water discharges, odor emissions, and the management and disposal
of, and exposure to, hazardous materials. Generally, developers of real estate projects are
required to submit project descriptions to regional offices of the Philippine Department of
Environment and Natural Resources (“DENR”). For environmentally-sensitive projects or in
other cases at the discretion of the regional office of the DENR, a detailed environmental impact
assessment may be required and the developer will be required to obtain an Environmental
Compliance Certificate (“ECC”) to certify that the project will not have an unacceptable
environmental impact. There can be no assurance that current or future environmental laws and
regulations applicable to the Company will not increase the costs of conducting its business
above currently projected levels or require future capital expenditures. In addition, if a violation
of an ECC occurs or if environmental hazards on land where the Company’s projects are located
cause damage or injury to buyers or any third party, the Company may be required to pay a fine,

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to incur costs in order to cure the violation and/or to compensate its buyers and any affected third
parties.

The Company cannot predict what environmental legislation or regulations will be amended or
enacted in the future, how existing or future laws or regulations will be enforced, administered or
interpreted, or the amount of future expenditures that may be required to comply with these
environmental laws or regulations or to respond to environmental claims. For example, in
February 2018, the DENR ordered the closure of more than 50 establishments in Boracay for
alleged continuous violations of environmental laws. Further, recently, “Task Force Boracay”
comprised officials from the DENR, Department of the Interior and Local Government and
Department of Tourism had recommended to the President of the Philippines that the whole
island of Boracay be closed for rehabilitation for up to a year, and President Duterte has ordered
the closure of the island for six months (or until November 2018). There can be no assurance that
the Company’s business in Boracay will not be materially and adversely affected by the closure
of Boracay (including as a result of a lack of foot traffic from tourists and a reduced number of
residents or workers on the island due to the ordered shutdown of several resorts by Philippine
environmental regulators). The Company’s planned hotels however are still in the design stage
and the Company believes that its CityMall in Boracay (which mostly caters to residents on the
island) will continue operations during the proposed closure. There can also be no assurance that
there will be no further closures of the island in the future or that Philippine regulators will not
extend the rehabilitation of Boracay or order the rehabilitation of other tourist destinations in the
Philippines, including sites where the Company’s projects are or will be located. Any such
closure or rehabilitation will materially and adversely affect the Company’s operations in such
locations.

The introduction or inconsistent application of, or changes in, laws and regulations applicable to
the Company’s business could have a material adverse effect on its business, financial condition
and results of operations. However, the Company intends to adhere to all environmental
regulations and is committed to sustainability efforts of the communities where its businesses
operate,

The Company’s reputation will be adversely affected if projects are not completed on time or if
projects do not meet customers’ requirements, and may be adversely affected by other factors
over which the Company does not have control.

If any of the Company’s projects experience construction or infrastructure failures, design flaws,
significant project delays, or quality control issues, this could have a negative effect on the
Company’s reputation and make it more difficult to attract new customers to its new and existing
projects. The Company intends to engage contractors and partners that are reputable and have
proven track records. The Company believes that it has also developed a well-defined execution
capability with proven track record of delivering projects. Any negative effect on the
Company’s reputation or its brands could also affect the Company’s ability to sell or lease its
projects. This would impair the Company’s ability to reduce its inventory and working capital
requirements. For example, delays in the roll out plan of CityMalls may affect the Company’s
cash flows and expected profitability, and adversely affect the Company’s ability to raise
external financing. The Company cannot provide any assurance that such events will not occur in
a manner that would adversely affect its business, financial condition and results of operations.

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Further, the Company’s hotels may be subject to random acts of terrorism, violence or other
mishaps involving its guests or third parties which may adversely affect the Company’s
reputation and brand name. Further, any deterioration to the “Jinjiang” brand outside the
Philippines may impact the Company’s Jinjiang Inns in the Philippines and adversely affect its
business and operations.

Also, the Company’s CityMalls are located in provincial areas in the Philippines, including some
areas where there historically have been communist rebels, separatists or acts of terrorism. Any
violence or terrorist attack in these areas, including on the Company’s property, may adversely
affect the operations of the Company’s CityMall in such areas, and may also adversely affect the
Company’s reputation and “CityMall” brand.

Independent contractors may not always be available, and once hired by the Company, may
not be able to meet the Company’s quality standards or to complete projects on time and
within budget.

The Company relies on independent contractors to provide various services, including land
clearing, infrastructure development and various construction projects including building and
property fitting-out. There can be no assurance that the Company will be able to find or engage
an independent contractor for any particular project or find a contractor that is willing to
undertake a particular project within the Company’s budget and schedule (including as a result of
a lack of manpower due to a shortage of available and qualified workers), which could result in
cost increases or project delays.

Furthermore, there can be no assurance that the services rendered by any of its independent
contractors will always be satisfactory or match the Company’s requirements for quality and
timing. The Company’s personnel however actively supervise the work of such independent
contractors. Contractors may also experience financial or other difficulties up to insolvency, and
shortages or increases in the price of construction materials or labor may occur, any of which
could delay the completion or increase the cost of certain housing and land development
projects, and the Company may incur additional costs as a result thereof. Any of these factors
could have a material adverse effect on the Company’s business, financial condition and results
of operations.

Construction defects and other building-related claims may be asserted against the Company,
and the Company may be subject to liability for such claims.

Philippine law provides that property developers, such as the Company, warrant the structural
integrity of houses or units that were designed or built by them for a period of 15 years from the
date of completion of the house or unit. The Company may also be held responsible for hidden
(i.e., latent or non-observable) defects in a house or unit sold by it when such hidden defects
render the house or unit unfit for the use for which it was intended or when its fitness for such
use is diminished to the extent that the buyer would not have acquired it or would have paid a
lower price had the buyer been aware of the hidden defect. This warranty may be enforced
within six months from the delivery of the house to the buyer. In addition, Republic Act No.
6541, as amended, or the National Building Code of the Philippines (the “Building Code”),
which governs, among others, the design and construction of buildings, sets certain requirements

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and standards that must be complied with by the Company. The Company or its officials may be
held liable for administrative fines or criminal penalties in case of any violation of the Building
Code.

There can be no assurance that the Company will not be held liable for damages, the cost of
repairs, and/or the expense of litigation surrounding possible claims or that claims will not arise
out of uninsurable events, such as landslides or earthquakes, or circumstances not covered by the
Company’s insurance and not subject to effective indemnification agreements with the
Company’s contractors. The Company intends to engage contractors and partners that are
reputable and with proven track records. Further, as a result of repeated transactions with the
local contractors, the Company is able to establish direct interaction with workers who have
better on-the-ground experience in sourcing labor and local materials. Neither can there be any
assurance that the contractors hired by the Company will be able to either correct any such
defects or indemnify the Company for costs incurred by the Company to correct such defects. In
the event a substantial number of claims arising from structural or construction defects arise, this
could have a material adverse effect on the Company’s reputation and on its business, financial
condition and results of operations.

Damage to, or other potential losses involving, the Company’s assets may not be covered by
insurance.

Design, construction or other latent property or equipment defects or deficiencies in the

Company’s properties may require additional capital expenditure, special repair or maintenance
expenses or the payment of damages or other obligations to third parties that may not be covered
by insurance. In addition, certain types of losses such as terrorist acts, the outbreak of infectious
disease or any resulting losses, may be uninsurable or the required insurance premiums may be
too expensive to justify obtaining insurance. In addition, in the event of a substantial loss, the
insurance coverage the Company carries may not be sufficient to pay the full market value or
replacement cost of the Company’s lost investment or that of the Company’s tenants or in some
cases could result in certain losses being uninsured. Accordingly, the Company could lose some
or all of the capital it has invested in a property, as well as the anticipated future revenue from
that property, and the Company could remain obligated for guarantees, debt, or other financial
obligations related to such property. The Company maintains comprehensive property and
liability insurance policies with coverage features and insured limits that the Company believes
are consistent with market practice in the commercial and retail leasing industries in the
Philippines.

Moreover, the scope of insurance coverage that the Company can obtain or the Company’s
ability to obtain such coverage at reasonable rates may be limited and the Company’s insurance
policies and terms of coverage will be subject to renewals and negotiations on a periodic basis
and there is no assurance that adequate insurance coverage will be available on commercially
reasonable terms in the future. Any material increase in insurance rates, decrease in available
coverage or any failure to maintain adequate insurance in the future could adversely affect the
Company’s business, financial condition and results of operations.

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The Company may not be successful in protecting its brand image or its interests in certain
trademarks and domain names.

Maintaining the reputation of the Company’s brand names and trademarks is critical to its
success. The Company relies on the strength of these brand names and trademarks to, among
other things, attract tenants to its properties, increase retail footfall, and attract third parties to
partner with. Substantial erosion in the value of these brand names and trademarks due to
construction delays or defects, customer complaints, adverse publicity, legal action or other
factors may have an adverse effect on the Company’s business, financial condition and results of
operations. The Company’s trademarks have been registered in the Philippines, however, the
Company cannot be certain that any steps that have been taken to secure these trademarks or
other intellectual property will be sufficient or that third parties will not infringe or challenge
such rights. If the Company is unable to protect its intellectual property rights from infringement,
it may have an adverse effect on the Company’s business, financial conditions and result of
operations.

The Company is controlled by the DD Majority Shareholders, whose interests may not be the
same as those of other shareholders.

The Company is bound by reportorial and corporate governance requirements that are more
stringent that than those applicable to private companies. Further, the Company has also adopted
governance policies and mechanisms to serve as its foundation and guiding principle for good
governance. The Company also continues to adopt policies and mechanisms in accordance with
established rules and best practices. As of the date of this Prospectus, the DD Majority
Shareholders beneficially own a total of 1,649,993,998 Common Shares in the Company,
representing 74.0% of the Company’s total issued and outstanding Common Shares. Assuming
the sale of 135,000,000 Firm Shares and no Optional Shares, the DD Majority Shareholders will
have effective interest of approximately 69.8% of the Company’s outstanding Common Shares
upon the completion of the Offer. With such effective interest, the DD Majority Shareholders
will continue to be able to elect members of the Board and pass shareholder resolutions
(including special resolutions), both of which under the By-laws generally require a majority
vote by its shareholders (or a two-thirds majority in the case of special resolutions).
Accordingly, the DD Majority Shareholders exercises control over major policy decisions of the
Company, including its overall strategic and investment decisions, dividend plans, issuance of
securities, adjustments to its capital structure, mergers, liquidation or other reorganization and
amendments to its Articles of Incorporation and By-laws. If the interests of the DD Majority
Shareholders conflict with the interests of other shareholders of the Company, there can be no
assurance that the DD Majority Shareholders will not cause the Company to take action in a
manner which might differ from the interests of other shareholders.

The Company’s business and operations are dependent upon key executives.

The Company’s key executives and members of management have greatly contributed to the
Company’s success with their experience, knowledge, business relationships and expertise,
although it believes its success is driven by its entire work force as a whole. Further, the
Company’s senior management team has a proven track record in developing, investing in,

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managing, and enhancing commercial real estate, possessing an average of 12 years of
experience on average in the Philippine real estate and commercial sectors. The team covers the
entire value chain of the business, including asset development and enhancement, asset
management, and commercial operations. If the Company is unable to fill any vacant key
executive or management positions with qualified candidates, the Company’s business, operating
efficiency and financial performance may be adversely affected.

Any deterioration in the Company’s employee relations could materially and adversely affect
the Company’s operations.

The Company’s success depends partially on the ability of the Company, its contractors and its
third party marketing agents to maintain productive workforces. Any strikes, work stoppages,
work slowdowns, grievances, complaints or claims of unfair practices or other deterioration in
the Company’s or its contractors’ or tenants’ employee relations could have a material and
adverse effect on the Company’s financial condition and results of operations. However, the
Company has not experienced any disruptive labor disputes, strikes or threats of strikes, and
management believes that the Company’s relationship with its employee in general is
satisfactory. Further, in addition to complying with the minimum compensation standards
mandated by law, the Company has historically made available to qualified personnel
supplemental benefits such as health insurance, car plans and bonuses.

In addition, the Company is subject to a variety of national and local laws and regulations,
including those relating to labor. Any actions that may be taken by labor unions or federations
having the Company’s employees as members could adversely affect the Company’s operations,
costs, or both. Any changes in labor laws and regulations could result in the Company having to
incur substantial additional costs to comply with increased minimum wage and other labor laws.
The occurrence of any of these events could be disruptive to the Company’s operations and
materially and adversely affect the Company’s business, financial condition and results of
operations.

The Company may, from time to time, be involved in legal and other proceedings arising out
of its operations.

The Company believes that it has had, and intends to continue to maintain its good working
relationships with counterparties such as its contractors and suppliers. The Company may, from
time to time, be involved in disputes with various parties involved in the construction and
operation of its properties, including contractual disputes with contractors, suppliers,
construction workers or property damage or personal liability claims. Regardless of the
outcome, these disputes may lead to legal or other proceedings and may result in substantial
costs, delays in the Company’s development schedule, and the diversion of resources and
management’s attention. The Company may also have disagreements with regulatory bodies in
the course of its operations, which may subject it to administrative proceedings and unfavorable
decisions that result in penalties and/or delay the development of its projects. In such cases, the
Company’s business, financial condition and results of operations could be materially and
adversely affected.

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There can be no assurance that the Company will not suffer from substantial sales
cancellations.

From time to time, the Company has had buyers who have indicated their intent to cancel their
previous purchases of the Company’s interim residential projects.

The Company is subject to Republic Act No. 6552 (the “Maceda Law”), which applies to all
transactions or contracts involving the sale or financing of real estate through installment
payments, including residential condominium units and horizontal residential units. Under the
Maceda Law, buyers who have paid at least two years of installments are granted a grace period
of one month for every year of paid installments to cure any payment default. If the contract is
cancelled by the Company, the buyer is entitled to receive a refund of at least 50% of the total
payments made by the buyer, with an additional 5% per annum in cases where at least five years
of installments have been paid (but with the total not to exceed 90% of the total payments).
Buyers who have paid less than two years of installments and who default on installment
payments are given a 60-day grace period to pay all unpaid installments before the sale can be
cancelled, but without right of refund.

While the Company historically has not experienced a material number of cancellations to which
the Maceda Law has applied, there can be no assurance that it will not experience a material
number of cancellations in the future, particularly during slowdowns or downturns in the
Philippine economy. In the event the Company does experience a material number of
cancellations, it may not have enough funds on hand to pay the necessary cash refunds to buyers
or it may have to incur indebtedness in order to pay such cash refunds. The Company may also
experience losses relating to these cancellations. In addition, particularly during an economic
slowdown or downturn, there can be no assurance that the Company would be able to re-sell the
same property or re-sell it at an acceptable price. Any of the foregoing events would have a
material adverse effect on the Company’s business, financial condition and results of operations.

Furthermore, in the event the Company experiences a material number of sales cancellations, the
Company’s historical revenues would have been overstated because such historical revenue
would not have accurately reflected subsequent customer defaults or sales cancellations. There
is no assurance that the Company will not incur losses and there is no assurance that the
Company’s historical income statements will be accurate indicators of the Company’s future
revenue or profits.

The Company, historically however has booked a net gain / income from sale cancellations as
the forfeited payments. Further, from a traditional model with real estate sales the Company is
transitioning to a leasing business that will be supported by a diversified recurring income
platform from four property pillars across retail, office, hospitality and industrial segments.

Electronic commerce platforms may challenge the viability of the retail tenants of the
Company

The Company expects to derive a substantial portion of its revenue from its current and future
portfolio of retail, office, and industrial leasing space. The Company’s retail tenants may be
negatively affected by the growth and popularity of online purchasing, and demand for leasing

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space in the Company’s properties may be negatively affected by shifts in marketing strategies
by existing and new retailers in response to changing market conditions or challenges from and
opportunities provided by electronic commerce platforms.

There is no assurance that the growth of e-commerce would not have a material adverse effect on
the Company’s business, financial condition and results of operations. The Company however
expects that its retail properties will complement electronic commerce platforms by enabling
retailers to provide a physical outlet for online purchasers to receive their items, and that its
industrial properties will enable logistics providers to consolidate and optimize their operations
to cope with the growth of electronic commerce platforms.

There is no assurance that new electronic commerce platforms will be developed to cater to basic
necessities or that internet and mobile technology will not penetrate the mass market or that
consumer preferences will change in the future. However, Savills expects much of the disruption
from electronic commerce to be limited to retailers of apparel and consumer electronics and the
Company’s retail properties generally focus on the sale of basic necessities which are
traditionally procured through brick and mortar stores.

RISKS RELATING TO THE PHILIPPINES

All of the Company’s operations and assets are based in the Philippines and, therefore, a
slowdown in economic growth in the Philippines could materially and adversely affect the
Company’s business, financial position and results of operations.

All of the Company’s business activities and assets are based in the Philippines, which exposes
the Company to risks associated with the country, including the performance of the Philippine
economy. Historically, the Company has derived substantially all of its revenues and operating
profits from the Philippines and, as such, its businesses are highly dependent on the state of the
Philippine economy. Demand for residential real estate, commercial leasing, office leasing,
industrial leasing and hospitality services, are all directly related to the strength of the Philippine
economy (including its overall growth and income levels), the overall levels of business activity
in the Philippines as well as the amount of remittances received from OFWs and OFs. In
particular, the Company’s office leasing operations depend on the growth of the BPO sector,
including Philippine offshore gaming operators (“POGO”), while its hospitality operations are
highly dependent on tourism growth in the Philippines (and with respect to the Company’s
“Jinjiang”-branded hotels, on the growth of tourists from China).

Further, the office space leasing business is reliant the growth of the BPO sector that mainly
originate from other countries, exposing the Company to certain political and economic
conditions present in such jurisdictions. These conditions include but are not limited to: (a) a
downturn in the economic performance and (b) a change in government policy that limits or
suspends the outsourcing of functions to offshore BPO companies or POGO companies.
Any of these events could adversely affect the demand from these BPO or POGO companies,
which could have a material adverse effect on the Company’s business, financial condition, and
results of operations. For example, there is recent concern that the election of President Trump
may have an adverse effect on the Philippine BPO industry due to his protectionist stance on the
US economy. There have been pronouncements from President Trump and his senior advisers

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about their opposition of the movement of jobs from the US overseas, and the possible
imposition of tariffs and penalties on products and services from foreign countries. If this event
translates into economic policy, this may affect the Philippine BPO industry by inhibiting entry
of new companies into the Philippines or in the worst case the exit of companies already present
in the Philippines.

As a developer and lessor of office spaces that caters to clients such as BPOs and POGOs, the
Company’s business, financial condition and results of operations could be adversely affected in
the event a material number of leases are terminated. If these leases are prematurely terminated,
then the Company stands to lose revenues until the office space is leased to a new tenant. This
would exacerbate a decline in the BPO industry which would make the search for a replacement
tenant more difficult. This risk is increased in regard to certain BPO or POGO companies that
individually lease a material portion of the Company’s office space. Should any of these
companies exit the Philippines or significantly downsize operations, the Company runs the risk
of losing a significant portion of its business all at once. There can be no assurance that the
Company will not suffer from substantial lease terminations and that such terminations will not
have a material adverse effect on its financial condition and results of operations.

The Company continuously monitors the political and economic situations in these countries to
anticipate any effect it may have on the Company, its lessees, and the BPO industry in general.
The Company also has other sources of revenue, and has historically earned revenue through its
retail and hospitality segments and expects to earn revenue from its industrial leasing sites once
the same become operational.

A substantial percentage of the Company’s tenants in DoubleDragon Plaza are from the BPO
industry which is dependent on the demand for outsourced services in the Philippines, and
POGOs which depend on the Philippine Government’s current policy and regulations on gaming.
Factors that may adversely affect the Philippine economy include:

• decreases in business, industrial, manufacturing or financial activities in the Philippines,

the Southeast Asian region or globally;

• scarcity of credit or other financing, resulting in lower demand for products and services
provided by companies in the Philippines, the Southeast Asian region or globally;

• exchange rate fluctuations and foreign exchange controls;

• rising inflation or increases in interest rates;

• levels of employment, consumer confidence and income;

• changes in the Government’s fiscal and regulatory policies;

• Government budget deficits;

• adverse trends in the current accounts and balance of payments of the Philippine
economy;

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• re-emergence of Middle East Respiratory Syndrome-Corona virus (“MERS-CoV”),
SARS, avian influenza (commonly known as bird flu), or H1N1, or the emergence of
another similar disease (such as Zika) in the Philippines or in other countries in Asia;

• natural disasters, including but not limited to tsunamis, typhoons, earthquakes, fires,
floods and similar events;

• political instability, terrorism or military conflict in the Philippines, other countries in the
region or globally; and

• other regulatory, social, political or economic developments in or affecting the

Philippines.

There can be no assurance that the Philippines will maintain strong economic fundamentals in
the future. Changes in the conditions of the Philippine economy could materially and adversely
affect the Company’s business, financial condition and results of operations.

Volatility in the value of the Peso against the U.S. dollar and other currencies as well as in the
global financial and capital markets could adversely affect the Company’s businesses.

The Philippine economy has experienced volatility in the value of the Peso and also limitations
to the availability of foreign exchange. In July 1997, the BSP announced that the Peso can be
traded and valued freely on the market. As a result the value of the Peso underwent significant
fluctuations between July 1997 and December 2004 and the Peso declined from approximately
₱29.00 to U.S.$1.00 in July 1997 to ₱56.18 to U.S.$1.00 by December 2004.

While the value of the Peso has recovered since 2010, its valuation may be adversely affected by
certain events and circumstances such as the strengthening of the U.S. economy, the rise of the
interest rates in the U.S. and other events affecting the global markets or the Philippines, causing
investors to move their investment portfolios from the riskier emerging markets such as the
Philippines. Consequently, an outflow of funds and capital from the Philippines may occur and
may result in increasing volatility in the value of the Peso against the U.S. Dollar and other
currencies. As of December 31, 2017, according to BSP data, the Peso has depreciated by 5.86%
to ₱49.92 per U.S.$1 from ₱47.166 per U.S.$1.00 at the end of 2015. As of June 8, 2018, the
Peso was at ₱52.70 against the U.S. dollar.

Political instability in the Philippines could destabilize the country and may have a negative
effect on the Company.

The Philippines has from time to time experienced severe political and social instability. The
Philippine Constitution provides that, in times of national emergency, when the public interest so
requires, the Government may take over and direct the operation of any privately owned public
utility or business. In the last few years, there were instances of political instability, including
public and military protests arising from alleged misconduct by the previous administration.

On March 27, 2014, the Government and the Moro Islamic Liberation Front (“MILF”) signed a
peace agreement, the Comprehensive Agreement on Bangsamoro. On September 10, 2014, the
draft of the Bangsamoro Basic Law (“BBL”) was submitted by former President Aquino to

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Congress. The BBL is a draft law intended to establish the Bangsamoro political entity in the
Philippines and provide for its basic structure of government, which will replace the existing
Autonomous Region in Muslim Mindanao. Following the Mamasapano incident where high-
profile terrorists clashed with armed members of the Bangsamoro Islamic Freedom Fighters and
MILF leading to the deaths of members of the Special Action Force (“SAF”) of the Philippine
National Police, MILF, the Bangsamoro Islamic Freedom Fighters, and several civilians, the
Congress stalled deliberations on the BBL. The Board of Inquiry on the Mamasapano incident
and the Senate released their reports on the Mamasapano incident. On March 27, 2015, former
President Aquino named a Peace Council consisting of five original members to study the draft
BBL. 17 co-convenors were later named as part of the Peace Council. The Council examined the
draft law and its constitutionality and social impact. The Council Members testified before the
House of Representatives and the Senate, and submitted their report, which endorses the draft
BBL but with some proposed amendments. On May 13 and 14, 2015, the Senate conducted
public hearings on the BBL in Zamboanga and Jolo, Sulu, with the Zamboanga City government
and sultanate of Sulu opposing their inclusion in the proposed Bangsamoro entity.

The Philippine Presidential elections were held on May 9, 2016, and on June 30, 2016, President
Rodrigo Duterte assumed the presidency with a mandate to advance his “Ten-Point Socio-
Economic Agenda” focusing on policy continuity, tax reform, infrastructure spending and
countryside development, among others. The Duterte government has initiated efforts to build
peace with communist rebels and other separatists through continuing talks with these groups.
The shift to the federal-parliamentary form of government is likewise targeted to be achieved in
two years.

There can be no assurance that the current administration will continue to implement social and
economic policies favored by the previous administration. Major deviation from the policies of
the previous administration or fundamental change of direction, including with respect to
Philippine foreign policy, may lead to an increase in political or social uncertainty and
instability. The President’s unorthodox and radical methods may also raise risks of social and
political unrest. Any potential instability could have an adverse effect on the Philippine
economy, which may impact the Company’s business, financial condition and results of
operations.

Natural or other catastrophes, including severe weather conditions, may materially disrupt the
Company’s operations and result in losses not covered by its insurance.

The Philippines has experienced a number of major natural catastrophes over the years, including
typhoons, droughts, volcanic eruptions and earthquakes. There can be no assurance that the
occurrence of such natural catastrophes will not materially disrupt the Company’s operations.
These factors, which are not within the Company’s control, could potentially have significant
effects on the Company’s malls, offices and other real estate projects. While the Company
carries insurance for certain catastrophic events, of types, in amounts and with deductibles that
the Company believes are in line with general industry practices in the Philippines, there are
losses for which the Company cannot obtain insurance at a reasonable cost or at all. Should an
uninsured loss or a loss in excess of insured limits occur, the Company could lose all or a portion
of the capital invested in such business, as well as the anticipated future turnover, while
remaining liable for any costs or other financial obligations related to the business. Any material

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uninsured loss could materially and adversely affect the Company’s business, financial condition
and results of operations.

Acts of terrorism could destabilize the country and could have a material adverse effect on the
Company’s business, financial position and results of operations.

The Philippines has been subject to a number of terrorist attacks since 2000. In recent years, the
Philippine army has also been in conflict with the Abu Sayyaf organization, which has ties to the
al-Qaeda terrorist network, and has been identified as being responsible for certain kidnapping
incidents and other terrorist activities particularly in the southern part of the Philippines,
including areas where the Company operates its CityMalls. In September 2016, the Abu Sayyaf
abducted Jurgen Gustav Kantner and killed his wife while the couple were sailing off the waters
of the southern Philippines. Recently, Kantner was beheaded in February 2017, after ransom
demands were not allegedly met. An increase in the frequency, severity or geographic reach of
these terrorist acts could destabilize the Philippines, and adversely affect the country’s economy.

Moreover, there were isolated bombings in the Philippines in recent years, mainly in regions in
the southern part of the Philippines, such as the province of Maguindanao. Although no one has
claimed responsibility for these attacks, it is believed that the attacks are the work of various
separatist groups, possibly including the Abu Sayyaf organization. An increase in the frequency,
severity or geographic reach of these terrorist acts could destabilize the Philippines and adversely
affect the country’s economy.

The Government of the Philippines and the Armed Forces of the Philippines have clashed with
members of several separatist groups seeking greater autonomy, including the MILF, the Moro
National Liberation Front and the New People’s Army.

On September 2, 2016, a bombing that killed 15 and injured 71 took place in Davao City,
Mindanao. It is believed that the Abu Sayyaf organization and/or their allies are responsible for
the bombing.

In May 2017, members of the “Maute Group”, a local terrorist group with alleged allegiances to
the Islamic State of Iraq and Syria, attacked Marawi City in Lanao del Sur, leading to clashes
with Government troops that have been ongoing for four months. The attacks on Marawi City
prompted President Duterte to declare martial law and suspend the writ of habeas corpus over the
whole island of Mindanao. Based on news reports, up to 600,000 residents of Marawi City and
nearby towns have been displaced as a result of the ongoing clashes between the Maute Group
and Government troops.

Similar attacks or conflicts between the Government and armed or terrorist groups could lead to
further injuries or deaths of civilians and police or military personnel, which could destabilize
parts of the country and adversely affect the country’s economy. Any such destabilization could
cause interruption to parts of the Company’s business and materially and adversely affect its
business, financial condition and results of operations.

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Public health epidemics or outbreaks of diseases could have an adverse effect on economic
activity in the Philippines, and could materially and adversely affect the Company’s business,
financial condition and results of operations.

In April 2009, an outbreak of the H1N1 virus, commonly referred to as “swine flu,” occurred in
Mexico and spread to other countries, including the Philippines. In August 2014, the World
Health Organization (the “WHO”) declared the Ebola outbreak that originated in West Africa as
an international health emergency in view of the rising death toll due to the disease. That month,
a Filipino seaman in Togo was quarantined for exhibiting symptoms of Ebola virus infection but
was later released after testing negative for the disease. While still Ebola-free, the Philippines,
however, remains vulnerable to exposure and spread of the disease for the following reasons: a)
the considerable number of OFWs in the Ebola-hit West African countries; b) the impact of
international travel which raises the probability of transmission; and c) lack of the necessary
infrastructure to contain the spread of the disease. In March 2016, the Director-General of the
WHO terminated the Public Health Emergency of International Concern in regards to the Ebola
Virus Disease outbreak.

In February 2015, a Filipina nurse who arrived from Saudi Arabia tested positive for the MERS-
CoV. She was quarantined, received medical treatment and later discharged and cleared of the
disease by the Department of Health. All known contacts of the said nurse, including some
passengers in the same flight that arrived from Saudi Arabia, were also cleared of the infection,
putting the country once again free of an active case of the disease.

In March 2016, reports of an American woman who stayed in the Philippines for four weeks in
January 2016, tested positive for the Zika virus upon returning home, indicating the local
transmission of the disease through the Aedes aegypti mosquito. In May 2016, a South Korean
national was reported to have acquired the infection while visiting the Philippines, following
earlier reports of two other confirmed cases of the viral infection in the country. All of the
patients had recovered, indicating that the Zika viral infection acquired in the country was self-
limiting.

If the outbreak of the Ebola virus, MERS-CoV, Zika virus or any public health epidemic
becomes widespread in the Philippines or increases in severity, it could have an adverse effect on
economic activity in the Philippines, and could materially and adversely affect the Company’s
business, financial condition and results of operations.

Any future changes in PFRS may affect the financial reporting of the Company’s business.

PFRS continues to evolve as standards and interpretations promulgated effective January 1, 2017
and onwards come into effect. PFRS 16 replaces the accounting requirements for leases under
the old Standard (IAS 17, Leases). The new standard requires all leases to be reported on balance
sheet as assets and liabilities. PFRS 16 shall be effective for annual periods beginning on or after
January 1, 2019. Earlier application is not permitted until the Financial Reporting Standards
Council (“FRSC”) has adopted the new revenue recognition standard International Financial
Reporting Standards (“IFRS”) 15, Revenues from Contracts with Customer, issued by the
International Accounting Standards Board (“IASB”). The Company is currently assessing the
impact of adopting this standard.

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Moreover, under current Philippine Accounting Standards (“PAS”), real estate companies, such
as the Company, are allowed to recognize revenue from the sale of real estate units before
construction is complete based on the percentage of completion method, which allows
recognition of revenue as construction progresses by reference to the stage of completion of the
project and the payments that have been received from buyers.

In 2008, the International Financial Reporting Interpretations Committee (“IFRIC”) of the IASB
issued IFRIC No. 15 Agreements for the Construction of Real Estate (“IFRIC 15”), which
provides guidance on how to determine whether an agreement for the construction of real estate
is within the scope of IAS 11 Construction Contracts or IAS 18 Revenue and when revenue from
the construction should be recognized. The main change in practice has been a shift for some
entities from recognizing revenue using the percentage of completion method to recognizing
revenue at a single time (i.e., upon completion or after delivery). Agreements affected are those
previously accounted for in accordance with IAS 11 that do not meet the definition of a
construction contract as interpreted by the IFRIC and do not transfer to the buyer control and the
significant risks and rewards of ownership of the work in progress in its current state as
construction progresses.

Accounting standards in the Philippines are adopted by the Philippines Financial Reporting
Standards Council (“PFRSC”) and approved by the Philippine SEC. In addition, the PFRSC has
formed the Philippine Interpretations Committee, which issues implementation guidance on
PFRS and PAS. While the PFRSC has adopted and the Philippine SEC has approved most
International Financial Reporting Standards and International Accounting Standards, the
Philippine SEC has deferred the adoption of IFRIC 15 in the Philippines as a result of a position
paper submitted by various real estate industry associations in the Philippines and the ongoing
deliberation over the Revenue Recognition standard by the IASB, which is expected to address
some of the issues relevant to the adoption of IFRIC 15. It is currently unknown when IFRIC 15
will take effect, if ever; however, the Revenue Recognition standard is expected to become
effective in 2017 and this may lead to the adoption of IFRIC 15 in the Philippines.

Although the Company only has one remaining vertical residential development currently under
construction (i.e., The SkySuites Tower) which is expected to be completed in 2018, if IFRIC 15
is adopted in the Philippines, the Company may need to restate its financial statements and
certain amounts recorded in these financial statements, such as gross income and net income, as
well as receivables, may be materially different from its publicly disclosed financial information,
which could result in a materially different view of the Company’s financial condition and
results of operations. The Company continues to assess the impact of adoption of this standard
on its financial results.

IFRS 15, Revenue from contracts with customer, was issued in May 2014 and establishes a new
five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15
revenue is recognized at an amount that reflects the consideration to which an entity expects to
be entitled in exchange for transferring goods or services to a customer. The principles in IFRS
15 provide a more structured approach to measuring and recognizing revenue. The new revenue
standard is applicable to all entities and will supersede all current revenue recognition
requirements under IFRS, including IFRIC 15. Either a full or modified retrospective application
is required for annual periods beginning on or after 1 January 2018 with early adoption

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permitted. The Company’s adoption of the standard did not have a material impact on its
consolidated interim financial statements.

PFRS 9 (2014) replaces PAS 39 Financial Instruments: Recognition and Measurement and
supersedes the previously published versions of PFRS 9 that introduced new classifications and
measurement requirements (in 2009 and 2010) and a new hedge accounting model (in 2013).
PFRS 9 includes revised guidance on the classification and measurement of financial assets,
including a new expected credit loss model for calculating impairment, guidance on own credit
risk on financial liabilities measured at fair value and supplements the new general hedge
accounting requirements published in 2013. PFRS 9 incorporates new hedge accounting
requirements that represent a major overhaul of hedge accounting and introduces significant
improvements by aligning the accounting more closely with risk management. The new standard
is to be applied retrospectively for annual periods beginning on or after January 1, 2018, with
early adoption permitted. The Company has adopted PFRS 9 and has not restated the
comparative information. The adoption of PFRS 9 did not have any significant effect on the
classification and measurement of financial assets and financial liabilities of the Company. The
Company is currently completing the expected credit loss model under PFRS 9 on the
impairment of financial assets, but it is not expected to have significant impact on the condensed
consolidated interim financial statements.

The Company believes that other amendments and improvement to PFRS issued effective
January 1, 2018 and onwards will not have material impact on the Company’s future financial
statements.

Corporate governance and disclosure standards in the Philippines may differ from those in
other countries.

Although a principal objective of Philippine securities laws and the PSE listing rules is to
promote full and fair disclosure of material corporate information, there may be less publicly
available information about Philippine public companies, such as the Company, than is regularly
made available by public companies in the U.S. and other countries. As a result, shareholders
may not have access to the same amount of information or have access to information in as
timely of a manner as may be the case for companies listed in the U.S. and many other
jurisdictions. Furthermore, although the Company complies with the requirements of the
Philippine SEC with respect to corporate governance standards, these standards may differ from
those applicable in other jurisdictions. For example, the SRC requires the Company to have at
least two independent Directors or such number of independent Directors as is equal to 20% of
the Board, whichever is the lower number. The Company currently has two independent
Directors. Many other jurisdictions may require more independent directors.

Furthermore, corporate governance standards may be different for public companies listed on the
Philippine securities markets than for securities markets in developed countries. Rules and
policies against self-dealing and regarding the preservation of shareholder interests may be less
well-defined and enforced in the Philippines than elsewhere, putting shareholders at a potential
disadvantage. Because of this, the directors of Philippine companies may be more likely to have
interests that conflict with the interests of shareholders generally, which may result in them
taking actions that are contrary to the interests of shareholders.

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Investors may face difficulties enforcing judgments against the Company.

The Company is organized under the laws of the Republic of the Philippines. All of the
Company’s assets are located in the Philippines and outside of the United States. It may be
difficult for investors to effect service of process outside of the Philippines upon the Company.
Moreover, it may be difficult for investors to enforce judgments against the Company outside of
the Philippines in any actions pertaining to the Offer Shares. In addition, substantially all of the
directors and officers of the Company are residents of the Philippines, and all or a substantial
portion of the assets of such persons are or may be located in the Philippines. As a result, it may
be difficult for investors to effect service of process upon such persons or enforce against such
persons judgments obtained in courts or arbitral tribunals outside of the Philippines predicated
upon the laws of jurisdictions other than in the Philippines.

The Philippines is not a party to any international treaty in relation to the recognition or
enforcement of foreign judgments but is a signatory to the United Nations Convention on the
Recognition and Enforcement of Foreign Arbitral Awards. Judgments obtained against the
Company in any foreign court may be recognized and enforced by the courts of the Philippines
in an independent action brought in accordance with the relevant procedures set forth in the
Rules of Court of the Philippines to enforce such judgment. However, such foreign judgment or
final order may be rejected in the following instances: (i) such judgment was obtained by
collusion or fraud, (ii) the foreign court rendering such judgment did not have jurisdiction, (iii)
such order or judgment is contrary to good customs, public order, or public policy of the
Philippines, (iv) the Company did not have notice of the proceedings before the foreign court, or
(v) such judgment was based upon a clear mistake of law or fact.

Overseas shareholders may be subject to restrictions on repatriation of Pesos received with

respect to the Common Shares.

Under BSP regulations, as a general rule, Philippine residents may freely dispose of their foreign
exchange receipts and foreign exchange may be freely sold and purchased outside the Philippine
banking system. Restrictions exist on the sale and purchase of foreign exchange within the
Philippine banking system. In particular, a foreign investment must be registered with the BSP if
foreign exchange needed to service the repatriation of capital and the remittance of dividends,
profits and earnings which accrue thereon is sourced from the Philippine banking system. See
“Philippine Foreign Exchange and Foreign Ownership Controls”.

The Government has, in the past, instituted restrictions on the conversion of Pesos into foreign
currency and the use of foreign exchange received by Philippine residents to pay foreign
currency-denominated obligations. The Monetary Board of the BSP, with the approval of the
President of the Philippines, has statutory authority during a foreign exchange crisis or in times
of national emergency to suspend temporarily or restrict sales of foreign exchange, to require
licensing of foreign exchange transactions or to require delivery of foreign exchange to BSP or
its designee. The Company is not aware of any pending proposals by the Government relating to
such restrictions. The Government has from time to time made public pronouncements of a
policy not to impose restrictions on foreign exchange. Any restrictions imposed in the future
pursuant to such statutory authority could adversely affect the ability of investors to repatriate
foreign currency upon sale of the Common Shares or dividends or distributions relating to them.

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The sovereign credit ratings of the Philippines may adversely affect the Company’s business.

The sovereign credit ratings of the Philippines directly affect companies resident and domiciled
in the Philippines as international credit rating agencies issue credit ratings by reference to that
of the sovereign. In 2013, the Philippines earned investment grade status from all three major
credit ratings agencies – Fitch (BBB-), Standard and Poor’s (BBB-) and Moody’s (Baa3). In
2014, S&P and Moody’s upgraded their ratings to “BBB” and “Baa2” in May and December,
respectively, with both agencies affirming these ratings in 2015. Meanwhile, Fitch has kept the
country’s credit rating at “BBB-” in the last three years, with the last review held in April 2016.
All ratings are a notch above investment grade and the highest that the country has received so
far from any credit ratings agency.

International credit rating agencies issue credit ratings for companies with reference to the
country in which they are resident. As a result, the sovereign credit ratings of the Philippines
directly affect companies that are resident in the Philippines, such as the Company. There is no
assurance that Fitch, Moody’s, S&P or other international credit rating agencies will not
downgrade the credit rating of the Philippines in the future. Any such downgrade could have a
material adverse effect on liquidity in the Philippine financial markets and the ability of the
Philippine government and Philippine companies, including the Company, to raise additional
financing, and will increase borrowing and other costs.

Territorial disputes with China and a number of Southeast Asian countries may disrupt the
Philippine economy and business environment.

The Philippines, China and several Southeast Asian nations have been engaged in a series of
long-standing territorial disputes over certain islands in the West Philippine Sea, also known as
the South China Sea. The Philippines maintains that its claim over the disputed territories is
supported by recognized principles of international law consistent with the United Nations
Convention on the Law of the Sea (“UNCLOS”). The Philippines made several efforts during the
course of 2011 and 2012 to establish a framework for resolving these disputes, calling for
multilateral talks to delineate territorial rights and establish a framework for resolving disputes.

Despite efforts to reach a compromise, a dispute arose between the Philippines and China over a
group of small islands and reefs known as the Scarborough Shoal. In April and May 2012, the
Philippines and China accused each other of deploying vessels to the shoal in an attempt to take
control of the area, and both sides unilaterally imposed fishing bans at the shoal later that year.
These actions threatened to disrupt trade and other ties between the two countries, including a
temporary ban by China on Philippine banana imports, as well as a temporary suspension of
tours to the Philippines by Chinese travel agencies. Since July 2012, Chinese vessels have
reportedly turned away Philippine fishing boats attempting to enter the shoal, and the Philippines
has continued to protest China’s presence there. In January 2013, the Philippines sent notice to
the Chinese embassy in Manila that it intended to seek international arbitration to resolve the
dispute under UNCLOS. China has rejected and returned the notice sent by the Philippines to
initial arbitral proceedings.

On May 9, 2013, a Philippine Coast Guard ship opened fire on a Taiwanese fisherman’s vessel in
a disputed exclusive economic zone between Taiwan and the Philippines, killing a 65-year old

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Taiwanese fisherman. Although the Philippine government maintained that the loss of life was
unintended, Taiwan imposed economic sanctions on the Philippines in the aftermath of the
incident. Taiwan eventually lifted the sanctions in August 2013 after a formal apology was
issued by the Government of the Philippines.

In September 2013, the Permanent Court of Arbitration in The Hague, Netherlands issued rules
of procedure and initial timetable for the arbitration in which it will act as a registry of the
proceedings. Should these territorial disputes continue or escalate further, the Philippines and its
economy may be disrupted and the operations of the Company could be adversely affected as a
result. In particular, further disputes between the Philippines and China may lead both countries
to impose trade restrictions on the other’s imports. On July 12, 2016, the five-member Arbitral
Tribunal at the Permanent Court of Arbitration in The Hague, Netherlands, unanimously ruled in
favor of the Philippines on the maritime dispute over the West Philippine Sea. The Tribunal’s
landmark decision contained several rulings, foremost of which invalidated China’s “nine-dash
line”, or China’s alleged historical boundary covering about 85% of the South China Sea,
including 80% of the Philippines Exclusive Economic Zone (EEZ) in the West Philippine Sea.
China rejected the ruling, saying that it did not participate in the proceedings for the reason that
the court had no jurisdiction over the case. Any such impact from these disputes could adversely
affect the Philippine economy, and materially and adversely affect the Company’s business,
financial condition and results of operations.

Should territorial disputes between the Philippines and other countries in the region continue or
escalate further, the Philippines and its economy may be disrupted and the Company’s operations
could be adversely affected as a result.

RISKS RELATING TO THE OFFER AND THE OFFER SHARES

The Offer Shares may not be a suitable investment for all investors.

Each prospective investor in the Offer Shares must determine the suitability of that investment in
light of its own circumstances. In particular, each prospective investor should:

• have sufficient knowledge and experience to make a meaningful evaluation of the

Company and its businesses, the merits and risks of investing in the Offer Shares and the
information contained in this Prospectus;

• have access to, and knowledge of, appropriate analytical tools to evaluate, in the context
of its particular financial situation, an investment in the Offer Shares and the impact the
Offer Shares will have on its overall investment portfolio;

• have sufficient financial resources and liquidity to bear all of the risks of an investment in
the Offer Shares, including where the currency for purchasing and receiving dividends on
the Offer Shares is different from the potential investor’s currency;

• understand and be familiar with the behavior of any relevant financial markets; and

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• be able to evaluate (either alone or with the help of a financial advisor) possible scenarios
for economic, interest rate and other factors that may affect its investment and its ability
to bear the applicable risks.

The relative volatility and illiquidity of the Philippine securities market may substantially limit
investors’ ability to sell the Offer Shares at a suitable price or at a time they desire.

The Philippine securities markets are substantially smaller, less liquid, and more volatile relative
to major securities markets in other jurisdictions, and are not as highly regulated or supervised as
some of these other markets are. The Offer Price could differ significantly from the price at
which the Common Shares will trade subsequent to completion of the Offer. There can be no
assurance that even after the Offer Shares have been approved for listing on the PSE, any active
trading market for the Common Shares will develop or be sustained after the Offer, or that the
Offer Price will correspond to the price at which the Common Shares will trade in the Philippine
public market subsequent to the Offer. There is no assurance that investors may sell the Offer
Shares at prices or at times deemed appropriate.

Factors that could affect the price of the Company’s Common Shares include the following:

• fluctuations in the Company’s results of operations and cash flows or those of other
companies in the Company’s industry;

• the public’s reaction to the Company’s press releases, announcements and filings with the
Philippine SEC and PSE;

• additions or departures of key personnel;

• changes in financial estimates or recommendations by research analysts;

• changes in the amount of indebtedness the Company has outstanding;

• changes in general conditions in the Philippines and international economy, financial

markets or the industries in which the Company operates, including changes in regulatory
requirements and changes in political conditions in the Philippines;

• significant contracts, acquisitions, dispositions, financings, joint marketing relationships,

joint ventures or capital commitments by the Company or its competitors;

• asset impairments or other charges;

• developments related to significant claims or proceedings against the Company;

• the Company’s dividend policy; and

• future sales of the Company’s equity or equity-linked securities.

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In recent years, stock markets, including the PSE, have experienced extreme price and volume
fluctuations. This volatility has had a significant effect on the market price of securities issued
by many companies for reasons unrelated to the operating performance of these companies.
These broad market fluctuations may adversely affect the market prices of the Company’s
Common Shares.

Future sales of Common Shares in the public market could adversely affect the prevailing
market price of the Common Shares and shareholders may experience dilution in their
holdings.

In order to finance the expansion of the Company’s business and operations, the Company will
consider the funding options available to it at the time, which may include the sale of additional
Common Shares from the treasury or the issuance of new Common Shares. If additional funds
are raised through the sale or issuance of new equity or equity-linked securities by the Company
other than on a pro rata basis to existing shareholders, the percentage ownership of the
shareholders may be reduced, shareholders may experience subsequent dilution and/or such
securities may have rights, preferences and privileges senior to those of the Offer Shares.
Furthermore, the market price of the Common Shares could decline as a result of future sales of
substantial amounts of Common Shares in the public market or the issuance of new Common
Shares, or the perception that such sales, transfers or issuances may occur. This could also
materially and adversely affect the prevailing market price of the Common Shares or the
Company’s ability to raise capital in the future at a time and at a price it deems appropriate.
Investors may not be able to sell their Common Shares at or above the price they paid for them.

The Company’s shares are subject to Philippine foreign ownership limitations.

The Philippine Constitution and related statutes restrict land ownership to Philippine Nationals.
The term “Philippine National” as defined under Republic Act No. 7042 or the Foreign
Investments Act, as amended, means a citizen of the Philippines, a domestic partnership or
association wholly owned by citizens of the Philippines or a corporation organized under the
laws of the Philippines of which at least 60% of the capital stock outstanding and entitled to vote
is owned and held by citizens of the Philippines, or a corporation organized abroad and
registered to do business in the Philippines under the Philippine Corporation Code of
which 100% of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or
a trustee of funds for pension or other employee retirement or separation benefits, where the
trustee is a Philippine national and at least 60% of the fund will accrue to the benefit of
Philippine Nationals. As of the date of this Prospectus, the Company owns private land in the
Philippines.

On May 20, 2013, the Philippine SEC issued Memorandum Circular No. 8, Series of 2013 which
provided guidelines (the “Guidelines”) on compliance with the Filipino-Foreign ownership
requirements under the Philippine Constitution and other existing laws by corporations engaged
in nationalized or partly nationalized activities (the “Nationalized Corporations”). The
Guidelines provide that for purposes of determining compliance with the foreign equity
restrictions in Nationalized Corporations, the required percentage of Filipino ownership shall be
applied to both (a) the total number of outstanding shares of stock entitled to vote in the election

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of directors, and (b) the total number of outstanding shares of stock, whether or not entitled to
vote in the election of directors.

Since the aggregate foreign ownership in the Company is limited to a maximum of 40% of its
issued and outstanding capital stock, the Company cannot allow the issuance or the transfer of its
Common Shares to persons other than Philippine Nationals and cannot record transfers in its
books if such issuance or transfer would result in the Company ceasing to be a Philippine
National. This restriction may adversely affect the liquidity and market price of the Common
Shares to the extent international investors are not permitted to purchase Common Shares in
normal secondary transactions.

Shareholders may be subject to limitations on minority shareholders rights.

The obligation under Philippine law of majority shareholders and directors with respect to
minority shareholders may be more limited than those in certain other countries such as the
United States or United Kingdom. Consequently, minority shareholders may not be able to
protect their interests under current Philippine law to the same extent as in certain other
countries.

The Philippine Corporation Code, however, provides for minimum minority shareholders
protection in certain instances wherein a vote by the shareholders representing at least two-thirds
of the Company’s outstanding capital stock is required. Accordingly, there can be no assurance
that legal rights or remedies of minority shareholders will be the same, or as extensive, as those
available in other jurisdictions or sufficient to protect the interests of minority shareholders.

Investors may incur immediate and substantial dilution as a result of purchasing Offer Shares
and may also incur dilution as a result of the conversion of any Preferred Shares.

The Offer Price of the Common Shares may be substantially higher than the net tangible book
value of net assets per share of the Company’s outstanding Common Shares. Therefore,
purchasers of Offer Shares may experience immediate and substantial dilution and the
Company’s existing shareholders may experience a material increase in the net tangible book
value of net assets per share of the Common Shares they own. See “Dilution.”

Future changes in the value of the Philippine Peso against other currencies will affect the
foreign currency equivalent of the value of the Common Shares and any dividends.

The price of the Common Shares is denominated in Philippine Pesos. Fluctuations in the
exchange rate between the Peso and other currencies will affect the foreign currency equivalent
of the Peso price of the Common Shares on the PSE. Such fluctuations will also affect the
amount in foreign currency received upon conversion of cash dividends or other distributions
paid in Pesos by the Company on, and the Peso proceeds received from any sales of, the Offer
Shares, as well as the book value of foreign currency assets, and income and expenses and cash
flows in the Company’s financial statements.

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Developments in other markets and countries may adversely affect the Philippine economy
and, therefore, the market price of the Common Shares.

In the past, the Philippine economy and the securities of Philippine companies have been, to
varying degrees, influenced by economic and market conditions in other countries, especially
other countries in Southeast Asia, as well as investors’ responses to those conditions. Although
economic conditions are different in each country, investors’ reactions to adverse developments
in one country may affect the market price of securities of companies in other countries,
including the Philippines. For example, the economic crisis in the United States and Europe
triggered market volatility in other countries’ securities markets, including the Philippines.
Accordingly, adverse developments in the global economy could lead to a reduction in the
demand for, and market price of, the Common Shares.

The Company may be unable to pay dividends on the Common Shares.

Although the Company has adopted a dividend policy whereby, subject to available cash and the
existence of Unrestricted Retained Earnings, at least 30% of the Company’s net income for the
preceding fiscal year will be declared as dividends, there is no assurance that the Company can
or will declare dividends on the Common Shares in the future. Future dividends, if any, will be
at the discretion of the Board and will depend upon the Company’s future results of operations
and general financial condition, capital requirements, its ability to receive dividends and other
distributions and payments from its Subsidiaries, foreign exchange rates, legal, regulatory and
contractual restrictions, loan obligations and loan covenants, including loan obligations and loan
covenants of its Subsidiaries, and other factors the Board may deem relevant. See “Dividends
and Dividend Policy.”

There can be no guarantee that the Offer Shares will be listed on the PSE.

Purchasers of the Offer Shares will be required to pay for such Offer Shares on the Trading
Participants and Retail Offer Settlement Date and the Institutional Offer Settlement Date, which
are expected to be July 6, 2018 and July 10, 2018, respectively. Although the PSE is expected to
approve the Company’s application to list the Offer Shares, because the Listing Date is
scheduled to occur after the Trading Participants and Retail Offer Settlement Date and could
occur after the Institutional Offer Settlement Date, there can be no guarantee that listing will
occur on the anticipated Listing Date or at all. Delays in the admission and the commencement
of trading in shares on the PSE have occurred in the past. If the PSE does not admit the Firm
Shares onto the PSE, the market for the Offer Shares would be illiquid and shareholders may not
be able to trade the Offer Shares on the PSE. This may materially and adversely affect the value
of the Offer Shares.

The Company’s management has broad discretion to determine how to use the proceeds
received from the Firm Offer, and may use them in ways that may not enhance the Company’s
operating results or the price of the Company’s Common Shares.

The Company plans to use the net proceeds of this offering as described under “Use of
Proceeds”. The Company’s management will have broad discretion over the use and investment
of the net proceeds of the Firm Offer, and accordingly investors will need to rely upon the

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judgment of the Company’s management with respect to the use of proceeds with only limited
information concerning management’s specific intentions.

RISKS RELATING TO CERTAIN STATISTICAL INFORMATION IN THIS

PROSPECTUS

Certain information contained herein is derived from unofficial publications.

Certain information in this Prospectus relating to the Philippines, the industries in which the
Company competes and the markets in which the Company develops its projects, including
statistics relating to market size, is derived from various Government and private publications.
This Prospectus also contains industry information which was prepared from publicly available
third party sources and independent market research conducted by KMC Savills, Inc. to provide
an overview of the Philippine real estate industry. Industry publications generally state that the
information they contain has been obtained from sources believed to be reliable but that the
accuracy and completeness of that information is not guaranteed. The information contained in
the Industry section may not be consistent with other information regarding the Philippine real
estate industry. Similarly, industry forecasts and other market research data, including those
contained or extracted herein, have not been independently verified by the Company, the
International Bookrunners and Lead Managers, and the Domestic Lead Underwriters and
Bookrunners, nor any of their respective affiliates or advisors, and may not be accurate,
complete, up to date or consistent with other information compiled within or outside the
Philippines. Prospective investors are cautioned accordingly.

Neither the section of this Prospectus entitled “Industry” nor the Industry Report was
independently verified by the Company, the International Bookrunners and Lead Managers or
the Domestic Lead Underwriters and Bookrunners.

The section of this Prospectus entitled “Industry” incorporates the “Executive Summary” from a
report commissioned by the Company and prepared by KMC Savills, Inc. (the “Industry
Report”) and was included for the purpose of describing the Philippine real estate industry
generally, and the specific areas where the Company operates. Neither this section nor the
Industry Report was independently verified by the Company, the International Bookrunners and
Lead Managers, and the Domestic Lead Underwriters and Bookrunners, or any of their
respective affiliates or advisors. The information contained therein may not be consistent with
other information found elsewhere regarding the Philippine real estate industry. The Industry
Report and the section of this Prospectus entitled “Industry” represent the opinions of KMC
Savills, Inc. and not those of the Company, the International Bookrunners and Lead Managers,
and the Domestic Lead Underwriters and Bookrunners, or any of their respective affiliates or
advisors. Much of the information set out therein is based on estimates, judgments, opinions and
beliefs of KMC Savills, Inc. and should be regarded as indicative only and treated with the
appropriate caution. Moreover, data taken from the Industry Report consist of excerpts and are
not meant to be a substitute for the complete Industry Report, a copy of which is attached
elsewhere in this Prospectus. Investors are cautioned to not rely on such excerpts as a
comprehensive depiction of the Philippine real estate industry.

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 EXCHANGE RATES

The PDS, a computer network supervised by the BSP, through which the members of the
Bankers Association of the Philippines effect spot and forward currency exchange transactions,
was introduced in 1992. The PDS was adopted by the BSP as a means to monitor foreign
exchange rates. Pursuant to the Bankers Association of the Philippines (“BAP”) Advisory dated
March 16, 2018, the publication of the PDS USD/PHP FX Spot Summary ceased on April 1,
2018. The BSP Rate is the closing spot rate for the purchase of U.S. dollars with Pesos, which is
quoted on the PDS/BAP and published in the BSP’s Reference Exchange Rate Bulletin and
major Philippine financial press on the following business day. On December 29, 2017, the BSP
Rate was ₱49.92 = U.S.$1.00, while on March 28, 2018, the BSP Rate was ₱52.21 = U.S.$1.00.
On June 8, 2018, the BAP closing spot rate was ₱52.70 = U.S.$1.00.

The following table sets forth certain information concerning the BSP Rate between the Peso and
the U.S. dollar for the periods and dates indicated, expressed in Pesos per U.S.$1.00:
Peso/U.S. dollar exchange rate
Year Period end Average(1) High(2) Low(3)
2013 44.41 42.45 44.66 40.57
2014 44.62 44.40 45.41 43.28
2015 47.17 45.50 47.44 44.05
2016 49.81 47.49 49.98 45.91
2017 49.92 50.40 51.80 49.40
2018
January 51.42 50.51 51.42 49.77
February 52.03 51.78 52.35 51.21
March 52.21 52.07 52.34 51.86
April 51.97 52.10 52.30 51.94
May (as of May 15) 52.10 51.87 52.10 51.65

_______________
(1) Weighted average rate under the Philippine Dealing System (“PDS”) starting August 4, 1992.

(2) Highest closing exchange rate for the period.

(3) Lowest closing exchange rate for the period.

Source: Reference Exchange Rate Bulletin, Treasury Department of the BSP.

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 USE OF PROCEEDS

The Company estimates that net proceeds from the Firm Offer at the Offer Price of ₱30.00 per
Offer Share will be approximately ₱3,959.2 million after deducting the applicable underwriting
fees and commissions and expenses for the Offer payable by the Company as shown below. At
the Offer Price of ₱30.00 per Offer Share, the total proceeds from the offer and sale of the Offer
Shares (assuming full exercise of the Over-allotment Option), the estimated costs and expenses
for the offer and sale of the Offer Shares to be incurred by the Company and the estimated net
proceeds from the offer and sale of the Offer Shares (assuming full exercise of the Over-
allotment Option) are also shown in the table below.

Estimated Amounts
Offer
Firm Offer (assuming full exercise of
Over-allotment Option)
(₱ millions)
Estimated Proceeds* 4,050.0 4,500.0
Less: Estimated fees, commissions and
expenses
Gross Underwriting Fees 60.8 67.5
Philippine SEC registration, filing and
research fees 1.6 1.7
PSE listing and processing fee 4.1 4.6
Estimated professional fees 22.3 22.3
Estimated other expenses 1.9 1.9
Documentary stamp tax 0.1 0.1
Total estimated expenses 90.8 98.1
Estimated net proceeds 3,959.2 4,401.9

Estimated other expenses include fees for publication, printing, shipping, and other
miscellaneous expenses that the Company expects to incur in relation to the Offer.

The Company intends to use the net proceeds from the Firm Offer for its expansion in industrial
leasing and the hospitality business, which will add an additional 200,000 sq. m. of leasable
space to its leasing portfolio by 2020, and for general corporate purposes. Further details on the
proposed use of net proceeds, are set forth below:

Offer
Estimated
Firm Offer (assuming full exercise of
Timing
Use of Proceeds Over-allotment Option)
Estimated Estimated
Percentage Percentage
Amounts Amounts
(₱ millions, except percentages)
CentralHub Industrial Centers
1,917.6 48.4% 2,131.4 48.4% 2018 to 2020
Inc.
Hotel of Asia Inc. 1,942.6 49.1% 2,171.5 49.3% 2018 to 2020
General corporate purposes 99.0 2.5% 99.0 2.3%

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 2018 to 2020

Estimated Net Proceeds 3,959.2 100.0% 4,401.9 100.0%

CentralHub Industrial Centers Inc.

CentralHub Industrial Centers Inc. (“CHICI”) is the Company’s industrial leasing arm and
intends to build a portfolio of 100,000 sq. m. of leasable space by 2020, which it expects to be in
the following locations:

Location Number of Sites*

North Luzon 2
South Luzon 2
Visayas 2
Mindanao 2
*inclusive of Tarlac and Iloilo

In 2017, the Company commenced identifying sites for its industrial leasing segment and, as of
February 28, 2018, has secured sites in Tarlac City from North Luzon and Iloilo City from the
Visayas. These two CentralHub sites are expected to have a total of 54,000 sq. m. of leasable
space. The Company continues to explore potential locations for other CentralHub sites in other
parts of the country. See “Business—Industrial Leasing”.

The amount of the proceeds allocated to this subsidiary will be used to purchase land for the
envisioned CentralHub sites nationwide and will also be deployed for the construction of
standardized modern multi-use warehouses suited for commissaries, cold storage and logistic
centers on the said sites. The proceeds that will be allocated for each site will depend on land
availability and cost which can only be determined once the site has been identified. The
Company believes and expects that, together with its internal operational cash flow, the proceeds
allocated for its industrial leasing arm shall be sufficient to cover the acquisition and construction
of all eight CentralHub sites. The Company intends to allocate 29% of the proceeds to CHICI
through shareholder’s advances which may be converted into equity at a later date should the
need arise.

The first CentralHub will be located on a 6.2 hectare property inside Luisita Industrial Park in
Tarlac City. As of February 28, 2018, development of phase 1 is 45.11% complete and, once
completed, the Company expects to commence its leasing operations. Construction of phase 2 of
the project is expected to commence within the first half of 2018, while the commencement of
construction for phases 3 and 4 will depend on tenant take-up. Any allotted proceeds for phases 3
and 4 may be used for other CentralHub sites while CHICI negotiates with potential tenants.
With an estimated project cost of ₱550 million, the Company expects CentralHub-Tarlac to
contribute 32,000 sq. m. of leasable space to its leasing portfolio once fully developed. The
Company estimates phases 1 and 2 of CentralHub-Tarlac to cost ₱275 million, and are expected
to be completed in 2018. The Company also recently acquired a 3.9 hectare parcel of land in
Iloilo where it intends to develop its second CentralHub. Pending the completion of the Offer
and receipt of proceeds, the Company uses its existing working capital lines to fund the

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foregoing acquisitions and construction (which lines shall be replenished for the Company’s
other operations after the Offer).

Hotel of Asia Inc.

Hotel of Asia Inc. (HOA) is the Company’s hospitality arm, which is envisioned to increase its
rooms under management portfolio from the current 866 rooms to 5,000 rooms by 2020 which
will be equivalent to 100,000 sq. m. of leasable space. The amount of the proceeds allocated to
this subsidiary will be used to partially finance the roll out the identified sites below of its two
hotel brands Hotel 101 and Jinjiang Inn respectively. The cash will be deployed to purchase land
and shoulder the construction costs needed for the expansion of the HOA’s hotel portfolio.
Proceeds will be allocated to HOA through shareholder’s advances which may be converted into
equity at a later date should the need arise. Currently, the Company has already secured the
following sites which a portion of the proceeds will be deployed in:

Estimated rooms based on initial

Hotel Site plans
(hotel rooms)
Hotel 101 Fort 606
Hotel 101 Bohol 502
Hotel 101 Davao 519
Hotel 101 Resort-Boracay 1,001
Jinjiang Inn Boracay (Newcoast) 95
Jinjiang Inn Cagayan de Oro 106
Estimated number of rooms under development 2,829

As of December 31, 2017, the Company had one hotel under construction, Hotel101 Fort, and
five more hotels in the planning and development stage. The allotted proceeds for the projects of
HOA will be used for the construction of all aforesaid six projects, with specific amounts
determined based on the results of HOA’s pre-selling activities. The Company recently
announced the entry by HOA into a joint venture for the development of Hotel 101 Resort-
Boracay in Megaworld’s Boracay Newcoast estate, which is expected to commence construction
in 2018. See “Business—Hospitality—Future Hotel Developments”.

General corporate purposes, land banking or potential acquisitions

The balance of the proceeds would be used by the Company for general corporate purposes, land
banking or potential acquisitions to grow the business beyond its current 2020 plan. The
proceeds of the Offer (with respect to the Firm Offer and assuming the full exercise of the Over-
allotment Option) will be allocated as follows:

Offer
Firm Offer (assuming full exercise of
Use of Proceeds
Over-allotment Option)
Estimated Percentage Estimated Percentage

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 Amounts of Net Amounts of Net
Proceeds Proceeds
(₱ millions, except percentages)
Land banking and potential
- - - -
acquisitions
General corporate purposes 99.0 2.5% 99.0 2.3%

The Company intends to acquire lands for future use in line with the Company’s growth strategy
to build recurring revenue from appreciating prime real estate assets. The Company continues to
explore potential acquisitions and pursue real estate deals which can be developed into future
commercial, hospitality or industrial leasing projects. As of December 31, 2017, aside from
acquisitions already disclosed in the Prospectus, no definitive agreements have been executed
with respect to any other acquisitions.

General corporate purposes include but are not limited to working capital requirements,
corporate office overhead, administrative expenses and other costs shouldered by Company in
the course of normal business operations not specifically related to any single project. The
proceeds for general corporate purposes will not be used to any of the Company’s interim
projects.

In the event that less than the estimated net proceeds is obtained, the use of the proceeds will still
be for the above stated uses.

If the expected gross proceeds are not realized, the Company will use its internally generated
funds from operations and existing cash flows, existing credit lines, and/or other potential
borrowings to finance the expected uses.

The proposed use of proceeds described above represents a best estimate of the use of the net
proceeds of the Firm Offer based on the Company’s current plans and expenditures. The actual
amount and timing of disbursement of the net proceeds from the Firm Offer for the use stated
above will depend on various factors. Once the Company receives the net proceeds from the
Firm Offer, it shall apply the same for the purposes discussed above, but to the extent that such
net proceeds from the Firm Offer are not immediately applied to the above purposes, the
Company will invest the net proceeds in interest-bearing short term demand deposits and/or
money market instruments. Aside from underwriting and selling fees, none of the International
Bookrunners and Lead Managers or the Domestic Lead Underwriters and Bookrunners will
receive any of the net proceeds from the Offer. The Company will not use any net proceeds from
the Offer to repay any indebtedness to the International Bookrunners and Lead Managers and the
Domestic Lead Underwriters and Bookrunners.

In the event of any material deviation or adjustment in the planned use of proceeds, the Company
shall inform its shareholders, the Philippine SEC and the PSE in writing at least 30 days before
such deviation or adjustment is implemented. Any material or substantial adjustments to the use
of proceeds, as indicated above, will be approved by the Company’s Board of Directors and
disclosed to the Philippine SEC and the PSE. In addition, the Company shall submit via the
PSE’s Online Disclosure System, the PSE Electronic Disclosure Generation Technology (“PSE
EDGE”), the following disclosure to ensure transparency in the use of proceeds:

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(i) any disbursements made in connection with the planned use of proceeds from the Firm
Offer;

(ii) Quarterly Progress Report on the application of the proceeds from the Firm Offer on or
before the first 15 days of the following fiscal quarter certified by the Company’s Chief
Financial Officer or Treasurer and external auditor;

(iii) annual summary of the application of the proceeds on or before January 31 of the year
following the Offer certified by the Company’s Chief Financial Officer or Treasurer and
external auditor; and

(iv) approval by the Company’s Board of Directors of any reallocation on the planned use of
proceeds. The actual disbursement or implementation of such reallocation must be
disclosed by the Company at least 30 days prior to the said actual disbursement or
implementation.

The quarterly and annual reports required in items (ii) and (iii) above must include a detailed
explanation for any material variances between the actual disbursements and the planned use of
proceeds in the Prospectus, if any. The detailed explanation must state the approval of the
Company’s Board of Directors as required in item (iv) above. The Company will submit an
external auditor’s certification of the accuracy of the information reported by the Company to the
PSE in its quarterly and annual reports.

Use of Proceeds from Previous Offerings

The Company's previous fundraising activities have supported the building of the Company's
projects nationwide and its progress to achieving its initial 2020 leasable area target of 1.0
million sq. m. The Company believes that the previous offering and the estimated net proceeds
from the upcoming offering with overallotment plus the expected cashflow from the operational
Projects will be sufficient to fund the 1.2 million square meters of leasable space by 2020. In the
event that this proves insufficient, the Company could temporarily use its working capital lines
which will be replenished from the cashflows once the projects are completed.

Since its Initial Public Offering, the Company has issued Convertible Preferred Shares as well as
two tranches of Fixed Rate Bonds. The table below shows the allocation of Use of Proceeds
based on the respective Final Prospectus published for the respective offerings as well as the
total amount disbursed accordingly from the funds raised as of December 31, 2017.

Amounts in Millions of Philippine Pesos

Total Total
Balance of
Funds Disbursed
Funds
Preferred Raised from Funds
PROJECT IPO Bonds 1 Bonds 2 from
Shares from Raised
Previous
Previous (as of Dec
Offerings
Offerings 31, 2017)
CityMall 200 3,950 2,530 5,660 12,340 12,031 309
DD-Meridian Park - 3,450 460 1,840 5,750 5,750 -

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Jollibee Tower - 980 440 1,330 2,750 750 2,000
The SkySuites Tower - 980 - - 980 980 -
Acquisition of Land &
pre-development works
for near-term
development 709 - - - 709 709 -
General working capital
purposes/ corporate
requirements 214 490 1,780 750 3,234 3,234 -
Total 1,122 9,850 5,210 9,580 25,762 23,453 2,309

CityMall Use of Proceeds

Below are the actual disbursements made from the previous offerings broken down on a per
CityMall site location basis. Funds disbursed were used to fund portions of the land acquisition
costs, construction costs and other project related expenses. Also shown on the table below is the
respective project status of each CityMall site as of December 31, 2017.

Amounts in Millions of Philippine Pesos

Total
Disbursed
Preferred from Funds Project Status as of
PROJECT IPO Bonds 1 Bonds 2
Shares Raised December 31, 2017
(as of Dec 31,
2017)

CityMall 200.00 4,000.22 2,530.00 5,300.36 12,030.58

CM-Arnaldo, Roxas 114.07 31.86 - - 145.93 Operational

CM-Consolacion Cebu 33.35 2.19 20.39 - 55.93 Operational
CM-Anabu Imus Cavite 11.09 8.66 33.67 - 53.42 Operational
CM-Tetuan 30.41 23.81 - - 54.22 Operational
CM-Tagbak, Jaro 11.08 8.63 - - 19.71 Operational
CM-Kalibo 66.33 - - 66.33 Operational
CM-Tiaong Quezon 112.25 - - 112.25 Operational
CM-Parola, Iloilo 149.27 - - 149.27 Operational
CM-Cotabato City 277.78 88.09 - 365.87 Operational
CM-Mandalagan, Bacolod 241.91 154.20 - 396.11 Operational
CM-Tagum City 124.89 185.74 99.53 410.16 Operational
CM-Boracay 100.21 86.28 163.70 350.19 Operational
CM-Kabankalan City 92.94 77.50 178.27 348.71 Operational
CM-Victorias City 89.14 98.47 165.23 352.84 Operational
CM-San Carlos City,
Negros 67.60 78.52 125.62 271.74 Operational
CM-Sctex Southbound 80.27 118.01 112.89 311.17 Operational
CM-Tarlac City 80.18 91.26 152.99 324.43 Operational
CM-Dumaguete City 111.34 153.07 113.00 377.41 Operational
CM-Goldenfields, Bacolod 97.75 142.93 192.69 433.37 Operational
CM-Dau, Pampanga 90.51 162.08 154.30 406.89 Operational
CM-Passi City 31.07 73.48 168.50 273.05 Operational

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 CM-Sta. Rosa, Nueva
Ecija 50.50 122.71 139.56 312.77 Operational
CM-Danao City 55.63 22.83 177.71 256.17 Operational
CM-Calamba 38.13 49.84 204.95 292.92 Operational
CM-Koronadal City 59.32 56.41 245.21 360.94 Operational
CM-Mayombo, Dagupan 38.74 40.77 205.32 284.83 Under Construction
CM-Bulua 33.27 65.74 194.35 293.36 Under Construction
CM-Cadiz City 80.19 0.70 97.11 178.00 Under Construction
CM-Isulan 1.27 24.23 191.63 217.13 Under Construction
CM-Pavia, Iloilo City 34.87 51.75 122.44 209.06 Under Construction
CM-Surigao City 16.07 15.21 181.72 213.00 Under Construction
CM-Calapan City 26.14 21.21 95.83 143.18 Under Construction
CM-Antique 4.04 96.06 94.35 194.45 Under Construction
CM-Ozamis 39.27 22.92 151.71 213.90 Under Construction
CM-Bacalso, Cebu City 57.34 22.11 345.69 425.14 Under Construction
CM-Pagadian 7.71 2.85 10.48 21.04 Planning & design stage
CM-Lam-An, Ozamiz 2.25 4.55 - 6.80 Planning & design stage
CM-San Enrique - 13.10 4.28 17.38 Planning & design stage
CM-Baler, Aurora 30.44 0.81 - 31.25 Planning & design stage
CM-Ormoc, Leyte 1.97 9.91 12.48 24.36 Under Construction
CM-Sorsogon 94.71 3.20 135.65 233.56 Under Construction
CM-San Carlos,
Pangasinan 10.42 23.04 79.25 112.71 Under Construction
CM-Palo, Leyte 68.69 3.90 14.51 87.10 Under Construction
CM-Iponan, CDO 41.05 50.54 202.27 293.86 Under Construction
CM-Tuguegarao 136.13 4.25 103.14 243.52 Under Construction
CM-General Trias 179.32 3.19 30.08 212.59 Planning & design stage
CM-Tagbilaran, Bohol 58.03 0.44 2.37 60.84 Planning & design stage
CM-Bongabon, Nueva
Ecija 46.03 8.19 0.32 54.54 Planning & design stage
CM-Aparri, Cagayan 59.45 18.44 48.85 126.74 Under Construction
CM-Los Baños, Laguna 109.59 1.02 28.29 138.90 Under Construction
CM-Roxas Ave., Roxas
City 29.97 38.26 168.26 236.49 Under Construction
CM-Guiwan, Zamboanga 25.06 14.46 170.81 210.33 Under Construction
CM-Dipolog City 62.58 50.15 207.81 320.54 Under Construction
CM-Northtown, Davao 6.57 79.64 7.21 93.42 Planning & design stage
CM-Lucena 102.67 8.92 - 111.59 Planning & design stage
CM-Basilan 40.87 13.62 - 54.49 Planning & design stage
CM-Balibago, Sta. Rosa 191.75 - - 191.75 Planning & design stage
CM-Guimaras 38.57 0.32 - 38.89 Planning & design stage
CM-Arayat 21.57 - - 21.57 Planning & design stage
CM-Dinalupihan 10.66 0.29 - 10.95 Planning & design stage
CM-Bais 132.36 0.38 - 132.74 Planning & design stage
CM-La Carlota City 68.40 0.35 - 68.75 Planning & design stage

Below are actual photos of the CityMall sites both operational and under construction:

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DD Meridian Park Use of Proceeds

Below are the actual disbursements made from the previous offerings broken down on a per
phase basis. Funds disbursed were used to fund construction costs and other project related
expenses. Also shown on the table below is the respective project status of each phase as of
December 31, 2017.

Amounts in Millions of Philippine Pesos

Total
Project Status
Disbursed
Preferred Bonds as of
PROJECT IPO Bonds 2 from Funds
Shares 1 December 31,
Raised
2017
(as of Dec

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 31, 2017)

DD Meridian - 3,450.0 460.0 1,840.00 5,750.00

Phase 1 - DoubleDragon Plaza - 3,450.00 460.00 1,559.00 5,469.00 Operational

Phase 2- DoubleDragon Center
East & West - - - 281.00 281.00 23.25%

Below is the actual photo of DoubleDragon Plaza which comprises Phase 1 of DD Meridian
Park:

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Below are the latest construction photos of DoubleDragon Center East (left) and DoubleDragon
Center (West) which comprises Phase 2 of DD Meridian Park which are 23.25% completed as of
December 31, 2017:

Jollibee Tower Use of Proceeds

Below are the actual disbursements made from the previous offerings. Funds disbursed were
used to fund construction costs and other project related expenses. Also shown on the table
below is the respective project status of the project as of December 31, 2017. Based on the
allocated funds presented in the previous offerings the Company still has ₱2 billion in funds
raised to be disbursed in the project as construction progresses. The Company invests a portion
of the undisbursed proceeds in short-term time deposit placements while the remaining proceeds
were included in the cash in bank of the Company as of December 31, 2017. Jollibee Tower is
slated for completion by end-2018.

Amounts in Millions of Philippine Pesos

Total Disbursed
Preferred Project Status as of
PROJECT IPO Bonds 1 Bonds 2 from Funds Raised
Shares December 31, 2017
(as of Dec 31, 2017)

Jollibee Tower - 750.0 - - 750.00 14.20%

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Below are the latest construction photos of Jollibee Tower which is 14.2% completed as of
December 31, 2017:

The SkySuites Tower

Below are the actual disbursements made from the previous offerings. Funds disbursed were
used to fund acquisition costs, construction costs and other project related expenses. Also shown
on the following is the respective project status of the project as of December 31, 2017.

Amounts in Millions of Philippine Pesos

Total
Disbursed Project
from Status as
Preferred
PROJECT IPO Bonds 1 Bonds 2 Funds of
Shares
Raised December
(as of Dec 31, 2017
31, 2017)
The SkySuites Tower - 980.0 - - 980.00 97.00%

In addition to the amounts above ₱35 million of the funds allocated from IPO for the acquisition
of land & pre-development works for near-term development were also used in the initial
acquisition of the project.

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Below is the actual photo of The SkySuites Tower:

Jollibee Tower, The SkySuites Tower and DD Meridian Use of Proceeds

The table below presents a summary of the use of proceeds from the previous offerings vis-à-vis
the actual disbursement:

Contract Actual Spend as of % Completion as of

Amount December 31, 2017 December 31, 2017
(₱ millions) (₱ millions)
Jollibee Tower 3,019.65 869.25 14.20%
The SkySuites Tower 3,161.38 2,062.7 97.00%
DD Meridian 7,652.70 5,762.40
Phase 1 - DoubleDragon 6,325.80 5,469.50 Operational
Plaza
Phase 2- DoubleDragon 1,326.90 292.90 23.25%
Center East & West

Land banking

As of December 31, 2017, the status of the Company’s land banking activities is as follows:

Target 2020 Target Total Sites Secured Percentage Leasable Target

(in sq. m.) Landbank Secured Once Fully Leasable
(in sq. m.) Developed (in sq. m.)
(in sq. m.)
63 of 100
Retail 700,000.00 804,910 63% 471,018 700,000
CityMalls Sites
Office 300,000.00 53,288 Fully Secured 100% 335,978 300,000
3,695 Rooms of
Hospitality 100,000.00 100,614 74% 79,015 100,000
5,000 Rooms

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 Target 2020 Target Total Sites Secured Percentage Leasable Target
(in sq. m.) Landbank Secured Once Fully Leasable
(in sq. m.) Developed (in sq. m.)
(in sq. m.)
54,000 sqm of
Industrial 100,000.00 31,935 54% 54,000 100,000
100,000 sqm
940,011
(78.3% of
target
leasable
Total 990,747 space) 1,200,000

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 DIVIDENDS AND DIVIDEND POLICY

Under Philippine law, dividends may be declared out of a corporation’s Unrestricted Retained
Earnings which shall be payable in cash, in property, or in stock to all stockholders on the basis
of outstanding stock held by them. The amount of retained earnings available for declaration as
dividends may be determined pursuant to regulations issued by the Philippine SEC. The
approval of the Board of Directors is generally sufficient to approve the distribution of
dividends, except in the case of stock dividends which requires the approval of stockholders
representing not less than two-thirds of the outstanding capital stock at a regular or special
meeting duly called for the purpose. From time to time, the Company may reallocate capital
among its Subsidiaries depending on its business requirements.

The Philippine Corporation Code prohibits stock corporations from retaining surplus profits in
excess of 100% of their paid-in capital stock, except when justified by definite corporate
expansion projects or programs approved by the Board of Directors, or when the corporation is
prohibited under any loan agreement with any financial institution or creditor from declaring
dividend without its consent, and such consent has not yet been secured, or when it can be
clearly shown that such retention is necessary under special circumstances obtaining in the
corporation.

Limitations and Requirements

Under Philippine law, a corporation can only declare dividends to the extent that it has
Unrestricted Retained Earnings that represent the undistributed earnings of the corporation which
have not been allocated for any managerial, contractual or legal purpose and which are free for
distribution to the shareholders as dividends. A corporation may pay dividends in cash, by the
distribution of property or by the issuance of shares. Stock dividends may only be declared and
paid with the approval of shareholders representing at least two-thirds of the outstanding capital
stock of the corporation voting at a shareholders’ meeting duly called for the purpose.

The Philippine Corporation Code generally requires a Philippine corporation with retained
earnings in excess of 100% of its paid-in capital to declare and distribute as dividends the
amount of such surplus. Notwithstanding this general requirement, a Philippine corporation may
retain all or any portion of such surplus in the following cases: (i) when justified by definite
expansion plans approved by the board of directors of the corporation; (ii) when the required
consent of any financing institution or creditor to such distribution has not been secured;
(iii) when retention is necessary under special circumstances, such as when there is a need for
special reserves for probably contingencies; or (iv) when the non-distribution of dividends is
consistent with the policy or requirement of a Government office.

The Company has entered into several long-term loan agreements which do not permit the
declaration of dividends, if as a result thereof, the Company would breach its financial covenants
or an event of default would occur. The Company’s long-term loan agreements require the
Company to maintain a debt-to-equity ratio of not more than 2.33x and a debt service coverage
ratio of not less than 1.25x. Further, the documentation relating to the Company’s ₱9.7 billion
6.0952% bonds due 2024 and ₱5.3 billion 5.9721% bonds due 2026 require the Company to

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maintain a debt-to-equity ratio of not more than 2.33x and a debt service coverage ratio of not
less than 1.00x.

Record Date

Pursuant to existing Philippine SEC rules, cash dividends declared by the Company must have a
record date not less than 10 nor more than 30 days from the date of declaration. For stock
dividends, the record date should not be less than 10 nor more than 30 days from the date of the
shareholders’ approval, provided however, that the set record date is not to be less than 10
trading days from receipt by the PSE of the notice of declaration of stock dividend. In the event
that a stock dividend is declared in connection with an increase in authorized capital stock, the
corresponding record date is to be fixed by the Philippine SEC.

Dividend History

On April 10, 2013 the Board of Directors in a special meeting declared cash dividends to
common shareholders in the amount of ₱92.7 million to all common stockholders of record as of
April 10, 2013 and the same was paid in June 2013. On June 25, 2015 the Board of Directors in a
regular meeting declared cash dividends to common shareholders equivalent to 20% of its net
income for the year ended December 31, 2014 amounting to ₱111.5 million or ₱0.05 per
Common Share to all common shareholders of record as of July 13, 2015. The payment date for
such dividend was on July 27, 2015.

For holders of Preferred Shares, the Board of Directors approved on June 23, 2016, a special
cash dividend, in the amount of ₱0.0867 per Preferred Share. On July 14, 2016, the special cash
dividend was paid to all shareholders holding Preferred Shares of record as of July 8, 2016. This
declaration of such special cash dividend was in addition to the regular dividend of 6.4778% per
annum that holders of Preferred Shares are entitled to (subject to the availability of sufficient
Unrestricted Retained Earnings). The Company has declared the following regular dividends for
holders of Preferred Shares:

Amount of Dividends
Date of Approval of Board
Approved Per Preferred Date of Payment
of Directors
Share
June 23, 2016 ₱1.619 July 14, 2016
September 20, 2016 ₱1.6199 October 14, 2016
December 8, 2016 ₱1.61945 January 14, 2017
March 21, 2017 ₱1.61945 April 17, 2017
June 21, 2017 ₱1.61945 July 14, 2017
September 27, 2017 ₱1.61945 October 16, 2017
December 6, 2017 ₱1.61945 January 15, 2018
March 22, 2018 ₱1.61945 April 16, 2018
June 19, 2018 ₱1.61945 July 16, 2018

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Dividend Policy

The Company’s current dividend policy provides that at least 30% of the preceding fiscal year’s
net income after tax will be declared as dividends, subject to (i) the availability of Unrestricted
Retained Earnings, (ii) implementation of business plans, (iii) contractual obligations, and (iv)
working capital requirements. There can be no guarantee that the Company will pay any
dividends in the future. The declaration and payment of dividends is subject to compliance
annually or as often as the Board of Directors may deem appropriate, in cash or in kind and/or in
additional shares from its surplus profits. The ability of the Company to pay dividends will
depend on its retained earnings level and financial condition. There is no assurance that the
Company will pay dividends in the future.

Each of the Subsidiaries intend to approve a dividend policy that would entitle its stockholders to
receive dividends equivalent to 30% to 100% of the prior year’s net income after tax subject to
(i) the availability of Unrestricted Retained Earnings, (ii) implementation of business plans, (iii)
contractual obligations, and (iv) working capital requirements. None of the Subsidiaries have
declared dividends in the past.

On April 14, 2016, the Company issued 100,000,000 Preferred Shares with a par value and issue
price of ₱100 per share at an initial dividend rate of 6.4778% per annum. Unless the Preferred
Shares shall have been redeemed by the Company on the seventh anniversary from the issue date
thereof, the dividend rate shall be adjusted to the higher of: a) the initial dividend rate, or b) the
10-year PDST-R2 plus a step up spread equivalent to the initial spread plus 150bps.

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 DETERMINATION OF THE OFFER PRICE

The Common Shares are listed and traded on the Main Board of the PSE under the symbol
“DD.” The Company will apply for the Offer Shares to be listed and traded on the PSE under
the same symbol. For a description of the PSE, see “The Philippine Stock Market.”

The Offer Price has been determined by the Company, the International Bookrunners and Lead
Managers and the Domestic Lead Underwriters and Bookrunners through a book-building
process and not by reference to the historical trading price of the Common Shares. Investors
should not rely on the historical market price of the Common Shares on the PSE as an indicator
of the value of the Common Shares.

The factors considered in determining the Offer Price, among others, include the Company’s
ability to generate earnings and cash flow, its prospects, the level of demand from institutional
investors, overall market conditions at the time of the launch and the market price of listed
comparable companies. The Offer Price does not have any correlation to the actual book value of
the Offer Shares.

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 CAPITALIZATION AND INDEBTEDNESS

The following table sets out the Company’s consolidated debt, shareholders’ equity and
capitalization as of March 31, 2018, and as adjusted to reflect the sale of 135,000,000 Firm
Shares at the Offer Price of ₱30.00 per Offer Share. The table should be read in conjunction with
the Company’s audited consolidated financial statements and the notes thereto, included in this
Prospectus beginning on page F-1. Other than as described below, there has been no material
change in the Company’s capitalization and indebtedness since March 31, 2018.
After Giving Effect to the Offer
and Various Debt and Equity
Actual Transactions subsequent to
as of March 31, 2018 March 31, 2018(2)(5)
(₱ in (U.S.$ in (₱ in (U.S.$ in
millions) millions)(1)(4) millions) millions)(1)(4)
(Unaudited) (Unaudited)
Total debt(3) ................................... 33,613.9 643.8 33,613.9 643.8
Equity:
Capital stock................................... 223.0 4.3 236.5(4) 4.5
Preferred shares .............................. 10,000.0 191.5 10,000.0 191.5
Additional paid-in capital .............. 1,358.2 26.0 5,303.9 101.6
Retained earnings ........................... 2,884.2 55.3 2,884.2 55.3
Remeasurement loss on defined
benefit liability – net of tax ............ 1.9 0.0 1.9 0.0
Non-controlling interests ............... 8,406.1 161.0 8,406.1 161.0
Total equity ................................... 22,873.4 438.1 26,832.6 513.9
Total capitalization ...................... 56,487.3 1,081.9 60,446.5 1,157.7

_______________
Notes:

(1) The translation of Peso amounts into U.S. dollars is provided for convenience only and is unaudited. For readers’ convenience only,
amounts in Pesos as of and for the year ended December 31, 2017 were converted to U.S. dollars using the BSP Rate as of December 29,
2017 of ₱49.92 = U.S.$1.00, while amounts in Pesos as of and for the three months ended March 31, 2018 were converted to U.S.
dollars using the BSP rate as of March 28, 2018 of ₱52.21 = U.S.$1.00.

(2) Various debt and equity transactions subsequent to December 31, 2017 consist of the sale of the Firm Shares.

(3) Total debt comprises short term notes payable, long-term notes payable – net of issue cost, and bonds payable – net of issue cost.

(4) Assuming full exercise of the Over-allotment Option, the Company’s capital stock would be ₱238.0 million (U.S.$4.6 million).

(5) This does not include any exercise of the employee stock options by eligible employees subsequent to March 31, 2018. On September 25,
2017, the Philippine SEC approved the Company’s proposed issuance of 9,850,000 Common Shares in favor of 64 eligible employees
pursuant to its Stock Option Plan. The issuance of such shares shall be exempt from the registration requirements under the SRC
provided the Company files within ten days from the end of each year, while the plan is in force, a report showing the names of the
option holders and the number of shares subscribed by them. As of March 31, 2018, no eligible employee has exercised his or her option
under the Stock Option Plan.

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 DILUTION

The book value attributable to the Company’s shareholders, based on the Company’s
consolidated financial statements as of March 31, 2018, was ₱4,467.3 million, while the book
value per Common Share was ₱2.00. The book value attributable to the Company’s shareholders
represents the amount of the Company’s total equity attributable to equity holders of the
Company. The Company’s book value per Common Share is computed by dividing the book
value attributable to the Company’s shareholders by the equivalent number of Common Shares
outstanding. Without taking into account any other changes in such book value after March 31,
2018 other than the sale of 135,000,000 Firm Shares at the Offer Price of ₱30.00 per Offer Share
and after deduction of the underwriting discounts and commissions and estimated offering
expenses of the Firm Offer payable by the Company, the Company’s net book value as of listing
would increase to ₱8,426.5 million, or ₱3.56 per Common Share. This represents an immediate
increase in net book value of ₱1.56 per Common Share to existing shareholders, and an
immediate dilution of ₱26.44 per Common Share to purchasers of Firm Shares at the Offer Price
of ₱30.00 per Offer Share. Assuming full exercise of the Over-allotment Option, the Company’s
net book value as of listing would increase to ₱8,869.2 million, or ₱3.73 per Common Share.
This represents an immediate increase in net book value of ₱1.73 per Common Share to existing
shareholders, and an immediate dilution of ₱26.27 per Common Share to purchasers of Offer
Shares at the Offer Price of ₱30.00 per Offer Share.

Dilution in pro forma book value per share to investors of the Offer Shares represents the
difference between the Offer Price and the pro forma book value per share immediately
following the completion of the Firm Offer. The pro forma book value per share immediately
following the completion of the Firm Offer represents the book value per share as of March 31,
2018 after giving effect to the Firm Offer.

The following table illustrates dilution on a per share basis based on at the Offer Price of ₱30.00
per Offer Share and the Firm Offer that includes an Offer of 135,000,000 Firm Shares and Over-
allotment Option of up to 15,000,000 Common Shares:

Offer Price range per Offer Share ......................................................................... ₱ 30.00

Book value per Common Share as of March 31, 2018 ......................................... ₱ 2.00
Difference in Offer Price per Offer Share and book value per Offer Share as of
March 31, 2018 ..................................................................................................... ₱ 28.00
Pro forma book value per Common Share immediately following completion of
the Firm Offer ....................................................................................................... ₱ 3.56
Pro forma book value per Common Share immediately following completion of
the Offer (assuming full exercise of the Over-allotment Option) ......................... ₱ 3.73
Dilution in Pro forma book value per Common Share to investors of the Firm
Shares .................................................................................................................... ₱ 26.44
Dilution in Pro forma book value per Common Share to investors of the Offer
Shares (assuming full exercise of the Over-allotment Option) ............................. ₱ 26.27

The following table sets forth the shareholdings and percentage of Common Shares outstanding
of existing and new shareholders of the Company immediately after completion of a Firm Offer

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of 135,000,000 Offer Shares and completion of the Offer (assuming full exercise of the Over-
Allotment Option):

Common Shares after

completion of the Offer
Common Shares after (assuming full exercise of
completion of the Firm Offer the Over-Allotment Option)
Number % Number %
Existing shareholders .................... 2,229,730,000 94.3 2,229,730,000 93.7
New investors................................ 135,000,000 5.7 150,000,000 6.3
Total ............................................. 2,364,730,000 100.0 2,379,730,000 100.0

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 SELECTED FINANCIAL AND OPERATING INFORMATION

The following tables set forth summary consolidated financial information for the Company and
should be read in conjunction with the independent auditors’ reports and the Company’s
consolidated financial statements, including the notes thereto, included elsewhere in this
Prospectus, and the section entitled “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” The summary consolidated financial information as at
and for the years ended December 31, 2017, 2016 and 2015 were derived from the Company’s
audited consolidated financial statements, which were prepared in accordance with PFRS and
were audited by RGM in accordance with the Philippine Standards on Auditing (“PSA”). The
summary consolidated financial information as at and for the three months ended March 31,
2017 and 2018 were derived from the Company’s consolidated financial statements, which were
prepared in accordance with PFRS and were reviewed by RGM in accordance with the PSA. The
summary consolidated financial information below is not necessarily indicative of the results of
future operations. Furthermore, the translation of Peso amounts into U.S. dollars as at and for
the year ended December 31, 2017 and the three months ended March 31, 2018 is provided for
convenience only and is unaudited. For readers’ convenience only, amounts in Pesos as of and
for the year ended December 31, 2017 were converted to U.S. dollars using the BSP Rate as of
December 29, 2017 of ₱49.92 = U.S.$1.00, while amounts in Pesos as of and for the three
months ended March 31, 2018 were converted to U.S. dollars using the BSP rate as of March 28,
2018 of ₱52.21 = U.S.$1.00. As of June 8, 2018, the Peso was at ₱52.70 against the U.S. dollar.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31, For the three months ended March 31,
2015 2016(2) 2017 2017 2017 2018 2018
₱ ₱ ₱ U.S.$ ₱ ₱ U.S.$
(Audited) (Unaudited) (Reviewed) (Unaudited)
(millions, except earnings per share)
REVENUES
Real estate sales.................................................. 641.5 931.9 819.5 16.4 400.0 241.7 4.6
Leasehold rights’ sales ....................................... 139.7 292.7 21.6 0.4 24.1 - -
Rental income .................................................... 116.5 268.7 909.2 18.2 104.5 409.7 7.8
Hotel revenues.................................................... — 78.9 397.5 8.0 89.7 121.7 2.4
Unrealized gains from changes in fair value
of investment property........................................ 811.1 1,830.0 4,174.5 83.6 - 851.9 16.3
Interest income ................................................... 120.9 119.3 128.0 2.6 9.3 119.9 2.3
Other income from forfeiture ............................. 69.3 12.7 12.1 0.2 2.0 2.4 -
Others ................................................................. 30.0 177.6 149.5 3.0 19.4 83.0 1.7
Total Revenues ................................................. 1,929.0 3,711.8 6,611.9 132.4 649.0 1,830.3 35.1
COSTS AND EXPENSES
Cost of real estate sales ...................................... 370.6 495.8 362.2 7.2 165.7 131.4 2.5
Cost of leasehold rights ...................................... 8.4 21.9 4.2 0.1 4.1 - -
Cost of hotel operations...................................... — 61.0 275.5 5.5 62.9 90.9 1.7
Selling and marketing expenses ......................... 113.0 172.7 197.4 4.0 50.3 50.8 1.0
General and administrative expenses.................. 428.6 725.5 1,093.9 21.9 161.9 295.6 5.7
Interest expense .................................................. 114.4 330.2 643.8 12.9 15.8 187.7 3.6
Total Costs and Expenses ................................ 1,035.0 1,807.1 2,577.0 51.6 460.7 756.4 14.5
Income before Income Tax .............................. 894.0 1,904.7 4,034.9 80.8 188.3 1,073.9 20.6
Income Tax Expense ........................................ 271.2 434.4 1,508.6 30.2 22.6 329.3 6.3
Net Income ........................................................ 622.8 1,470.3 2,526.3 50.6 165.7 744.6 14.3
Other Comprehensive Income (Loss)
Item that will never be reclassified to profit

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or loss
Remeasurement income (loss) on defined
benefit liability ............................................... (3.7) — 6.4 0.1 - - -
Deferred tax effect on remeasurement loss
on defined benefit liability.............................. 1.1 — (1.9) (0.0) - - -
Total Comprehensive Income .......................... 620.2 1,470.3 2,530.8 50.7 165.7 744.6 14.3
Total comprehensive income attributable to:
Equity holders of the Parent Company........... 556.8 1,079.1 1,646.0 33.0 149.4 524.2 10.1
Non-controlling interest ................................. 63.4 391.2 884.8 17.7 16.3 220.3 4.2
Basic earnings (loss) per Common Share
(₱)(1) ................................................................... 0.2509 0.2622 0.4457 (0.0056) 0.1625
Diluted earnings (loss) per Common Share
(₱)(1).................................................................... 0.2509 0.2622 0.4452 (0.0056) 0.1623

Note:
(1) These do not reflect the convertibility option of the 100,000,000 Preferred Shares in April 2018.
(2) The audited financial statements of the Company for 2016 were restated to reflect the adjustment in the fair values of the
identifiable net assets of HOA as a result of its acquisition in 2016. The independent valuation of such assets were made in 2017.
See accompanying notes to the Company’s audited financial statements elsewhere in the Prospectus.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As of December 31, As of March 31,
2015 2016(1) 2017 2017 2017 2018 2018
₱ ₱ ₱ U.S.$ ₱ ₱ U.S.$
(Audited) (Unaudited) (Reviewed) (Unaudited)
(millions)
ASSETS
Current Assets
Cash and cash equivalents................ 960.5 5,466.9 2,100.4 42.1 2,277.9 1,301.7 24.9
Receivables – net ............................. 719.1 1,712.3 3,419.4 68.5 1,747.5 3,719.3 71.2
Inventories ....................................... 2,640.4 3,186.3 3,819.5 76.5 3,253.9 3,929.3 75.3
Due from related parties................... 58.6 101.8 103.5 2.1 407.1 103.4 2.0
Prepaid expenses and other
current assets – net ........................... 1,282.7 3,251.3 4,822.6 96.6 2,959.0 4,299.2 82.4
Total Current Assets .......................... 5,661.3 13,718.6 14,265.4 285.8 10,645.4 13,352.9 255.8
Noncurrent Assets
Receivables – net of current
portion ......................................... 458.7 643.3 230.7 4.6 956.7 304.1 5.8
Property and equipment – net .......... 145.8 863.4 1,009.9 20.2 1,473.6 1,010.4 19.4
Goodwill and intangible assets......... 94.3 1,255.0 1,313.8 26.3 161.0 1,321.7 25.3
Investment property ......................... 19,929.9 32,535.1 46,423.6 930.0 34,864.9 50,075.8 959.1
Deferred tax assets ........................... 418.8 15.5 263.3 5.3 113.2 276.4 5.3
Other noncurrent assets .................... 1,054.5 1,022.6 822.6 16.4 1,776.3 847.3 16.2
Total Noncurrent Assets .................... 22,102.0 36,334.9 50,063.9 1,002.8 39,345.7 53,835.7 1,031.1
Total Assets ......................................... 27,763.3 50,053.5 64,329.3 1,288.6 49,991.1 67,188.6 1,286.9

LIABILITIES AND EQUITY

Current Liabilities
Accounts payable and other
liabilities .......................................... 1,603.2 2,640.0 4,057.6 81.3 2,735.9 4,924.3 94.4
Short-term notes payable ................. 4,274.0 3,486.0 3,452.2 69.2 3,187.6 4,152.1 79.5
Due to related parties ....................... 553.7 1,081.0 944.7 18.9 1,297.0 946.3 18.1
Current portion of customers’
deposits ............................................ 57.8 219.9 125.7 2.5 149.8 438.6 8.4
Dividends payable............................ — 162.0 152.1 3.0 152.4 177.1 3.4
Income tax payable .......................... 0.7 1.1 23.1 0.5 0.6 63.6 1.2

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 As of December 31, As of March 31,
2015 2016(1) 2017 2017 2017 2018 2018
₱ ₱ ₱ U.S.$ ₱ ₱ U.S.$
(Audited) (Unaudited) (Reviewed) (Unaudited)
(millions)
Total Current Liabilities .................... 6,489.4 7,590.0 8,755.4 175.4 7,523.3 10,702.0 205.0
Noncurrent Liabilities
Long-term notes payable – net of
debt issue costs ................................ 11,114.5 15,027.8 14,727.6 295.0 15,036.0 14,662.5 280.8
Bonds payable – net of issue cost..... — 5,217.7 14,795.3 296.4 5,219.4 14,799.3 283.5
Deferred tax liabilities...................... 785.1 1,149.4 2,849.1 57.1 1,076.8 3,142.2 60.2
Retirement benefits liability ............. 5.0 6.1 7.7 0.2 5.9 8.6 0.2
Customers’ deposits – net of - - -
current portion ................................. 111.3 — — —
Other noncurrent liabilities .............. 613.5 844.2 878.4 17.5 891.5 1,000.6 19.1
Total Noncurrent Liabilities .............. 12,629.4 22,245.2 33,258.1 666.2 22,229.6 33,613.2 643.8
Total Liabilities................................... 19,118.8 29,835.2 42,013.5 841.6 29,752.9 44,315.2 848.8
Equity Attributable to Equity
Holders of the Parent Company
Capital stock .................................... 223.0 223.0 223.0 4.5 223.0 223.0 4.3
Preferred shares ............................... — 10,000.0 10,000.0 200.3 10,000.0 10,000.0 191.5
Additional paid-in capital................. 1,358.2 1,358.2 1,358.2 27.2 1,358.2 1,358.2 26.0
Retained earnings............................. 1,174.3 1,578.1 2,571.9 51.5 1,581.8 2,884.2 55.3
Remeasurement gain (loss) on
defined benefit liability – net of
tax .................................................... (2.6) (2.6) 1.9 0.0 (2.6) 1.9 -
2,752.9 13,156.7 14,155.0 283.5 13,160.4 14,467.3 277.1
Non-controlling interests.................... 5,891.6 7,061.6 8,160.8 163.5 7,077.8 8,406.1 161.0
Total Equity ........................................ 8,644.5 20,218.3 22,315.8 447.0 20,238.2 22,873.4 438.1
Total Liabilities and Equity ............... 27,763.3 50,053.5 64,329.3 1,288.6 49,991.1 67,188.6 1,286.9

Note:
(1) The audited financial statements of the Company for 2016 were restated to reflect the adjustment in the fair values of the identifiable
net assets of HOA as a result of its acquisition in 2016. The independent valuation of such assets were made in 2017. See
accompanying notes to the Company’s audited financial statements elsewhere in the Prospectus.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, For the three months ended March 31,
2015 2016 2017 2017 2017 2018 2018
₱ ₱ ₱ U.S.$ ₱ ₱ U.S.$
(Audited) (Unaudited) (Reviewed) (Unaudited)
(millions)

Net cash provided by (used in)

operating activities ...................... (728.3) (2,909.4) (3,492.4) (69.9) 70.5 1,143.3 21.9
Net cash provided by (used in)
investing activities ....................... (9,064.9) (9,774.9) (8,624.1) (172.8) (2,798.9) (2,525.3) (48.4)
Net cash provided by (used in)
financing activities ...................... 6,936.5 17,190.7 8,750.0 175.3 (460.6) 583.3 11.2
Net increase (decrease) in cash
and cash equivalents. ................... (2,856.7) 4,506.4 (3,366.5) (67.4) (3,189.0) (798.7) (15.3)
Cash at beginning of the period ... 3,817.2 960.5 5,466.9 109.5 5,466.9 2,100.4 40.2
Cash at end of the period ............. 960.5 5,466.9 2,100.4 42.1 2,277.9 1,301.7 24.9

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KEY PERFORMANCE INDICATORS

The table below sets forth key performance indicators for the Company for the years ended
December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018.
For the three months
For the years ended December 31, ended March 31,
2015 2016 2017 2017 2018
Net Profit Margin (Net Income to Revenue)(1) ............................. 29.0% 29.1% 24.8% 23.0% 28.6%
Revenue Growth(2) ........................................................................ 12.8% 92.4% 78.1% 110.5% 182.0%
Net Income Growth(3) ................................................................... 0.6% 92.9% 52.1% 282.8% 250.9%
EBITDA (millions)(4).................................................................... ₱1,143.0 ₱2,268.4 ₱4,762.1 ₱216.9 ₱1,296.5
Recurring Revenue (millions)(5) ................................................... ₱116.5 ₱347.6 ₱1,306.6 ₱ 194.2 ₱ 531.4
Recurring Revenue Growth(6) ....................................................... 1,827.6% 198.2% 275.9% 325.7% 173.7%
Recurring Revenue as a Percentage of Total Revenues (7) ............ 6.0% 9.4% 19.8% 29.9% 29.0%
Total Revenues (millions) ............................................................ ₱1,929.0 ₱3,711.8 ₱6,611.9 ₱ 649.0 ₱ 1,830.3
Total Revenue Growth (excluding unrealized gains from
change in fair values of investment property) ............................... (10.9)% 68.3% 29.5% 110.5% 50.8%
Real Estate Sales as a Percentage of Total Revenues ................... 33.3% 25.1% 12.4% 61.6% 13.2%
Rental Income as a Percentage of Total Revenues ....................... 6.0% 7.2% 13.8% 16.1% 22.4%
Hotel Revenues as a Percentage of Total Revenues ..................... - 2.1% 6.0% 13.8% 6.6%
Debt to Equity Ratio (Gross)(8) ..................................................... 1.78 1.17 1.48 1.16 1.47
Debt to Equity Ratio (Net)(9)......................................................... 1.67 0.90 1.38 1.05 1.41
Debt to Assets(10) .......................................................................... 55.4% 47.4% 51.3% 46.89% 50.03%
Net Debt to Assets(11).................................................................... 52.0% 36.5% 48.0% 42.34% 48.09%
Acid Test Ratio(12) ........................................................................ 0.27 0.96 0.64 0.59 0.48
Solvency Ratio(13) ......................................................................... 1.45 1.68 1.53 1.68 1.52
Interest Coverage Ratio(14) ............................................................ 1.38 2.14 2.92 0.58 2.63
_______________
Notes:

(1) Net Profit Margin (Net Income to Revenue) is computed by dividing net income attributable to the owners of the parent company by total
revenue.

(2) Revenue Growth is computed by dividing the current period’s total revenue less the prior period’s total revenue by total revenue for the
prior period.

(3) Net Income Growth is computed by dividing the current period’s net income attributable to owners of the parent company less the prior
period’s net income attributable to owners of the parent company by the prior period’s net income attributable to owners of the parent
company.

(4) EBITDA means the sum of income from operations, depreciation and interest expense. EBITDA is not a measurement of financial
performance under PFRS and investors should not consider it in isolation or as an alternative to profit or loss for the period, income or
loss from operations, an indicator of the Company’s operating performance, cash flow from operating, investing and financing activities,
or as a measure of liquidity or any other measures of performance under PFRS. Because there are various EBITDA calculation methods,
the Company’s presentation of this measure may not be comparable to similarly titled measures used by other companies. EBITDA
above are unaudited figures.

(5) Recurring Revenues means the sum of rental income and hotel revenues for the period.

(6) Recurring Revenue Growth is computed by dividing the current period’s Recurring Revenues less the prior period’s Recurring Revenues
by Recurring Revenues for the prior period.

(7) Recurring Revenue as a Percentage of Total Revenues means the sum of rental income and hotel revenues divided by the total revenues
of the Company.

(8) Debt to Equity Ratio (Gross) is computed by dividing total interest bearing short-term and long-term debt by total equity.

(9) Debt to Equity Ratio (Net) is computed by dividing total interest bearing short-term and long-term debt less cash and cash equivalents by
total equity.

(10) Debt to Assets is computed by dividing total interest bearing short-term and long-term debt by total assets.

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(11) Net Debt to Assets is computed by dividing total interest bearing short-term and long term debt (less cash and cash equivalents) by total
assets.

(12) Acid Test Ratio is computed by dividing current assets less inventory and prepayments by current liabilities.

(13) Solvency Ratio is computed by dividing total assets by total liabilities.

(14) Interest Coverage Ratio is computed by dividing earnings before interest and taxes (EBIT) by interest charges. EBIT is not a
measurement of financial performance under PFRS and investors should not consider it in isolation or as an alternative to profit or loss
for the period, income or loss from operations, an indicator of the Company’s operating performance, cash flow from operating,
investing and financing activities, or as a measure of liquidity or any other measures of performance under PFRS. Because there are
various EBIT calculation methods, the Company’s presentation of this measure may not be comparable to similarly titled measures used
by other companies.

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 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion of the Company’s financial results should be read in conjunction with
the independent auditors’ reports and the Company’s audited and reviewed consolidated
financial statements and notes thereto contained in this Prospectus and the section entitled
“Selected Financial and Operating Information.”

This discussion contains forward-looking statements and reflects the current views of the
Company with respect to future events and financial performance. Actual results may differ
materially from those anticipated in these forward-looking statements as a result of certain
factors such as those set forth in the section entitled “Risk Factors” and elsewhere in this
Prospectus. The translation of Peso amounts into U.S. dollars as at and for the year ended
December 31, 2017 is provided for convenience only and is unaudited. For readers’
convenience only, amounts in Pesos as of and for the year ended December 31, 2017 were
converted to U.S. dollars using the BSP Rate as of December 29, 2017 of ₱49.92 = U.S.$1.00,
while amounts in Pesos as of and for the three months ended March 31, 2018 were converted to
U.S. dollars using the BSP rate as of March 28, 2018 of ₱52.21 = U.S.$1.00. As of June 8, 2018,
the Peso was at ₱52.70 against the U.S. dollar.

OVERVIEW

DoubleDragon Properties Corp. is an emerging real estate company in the Philippines,

principally engaged in the ownership and operation of a portfolio of leasable properties through
its four principal business segments: retail leasing, office leasing, hospitality and industrial
leasing, with the aim of becoming one of the leading property players in the Philippines with the
highest percentage of recurring revenue. The Company’s two principal shareholders are Injap
Investments Inc., controlled by the Sia family, and Honeystar Holdings Corp. controlled by the
Tan and Ang families, who also controls Jollibee Foods Corporation (“JFC”), the largest fast
food company in the Philippines.

As of December 31, 2017, through its subsidiary, CityMall Commercial Centers Inc.
(“CMCCI”), the Company owns and operates 25 CityMalls, with a total leasable area of
147,806.0 sq. m., primarily located in the provincial areas of the Philippines. The Company also
has 21 CityMalls under construction, with an additional land bank for 17 CityMalls. CMCCI is
66% owned by the Company and 34% owned by SM Investments Corp. (“SMIC”), the holding
company for one of the largest conglomerates in the Philippines.

The Company’s office leasing segment primarily consists of two key projects under
development, DD Meridian Park and Jollibee Tower. DD Meridian Park, a 4.8 hectare project
located in the Manila Bay area of Pasay City, and which is 70%-owned by the Company, is
expected to consist of 280,000 sq. m. of leasable space. The space will primarily be used for
BPO, outsourcing and support service offices, and corporate offices and is to be constructed in
four phases. The first phase, DoubleDragon Plaza, was inaugurated and unveiled on May 7,
2018, while the second phase is expected to be completed in the fourth quarter of 2018. Jollibee
Tower is a Grade A 41-storey commercial and office tower with 47,909 sq. m. of leasable space
and is situated in the heart of the Ortigas central business district in Metro Manila. The project,

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which is expected to be completed in 2018, is a joint venture between the Company and JFC,
who will serve as the building’s anchor tenant.

The Company’s hospitality segment is operated through its subsidiary, Hotel of Asia, Inc.
(“HOA”), which is 70%-owned by the Company, and HOA’s wholly owned subsidiary, Hotel
101 Management Inc. The hospitality operations comprise 866 operating hotel rooms, including
the Company’s own hotel brand, “Hotel 101”, which currently has one operating hotel in the Bay
Area near the Mall of Asia. CSI Hotels, Inc., a 50%-owned subsidiary of HOA, is the
Philippines’ master franchisee of the “Jinjiang Inn” brand, with two hotels in operation in
Ortigas and Makati, Metro Manila primarily targeted at Chinese tourists. Hotel 101 Management
Corporation, a wholly owned subsidiary of HOA, operates Injap Tower, a 21-storey condotel
located in Iloilo City. As of December 31, 2017, the Company had one hotel under construction,
Hotel101 Fort, and five more hotels in the planning and development stage, specifically
Hotel101 Bohol, Hotel101 Davao, Hotel101 Boracay, Jinjiang Inn Boracay (Newcoast) and
Jinjiang Inn Cagayan de Oro which are estimated to be completed in 2020. The Company
recently announced the entry by HOA into a joint venture for the development of Hotel 101
Resort-Boracay in Megaworld’s Boracay Newcoast estate. See “Business—Hospitality—Future
Hotel Developments”. The Company aims to have 5,000 rooms under management by 2020. The
Company also intends to subfranchise its “Jinjiang Inn” brand in the future.

The Company’s latest venture into the growing industrial leasing segment is through its wholly
owned subsidiary, CentralHub Industrial Centers Inc. (“CHICI”). The Company, through CHICI,
recently acquired a 6.2 hectare parcel of land in Luisita Industrial Park, Tarlac and a 3.9 hectare
parcel of land in Iloilo for industrial leasing, and the Company intends to acquire six additional
sites strategically located across Luzon, Visayas and Mindanao. See “Business—Industrial
Leasing”. The industrial centers will contain standardized, multi-use, and industrial quality
warehouses suited for commissaries, cold storage and logistics centers to be leased to locators
operating nationwide.

For the years ended December 31, 2015, 2016 and 2017, the Company had total revenues of
₱1,929.0 million, ₱3,711.8 million and ₱6,611.9 million (U.S.$132.4 million), respectively. The
Company also had net income of ₱622.8 million, ₱1,470.3 million and ₱2,526.3 million
(U.S.$50.6 million), respectively, over the same periods. For the three months ended March 31,
2017 and 2018, the Company had total revenues of ₱649.0 million and ₱1,830.3 million,
respectively. The Company’s recurring revenue, consisting of its rental income and income from
hotel operations, was 6.0%, 9.4%, 19.8%, 29.9% and 29.0% of its total revenues for the years
ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018,
respectively.

RECENT DEVELOPMENTS

On April 6, 2018, CMCCI entered into 10-year lease contracts for an additional 22 SM
Savemore Supermarkets in CityMall sites slated for opening in 2018 and located in various parts
of Luzon, Visayas and Mindanao. On June 7, 2018, the Company also unveiled “Islas Pinas”, a
food and heritage village located within DoubleDragon Plaza.

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FACTORS AFFECTING RESULTS OF OPERATIONS

The Company’s results of operations are affected by a variety of factors. Set out below is a
discussion of the most significant factors that have affected the Company’s results in the past
and which the Company expects to affect its financial results in the future. Factors other than
those set out below could also have a significant impact on the Company’s results of operations
and financial condition in the future. See “Risk Factors.”

Growth of leasing operations

The Company believes that the expansion of its leasing portfolio is the primary factor driving its
revenue growth and profitability.

During the years ended December 31, 2015, 2016 and 2017, the Company continued to expand
its retail lease operations by opening new CityMalls in both existing markets and new markets.
As the Company has expanded from five CityMalls as of December 31, 2015 to 25 CityMalls as
of December 31, 2017, its rental revenues have increased from ₱116.5 million for the year ended
December 31, 2015 to ₱909.2 million for the year ended December 31, 2017, representing a
CAGR of 179.3%. As of December 31, 2017, 25 CityMalls were operational. For the three
months ended March 31, 2018, the Company book rental revenues of ₱409.7 million, compared
to ₱104.5 million for the three months ended March 31, 2017.

In 2016, the Company also acquired its subsidiary Hotel of Asia, Inc., which operates Injap
Tower Hotel, Jinjiang Inn Ortigas, Jinjiang Inn Makati and Hotel 101 Manila. For the year ended
December 31, 2017, the Company had hotel revenues of ₱397.5 million. As of December 31,
2017, the Company had one more hotel under construction and several others in the planning and
development stages. See “Business—Hospitality—Future Hotel Developments”. For the three
months ended March 31, 2018, the Company booked hotel revenues of ₱121.7 million.

In the office leasing segment, DoubleDragon Plaza which opened in 2017, is expected to add
130,000 sq. m. of leasable space to the Company’s leasing portfolio. The Company also expects
Jollibee Tower to be completed in 2018 and to add 47,909 sq. m. of leasable office space to its
leasing portfolio.

The Company also acquired a 6.2 hectare lot in Tarlac, and another 3.9 hectare lot in Iloilo,
which will be developed into its first two industrial center estates. The Company intends to
acquire six more sites for its industrial leasing business by 2020.

The Company’s ability to complete its retail, office, hotel and industrial center projects on
schedule and within budget, and the success of leasing out spaces in such projects will affect the
Company’s results of operations.

Further, the Company’s ability to secure additional prime commercial property for each of its
leasing segments will also affect its results of operations. The Company’s expansion is affected
by the supply and demand for suitable land sites in the provinces for additional malls, hotels and
industrial centers, as well as land sites in the metro areas for additional offices and hotels.

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Philippine macroeconomic conditions and trends

All of the Company’s malls and other projects are located in the Philippines and, as a result, its
operations are significantly affected, and will continue to be significantly affected, by
macroeconomic conditions in the Philippines. Demand for the Company’s leasable properties are
directly related to the strength of the Philippine economy, including overall growth levels and the
amount of business activity in the Philippines. All of the Company’s CityMalls are located in,
and all of the Company’s industrial centers are expected to be located in, the provincial areas of
the Philippines and, as a result, the Company’s operations are also affected by economic
conditions in the provinces, including regional GDP growth. Based on data published by the
Philippine Statistics Authority, most regions outside Metro Manila have experienced GDP
growth in the past two years. The Company believes that such GDP growth complements the
demand for the modern retail concepts located in its CityMalls.

The Company’s CityMalls are located in the provinces, where its customers primarily comprise
consumers in the lower- to middle-income segments. The Company believes that the growth in
household disposable income and the emergence of the lower- to middle-income consumer
segment is expected to continue to provide a strong basis for growth in the Philippines.

Further, the Company’s office leasing and hospitality operations growth depends, however, on
several factors, including the increase in international and domestic tourism (with respect to
hospitality operations), the continued growth of the BPO sector (with respect to office leasing),
the completion of the transport infrastructure projects for improved access, and the general
political stability and security situation in the Philippines. In particular, the Company’s hotels
under the “Jinjiang” brand specifically target Chinese tourists, and are affected by the
Philippines’ relations with China.

Real estate demand for office space by corporate and BPO firms

The performance of the Company’s office leasing segment will be driven principally by
increased demand for office space from corporates, call centers and other BPO operators in the
Philippines, including POGOs. It is not certain whether demand for office space by these firms
will continue to remain high, as this demand is determined by, among other factors, overall
levels of business activity in the Philippines and worldwide, as well as the relative cost of
operating BPO facilities in the Philippines compared to other countries, such as India. In
addition, demand for the Company’s commercial office space will also be affected by the
relative cost of rents as compared to those owned by competitors such as SM Prime Holdings,
Inc. and Filinvest Development Corporation, by the supply of available office space in
competing business districts (such as in the Makati City and Fort Bonifacio business districts)
and by the number of corporates and BPO firms that are willing to set up operations in the areas
where the Company’s office properties are located.

Shift from traditional retailers to modern retail format

The Company’s CityMalls are envisioned as the modern alternative to traditional retailers in first
class municipalities and second and third class cities in the Philippines, and are meant to provide
a venue for modern retail concepts in the provinces. The success of the Company’s CityMalls

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largely depends on the shift of consumer preference in the provinces from traditional retailers
and local neighborhood stores to a modern retail format.

Further, the Company is subject to risks relating to the Philippine retail sector, including risks
relating to adverse changes in the Philippine economy. The retail business in the Philippines is
dynamic and success requires an ability to identify and quickly react to market changes.
Consumer preferences, changing lifestyles and consumption trends require shopping mall
operators to continuously modify their formats, introduce new products and maintain the
appropriate tenant mix to satisfy this demand.

The Company intends to implement optimal tenant mixes best suited for each CityMall location.
A typical CityMall would include a grocery and a “FoodWorld” with a variety of fast food
choices. Further, a majority of the leasable area in the Company’s operating CityMalls is
occupied by brands or businesses owned by the Company’s affiliates, such as SaveMore or
Jollibee, while the rest of the space is taken up by non-affiliates such as San-Yang, Expressions,
Potato Corner and Fun Nation. The growth of the Company’s retail leasing operations will
depend on its ability to continue to attract such tenants, as well as such tenants’ ability to keep up
with the pace of the Company’s growth.

Product mix of the Company’s properties

The Company intends in the future to rely primarily on provincial shopping malls, office space,
hotels and industrial centers for recurring income, while the Company continues to sell units of
its interim residential projects in the short term. As a result, the Company’s results of operations
and the sources and amount of its cash from operations may vary significantly from period to
period depending on the location, type and GFA of its properties that it leases or sells and when
the Company’s projects in various stages of development are to be completed. The Company’s
results of operations and cash flows will also vary depending on the market demand at the time it
leases or sells its properties, the rental and occupancy rates of its investment properties and the
selling prices for its interim projects and condotel units. The recurring rental income from, the
occupancy levels of, and the selling prices the Company receives from, its properties depend on
local market prices which in turn depend on local supply and demand, as well as the type of
property being developed and offered.

Competition

The Company faces significant competition in the Philippine property market. In particular, the
Company competes with other developers in locating and acquiring, or entering into joint
venture arrangements to develop, parcels of prime commercial property of suitable size in
locations and at attractive prices. This is particularly true for land located in urbanized areas
(including first class municipalities and second and third class cities) throughout the Philippines.
The Company’s continued growth also depends in large part on its ability either to acquire prime
commercial land of suitable size or at attractive prices or to enter into joint venture agreements
with land-owning partners under terms that can yield reasonable returns. As of December 31,
2017, the Company believes that it has obtained sufficient land reserves to develop 77% of its
target of 1.2 million sq. m. of leasable space by 2020. If the Philippine economy continues to
grow and if demand for retail, office, hospitality and industrial properties remains relatively

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strong, the Company expects that competition among developers for land reserves that are
suitable for development (whether through acquisitions or joint venture agreements) will
intensify and that land acquisition costs will increase as a result.

In the event the Company is unable to acquire suitable land at acceptable prices or enter into
joint ventures with land owners, its long-term growth prospects could be limited and its business
and results of operations could be adversely affected. Competition from other developers may
adversely affect the Company’s ability to grow its recurring income from new leasable
properties.

With regard to the Company’s properties dedicated to office space leasing and shopping mall
operations, the Company competes with property companies that have greater experience and
more expertise in commercial leasing operations. In office space leasing, particularly to call
centers and other BPO operators, the Company competes with companies such as Robinsons
Land, Inc., Ayala Land, Inc. and Megaworld Corporation, each of which has significantly more
leasable office space, greater experience in the business segment and greater financial resources
than the Company. In the hotel segment, the Company competes with other 3-star hotels
operating within the areas where the Company currently operates such as the Manila Bay Area,
Makati City, and Ortigas Center. As a result, the competition that the Company faces could have
a material adverse effect on the Company’s results of operations.

Price volatility of construction materials and other development costs

The Company’s expenses are affected by the price of construction materials such as steel, tiles
and cement, as well as fluctuations in electricity and energy prices, particularly in connection
with the construction of CityMalls. While the Company, as a matter of policy, attempts to fix the
cost of materials components in its agreements with contractors or enters into turnkey
agreements with its contractors, in cases where demand for steel, tiles and cement are high or
when there are shortages in supply, the contractors the Company hires for construction or
development work may be compelled to raise their contract prices. With respect to electricity,
higher prices generally result in a corresponding increase in the Company’s overall development
costs. As a result, rising costs for any construction materials or in the price of electricity will
impact the Company’s construction costs.

Valuation of investment property

The Company’s investment properties are stated at their fair value on its consolidated statements
of financial position as non-current assets as of each statement of financial position date on the
basis of valuations by an accredited independent appraiser. Gains or losses arising from changes
in the fair value of the Company’s investment properties are accounted for as change in fair
value of investment property in the Company’s consolidated statements of comprehensive
income, which may have a substantial effect on its profits. In particular, a significant portion of
the Company’s change in fair value of investment properties in recent years has been its DD
Meridian Park project. While property prices in the Manila Bay area have been on the rise in
recent years as the area continues to develop, property prices may stabilize in the future, which
could result in lower changes in fair value of the Company’s property. Property under
construction or development for future use as an investment property is classified as

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‘construction in progress’. If the fair value cannot be reliably determined, the investment
property under development will be measured at cost until such time as fair value can be
determined or development is completed, at which time any difference between the fair value
and the carrying amount will be recognized in profit or loss for that period. The property
valuation involves the exercise of professional judgment and requires the use of certain bases and
assumptions. The valuer uses the market data approach for and land and the cost approach for
buildings. The market data approach is based on sales and listings of comparable property
registered within the same vicinity. The cost approach is a comparative approach to the value of
the building and improvements or another asset that considers as a substitute for the purchase
price of a given property, the possibility of constructing another property that is a replica of the
original. The fair value of the Company’s investment properties may have been higher or lower
if the valuer had used a different valuation methodology or if the valuation had been conducted
by other qualified independent professional valuers using a different valuation methodology. In
addition, upward revaluation adjustments reflecting unrealized capital gains on the Company’s
investment properties as of the relevant statement of financial position dates are not profit
generated from the sales or rentals of the Company’s investment properties and do not generate
any cash inflow to the Company until such investment properties are disposed of at similarly
revalued amounts. The amounts of revaluation adjustments have been, and may continue to be,
significantly affected by the prevailing property markets and may decrease or increase.

Availability and cost of land

The Company’s future growth and development are dependent, in part, on its ability to acquire
additional tracts of land suitable for the Company’s future real estate projects. Although the
Company believes that as of December 31, 2017 it has acquired 77% of the land requirements
for its 2020 plan, there is a high level of scarcity covering prime commercial property in the
Philippines and the Company will require additional prime properties across the Philippines to
achieve its 2020 plan of developing 1.2 million sq. m. of leasable space for its retail leasing,
office leasing, industrial leasing and hospitality businesses.

When the Company attempts to locate sites for development, it may experience difficulty
locating parcels of land of suitable size in locations and at prices acceptable to the Company,
particularly parcels of land located in urban areas (including first class municipalities and second
and third class cities) throughout the Philippines. Furthermore, land acquired by the Company
may have pre-existing tenants or obligations that prevent immediate commencement of new
developments. In the event the Company is unable to acquire suitable land at prices and in
locations that are attractive to the Company, or at all, its growth prospects could be limited and
its business and results of operations could be adversely affected.

Access to and cost of financing

Although the Company believes it has raised enough capital to develop its initial target of 1.0
million sq. m. of leasable space by 2020, the Company may continue to tap the debt and equity
markets to finance its expansion projects and future development projects. If liquidity in the
regional and global credit markets contract, the Company may find it difficult and costly to
refinance existing obligations or raise additional financing, including equity financing, on
acceptable terms or at all, which may prevent the Company from completing its existing projects

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and future development projects and have an adverse effect on the Company’s results of
operations and business plans.

Laws and regulations affecting the real estate industry

The Company’s operations and growth strategy may be affected by changes in laws and
regulations generally affecting the real estate industry. To develop its investment properties, the
Company is required to obtain various permits and licenses, including environmental certificates,
construction permits, and other permits and licenses from various local governments and
agencies. Any changes in Government regulation or policy (including that of any local
government unit) may affect the Company’s ability to obtain the necessary permits and licenses
on a timely basis.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those that are both (i) relevant to the presentation of the
Company’s financial condition and results of operations and (ii) require management’s most
difficult, subjective or complex judgments, often as a result of the need to make estimates about
the effect of matters that are inherently uncertain. As the number of variables and assumptions
affecting the possible future resolution of the uncertainties increase, those judgments become
even more subjective and complex. To provide an understanding of how the Company’s
management forms its judgments about future events, including the variables and assumptions
underlying its estimates, and the sensitivity of those judgments to different circumstances, the
critical accounting policies discussed below have been identified. While the Company believes
that all aspects of its consolidated financial statements should be studied and understood in
assessing its current and expected financial condition and results of operations, the Company
believes that the critical accounting policies warrant particular attention.

For information on the Company’s significant accounting policies and significant accounting
judgments and estimates, see Notes 3 and 4 to the Company’s consolidated financial statements
included elsewhere in this Prospectus.

DESCRIPTION OF CONSOLIDATED STATEMENTS OF COMPREHENSIVE

INCOME LINE ITEMS

The following table sets forth details for the Company’s sales and other income line items for the
periods indicated.
For the years ended December 31, For the three months ended March 31,
2015 2016(2) 2017 2017 2017 2018 2018
₱ ₱ ₱ U.S.$ ₱ ₱ U.S.$
(Audited) (Unaudited) (Reviewed) (Unaudited)
(millions, except earnings per share)
REVENUES
Real estate sales.................................................. 641.5 931.9 819.5 16.4 400.0 241.7 4.6
Leasehold rights’ sales ....................................... 139.7 292.7 21.6 0.4 24.1 - -
Rental income .................................................... 116.5 268.7 909.2 18.2 104.5 409.7 7.8
Hotel revenues.................................................... — 78.9 397.5 8.0 89.7 121.7 2.4
Unrealized gains from changes in fair value - 851.9 16.3
of investment property........................................ 811.1 1,830.0 4,174.5 83.6

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Interest income ................................................... 120.9 119.3 128.0 2.6 9.3 119.9 2.3
Other income from forfeiture ............................. 69.3 12.7 12.1 0.2 2.0 2.4 -
Others ................................................................. 30.0 177.6 149.5 3.0 19.4 83.0 1.7
Total Revenues ................................................. 1,929.0 3,711.8 6,611.9 132.4 649.0 1,830.3 35.1
COSTS AND EXPENSES
Cost of real estate sales ...................................... 370.6 495.8 362.2 7.2 165.7 131.4 2.5
Cost of leasehold rights ...................................... 8.4 21.9 4.2 0.1 4.1 - -
Cost of hotel operations...................................... — 61.0 275.5 5.5 62.9 90.9 1.7
Selling and marketing expenses ......................... 113.0 172.7 197.4 4.0 50.3 50.8 1.0
General and administrative expenses.................. 428.6 725.5 1,093.9 21.9 161.9 295.6 5.7
Interest expense .................................................. 114.4 330.2 643.8 12.9 15.8 187.7 3.6
Total Costs and Expenses ................................ 1,035.0 1,807.1 2,577.0 51.6 460.7 756.4 14.5
Income before Income Tax .............................. 894.0 1,904.7 4,034.9 80.8 188.3 1,073.9 20.6
Income Tax Expense ........................................ 271.2 434.4 1,508.6 30.2 22.6 329.3 6.3
Net Income ........................................................ 622.8 1,470.3 2,526.3 50.6 165.7 744.6 14.3
Other Comprehensive Income (Loss)
Item that will never be reclassified to profit
or loss
Remeasurement income (loss) on defined
benefit liability ............................................... (3.7) — 6.4 0.1 - - -
Deferred tax effect on remeasurement loss
on defined benefit liability.............................. 1.1 — (1.9) (0.0) - - -
Total Comprehensive Income .......................... 620.2 1,470.3 2,530.8 50.7 165.7 744.6 14.3
Total comprehensive income attributable to:
Equity holders of the Parent Company........... 556.8 1,079.1 1,646.0 33.0 149.4 524.2 10.1
Non-controlling interest ................................. 63.4 391.2 884.8 17.7 16.3 220.3 4.2
Basic earnings (loss) per Common Share
(₱)(1) ................................................................... 0.2509 0.2622 0.4457 (0.0056) 0.1625
Diluted earnings (loss) per Common Share
(₱)(1).................................................................... 0.2509 0.2622 0.4452 (0.0056) 0.1623

Note:
(1) These do not reflect the convertibility option of the 100,000,000 Preferred Shares in April 2018.
(2) The audited financial statements of the Company for 2016 were restated to reflect the adjustment in the fair values of the
identifiable net assets of HOA as a result of its acquisition in 2016. The independent valuation of such assets were made in 2017.
See accompanying notes to the Company’s audited financial statements elsewhere in the Prospectus.

A majority of the revenues shown in the above table for the years 2015 and 2016 are derived
from interim and non-core projects that were undertaken for strategic reasons as the Company
transitions its business model into becoming a primarily recurring revenue company. See
“Business— Interim Projects”.

The gross revenue from the Company’s main business activities (as a percentage of total
revenues) for the past three fiscal years and the three months ended March 31, 2017 and 2018 are
presented in the table below:
For the three months ended
For the years ended December 31, March 31,
2015 2016 2017 2017 2018
(%)

Real estate sales..................................................................... 33.3 25.1 12.4 61.6 13.2

Rental income ....................................................................... 6.0 7.2 13.8 16.1 69.0
Hotel revenues....................................................................... - 2.1 6.0 13.8 6.6

Total ..................................................................................... 39.3 34.4 32.2 91.5 88.8

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The net income from the Company’s main business activities (as a percentage of net income) for
the past three fiscal years and the three months ended March 31, 2017 and 2018 are presented in
the table below:
For the three months ended
For the years ended December 31, March 31,
2015 2016 2017 2017 2018
(%)
Real estate sales................................................................... 41.4 23.9 29.7 221.9 16.9
Rental income ..................................................................... 161.0 84.0 80.4 (53.5) 75.5
Hotel revenues..................................................................... — (7.7) (1.5) 5.9 7.7
Others .................................................................................. (102.4) (0.1) (8.6) (74.3) (0.1)
Total ................................................................................... 100.0 100.0 100.0 100.0 100.0

The Company’s real estate sales from buyers based in foreign jurisdictions accounted for 3.2%
and 26.3% of its total real estate sales revenues for the year ended December 31, 2017 and the
three months ended March 31, 2018, respectively.

Real estate sales

The Company’s real estate sales primarily comprise revenues received from its sales of
condominium and subdivision units.

Leasehold rights’ sales

The Company’s leasehold rights’ sales primarily comprise revenues received from its sales of
leasehold rights in Dragon8 Mall. Revenue is recognized on an accrual basis when collectability
of sales price is reasonably assured.

Rental income

The Company’s rental income primarily comprise revenues received from the lease of
commercial spaces relating to its CityMalls operations, and also comprise revenues received
from leases of commercial spaces in Dragon8 Mall and Umbria Mall. Rental income is
recognized on a straight-line basis over the lease term or based on a certain percentage of the
gross revenue of tenants, as provided under the terms of the lease contract.

Hotel revenues

The Company’s hotel revenues area based on actual occupancy and primarily comprise revenues
received from the operations of its subsidiary, Hotel of Asia, Inc., which include Injap Tower
Hotel, Jinjiang Inn Ortigas, Jinjiang Inn Makati and Hotel 101 Manila.

Unrealized Gains from Changes in Fair Values of Investment Property

Gains or losses arising from changes in the fair values of investment property of the Company
are included in the Company’s statements of comprehensive income on an annual basis.
Investment property is initially measured at cost including certain transaction costs. Subsequent
to initial recognition, investment property is stated at fair value, which reflects market conditions
at the reporting date. The fair value of investment property is determined by independent real

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estate valuation experts based on recent real estate transactions with similar characteristics and
location to the Company’s investment property.

Interest income

The Company’s interest income primarily comprise interest earned on loans and advances to the
Company’s Subsidiaries, and also include interest earned from the Company’s cash in banks and
cash in short-term placements.

Other income from forfeiture

Other income from forfeiture primarily comprise income from forfeited payments of defaulting
purchasers of units in The SkySuites Tower.

Other income

Other income primarily comprise CUSA and service fees, and also include other income from
hotel operations such as laundry, minibar, shuttle service and other charges.

Cost of real estate sales

The Company’s cost of real estate sales represents the construction and development of
completed and in-progress residential properties for sale, including land and land development
costs.

Cost of leasehold rights

The Company’s cost of leasehold rights consist of Dragon8 Mall’s building construction costs
prorated over the leasehold rights for sale.

Cost of hotel operations

The Company’s cost of hotel operations primarily consists of administrative, housekeeping,

utility costs, and consumable items used in the operations of Injap Tower Hotel, Jinjiang Inn
Ortigas, Jinjiang Inn Makati and Hotel 101 Manila.

Selling and marketing expenses

Selling expenses primarily consist of commissions relating to sales of residential units, and
marketing expenses primarily consist of expenses relating to the advertisement and promotion of
the Company’s projects.

General and administrative expenses

General and administrative expenses primarily consist of salaries, wages and other benefits,
utility costs, expenses for outsourced services, rent costs, taxes and licenses, input VAT written
off, depreciation and amortization, professional fees, transportation and travel, repairs and
maintenance, representation, insurance, property management supplies, communications,

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printing and office supplies, management fees, retirement costs, donations, impairment loss on
receivables and other miscellaneous costs.

Interest expense

Interest expense comprise interest associated with the Company’s bilateral long-term loans, long-
term notes, short-term loans, short-term notes, bonds payable and interest accreted on security
deposits. Interest expense does not include the portion of interest capitalized as part of the costs
of projects funded by the proceeds from such loans, notes or bonds.

RESULTS OF OPERATIONS

Three months ended March 31, 2018 compared to the three months ended March 31, 2017

Revenues

Consolidated revenues increased by ₱1,181.3 million, or 182.0%, to ₱1,830.3 million (U.S.$35.1

million) for the three months ended March 31, 2018 compared to ₱649.0 million for the three
months ended March 31, 2017. This growth was primarily due to the Company’s recognition of
unrealized gains from changes in fair value of investment property of ₱851.9 million for the
three months ended March 31, 2018 comprised primarily of the increase in fair value of the
Company’s investment property driven by the completion of Tower 3 of DoubleDragon Plaza.
The Company did not recognize unrealized gains from changes in fair value of investment
property for the three months ended March 31, 2017 because there was no substantial project
completed within such period.

The Company’s revenues from rental income and hotel operations also contributed to the overall
growth in revenue. Rental income increased by ₱305.2 million, or 292.1%, to ₱409.7 million
(U.S.$7.8 million) for the three months ended March 31, 2018 compared to ₱104.5 million for
the three months ended March 31, 2017, driven by the increase in the Company’s operational
CityMalls as of March 31, 2018 compared to March 31, 2017. The Company’s hotel revenues
also increased by ₱32.0 million, or 35.7%, to ₱121.7 million (U.S.$2.4 million) for the three
months ended March 31, 2018 compared to ₱89.7 million for the three months ended March 31,
2017, due to an increase in the number of the Company’s hotels’ operating rooms.

The growth in revenues was offset by the decrease in the Company’s real estate sales by ₱158.3
million, or 39.6%, to ₱241.7 million (U.S.$4.6 million) for the three months ended March 31,
2018 compared to ₱400.0 million for the three months ended March 31, 2017, due to the lower
number of available-for-sale units in the Company’s interim projects, as most of the Company’s
interim real estate projects are near completion and the Company is transitioning its focus to
projects with that produce recurring revenue. The Company’s real estate sales for the three
months ended March 31, 2018 included ₱101.5 million of revenues from HOA’s sale of condotel
units in Hotel101-Fort. The Company did not sell any condotel units for the three months ended
March 31, 2017.

The Company’s interest income for the three months ended March 31, 2018 also increased by
₱110.6 million, or 1,189.2%, to ₱119.9 million (U.S.$2.3 million) for the three months ended

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March 31, 2018 compared to ₱9.3 million for the three months ended March 31, 2017, primarily
as a result of an increase in the Company’s deposit placements with financial institutions and
income recognized from the discounting of receivables collectible beyond one year. The income
recognized from the discount of receivables collectible beyond one year that is booked as interest
income, represents the difference between the actual value of such receivables and the present
value of such receivables.

Other income from forfeiture also increased by ₱0.4 million, or 20.0%, to ₱2.4 million for the
three months ended March 31, 2018 compared to ₱2.0 million for the three months ended March
31, 2017. Other income also increased by ₱63.6 million, or 327.8%, to ₱83.0 million (U.S.$1.7
million) for the three months ended March 31, 2018 compared to ₱19.4 million for the three
months ended March 31, 2017, primarily due to increase in service fee and ads and promo
charges from additional CityMalls.

Cost and expenses

The Company’s consolidated costs and expenses increased by ₱295.7 million, or 64.2%, to
₱756.4 million (U.S.$14.5 million) for the three months ended March 31, 2018 compared to
₱460.7 million for the three months ended March 31, 2017, mainly driven by the increase in the
Company’s interest expense and general and administrative expenses. Interest expense for the
three months ended March 31, 2018 increased by ₱171.9 million, or 1,088.0%, to ₱187.7
million, compared to ₱15.8 million for the three months ended March 31, 2017, primarily as a
result of the interest due on the Company’s ₱9.7 billion 6.0952% bonds due 2024 which were
issued in July 2017. The Company’s general and administrative expenses increased by ₱133.7
million, or 82.6%, to ₱295.6 million (U.S.$5.7 million) for the three months ended March 31,
2018 compared to ₱161.9 million for the three months ended March 31, 2017, primarily due to
increase in number of operational CityMalls, which resulted in the growth in personnel cost,
business taxes and licenses, depreciation, and rental cost.

The Company’s cost of hotel operations increased by ₱28.0 million, or 44.5%, to ₱90.9 million
(U.S.$1.7 million) for the three months ended March 31, 2018 compared to ₱62.9 million for the
three months ended March 31, 2017, primarily due to the increase in the income share of condo
unit owners as a result of the increase in hotel revenues.

The Company’s selling and marketing expenses increased by ₱0.5 million, or 1.0%, to ₱50.8
million (U.S.$1.0 million) for the three months ended March 31, 2018 compared to ₱50.3 million
for the three months ended March 31, 2017, due to increased advertising and marketing efforts
relating to the Company’s hospitality operations and new operational CityMalls.

The Company’s cost of real estate sales also decreased by ₱34.3 million, or 20.7%, to ₱131.4
million (U.S.$2.5 million) for the three months ended March 31, 2018 compared to ₱165.7
million for the three months ended March 31, 2017, due to the decrease in real estate units sold
for the period.

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Income before income tax

The Company’s consolidated income before income tax for the three months ended March 31,
2018 was ₱1,073.9 million (U.S.$20.6 million), an increase of ₱885.6 million or, 470.3%, from
its consolidated income before income tax of ₱188.3 million recorded for the three months ended
March 31, 2017.

Income tax expense

The Company’s income tax expense for the three months ended March 31, 2018 was ₱329.3
million (U.S.$6.3 million), an increase of ₱306.7 million or, 1,357.1%, from its income tax
expense of ₱22.6 million recorded for the three months ended March 31, 2017, primarily due to
the higher income (as a result of the recognition of unrealized gains from increase in fair value of
investment property) of the Company subjected to income tax for the period.

Net Income

As a result of the foregoing, the Company’s consolidated net income of ₱744.6 million
(U.S.$14.3 million) increased by ₱578.9 million, or 349.4% for the three months ended March
31, 2018 from its consolidated net income of ₱165.7 million for the three months ended March
31, 2017.

Year ended December 31, 2017 compared to the year ended December, 2016

Revenues

Consolidated revenues increased by ₱2.9 billion, or 78.1%, to ₱6.6 billion (U.S.$132.4 million)
for the year ended December 31, 2017 compared to ₱3.7 billion for the year ended December 31,
2016. This growth was primarily due to the Company’s recognition of ₱4.2 billion (U.S.$83.6
million) in revenue from unrealized gains from changes in fair value of investment property for
the year ended December 31, 2017, an increase of ₱2.3 billion, or 128.2%, from ₱1.8 billion
booked in 2016 as a result of increase in the fair value of investment property primarily driven
by the first phase (DoubleDragon Plaza) of DD Meridian Park which was close to completion as
of December 31, 2017. As a result, DoubleDragon Plaza was appraised at fair value, which is
determined based on the valuations of the property’s leasable space, performed by an accredited
independent appraiser.

The Company’s revenues from rental income and hotel operations also contributed to the overall
growth in revenue. Rental income increased by ₱640.5 million, or 238.4%, to ₱909.2 million
(U.S.$18.2 million) for the year ended December 31, 2017 compared to ₱268.7 million in 2016,
driven by the increase in the Company’s operational CityMalls (i.e., 25 operational CityMalls as
of December 31, 2017 as compared to ten as of December 31, 2016). The Company’s hotel
revenues also increased by ₱318.6 million or 403.8% to ₱397.5 million (U.S.$8.0 million) for the
year ended December 31, 2017, compared to ₱78.9 million for the year ended December 31,
2016, due to the full year recognition of revenues from Hotel of Asia, Inc. which was acquired in

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August 2016, and the first full year of operations of Hotel 101 Manila, which was completed in
October 2016.

The growth in revenues was offset by the decrease in the Company’s real estate sales by ₱112.4
million, or 12.1%, to ₱819.5 million (U.S.$16.4 million) for the year ended December 31, 2017
compared to ₱931.9 million for the year ended December 31, 2016, due to the sale of Hotel 101
units in 2016 and recognition of prior Hotel 101 units sold upon the completion of the acquisition
of Hotel of Asia, Inc. in August 2016. Leasehold rights’ sales likewise decreased by ₱271.1
million, or 92.6%, to ₱21.6 million (U.S.$0.4 million) for the year ended December 31, 2017
compared to ₱292.7 million in 2016, as a result of all leasehold rights in the ground floor of
Dragon8 Mall being completely sold, and the Company’s decision to lease out the remaining
units in Dragon8 Mall as investment properties instead of selling the leasehold rights pertaining
thereto.

The Company’s interest income for the year ended December 31, 2017 also increased by ₱8.7
million or, 7.3%, to ₱128.0 million (U.S.$2.6 million), compared to ₱119.3 million in 2016,
primarily as a result of the increase in the Company’s deposit placements with financial
institutions.

Other income from forfeiture also decreased by ₱0.6 million, or 4.7%, to ₱12.1 million (U.S.$0.2
million) for the year ended December 31, 2017 compared to ₱12.7 million in 2016. The growth
in consolidated revenues was also partially offset by the decrease in other income by ₱28.1
million, or 15.8%, to ₱149.5 million (U.S.$3.0 million) for the year ended December 31, 2017
compared to ₱177.6 million in 2016.

Cost and expenses

The Company’s consolidated costs and expenses grew by ₱769.9 million, or 42.6%, to ₱2.6
billion (U.S.$51.6 million) for the year ended December 31, 2017, compared to ₱1.8 billion in
2016, mainly driven by the increase in the Company’s cost of hotel operations, interest expense
and general and administrative expenses.

The Company also booked cost of hotel operations of ₱275.5 million (U.S.$5.5 million) for the
year ended December 31, 2017, an increase of ₱214.5 million or 351.6% compared to ₱61.0
million for the year ended December 2016, because of the full year operations of its new
subsidiary, Hotel of Asia, Inc., and Hotel 101 Manila, in 2017.

Interest expense increased by ₱313.6 million, or 95.0%, to ₱643.8 million (U.S.$12.9 million)
for the year ended December 31, 2017, compared to ₱330.2 million in 2016, primarily as a result
of the interest due on the Company’s ₱9.7 billion 6.0952% bonds due 2024 which were issued in
July 2017 and ₱5.3 billion 5.9721% bonds due 2026 in December 2016.

The Company’s general and administrative expenses increased by ₱368.4 million, or 50.8%, to
₱1.1 billion (U.S.$21.9 million) for the year ended December 31, 2017 compared to ₱725.5
million in 2016, primarily due to the increase in number of operational CityMalls, which resulted
in the growth in personnel cost, electricity and water charges, business taxes and licenses,
depreciation, rental cost, professional fees and repairs and maintenance. The Company’s selling

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and marketing expenses also increased by ₱24.7 million, or 14.3%, to ₱197.4 million (U.S.$4.0
million) for the year ended December 31, 2017 compared to ₱172.7 million in 2016, due to
increased advertising and marketing efforts relating to the Company’s hospitality operations and
new operational CityMalls.

The Company’s cost of real estate sales decreased by ₱133.6 million, or 26.9%, to ₱362.2
million (U.S.$7.2 million) for the year ended December 31, 2017 compared to ₱495.8 million in
2016, due to the decrease in real estate units sold for the year. The Company’s cost of leasehold
rights also decreased by ₱17.7 million, or 80.8%, to ₱4.2 million (U.S.$0.1 million) for the year
ended December 31, 2017 compared to ₱21.9 million in 2016, also due to the corresponding
decrease in leasehold rights’ sales in 2017.

Income before income tax

The Company’s consolidated income before income tax for the year ended December 31, 2017
was ₱4.0 billion (U.S.$80.8 million), an increase of ₱2.1 billion or, 111.8%, from its
consolidated income before income tax of ₱1.9 billion recorded for the year ended December 31,
2016.

Income tax expense

The Company’s income tax expense for the year ended December 31, 2017 was ₱1.5 billion
(U.S.$30.2 million), an increase of ₱1.1 billion, or 247.3%, from its income tax expense of
₱434.4 million recorded for the year ended December 31, 2016, primarily due to the deferred tax
of ₱1.5 billion recognized mainly as a result of the ₱4.2 billion unrealized gains from change in
fair values of investment property booked in 2017.

Net Income

As a result of the foregoing, the Company’s consolidated net income for the year ended
December 31, 2017 was ₱2.5 billion (U.S.$50.6 million), an increase of ₱1.1 billion, or 71.8%,
from its consolidated net income of ₱1.5 billion recorded for the year ended December 31, 2016.

Year ended December 31, 2016 compared to year ended December 31, 2015

Revenues

Consolidated revenues increased by ₱1,782.8 million, or 92.4%, to ₱3,711.8 million (U.S.$74.4

million) for the year ended December 31, 2016 compared to ₱1,929.0 million for the year ended
December 31, 2015. This growth was primarily due to the Company’s recognition of ₱1,830.0
million (U.S.$36.7 million) in revenue from unrealized gains from changes in fair value of
investment property for the year ended December 31, 2016, an increase of ₱1,018.9 million, or
125.6%, from ₱811.1 million booked in 2015. The Company’s real estate sales also increased by
₱290.4 million or 45.3%, to ₱931.9 million (U.S.$18.7 million) for the year ended December 31,
2016 compared to ₱641.5 million for the year ended December 31, 2015, driven by sales from
the Company’s interim projects, W.H. Taft Residences, The SkySuites Tower, The Uptown
Place, and the Company’s affordable housing arm, DD HappyHomes with projects in
Mandurriao, Iloilo and Tanauan Leyte. Leasehold rights’ sales likewise increased by ₱153.0

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million, or 109.5%, to ₱292.7 million (U.S.$5.9 million) for the year ended December 31, 2016
compared to ₱139.7 million for 2015, driven by increased sales of leasehold rights of mall stall
units in the Company’s Dragon8 Mall in Binondo. Rental income also increased by ₱152.2
million, or 130.6%, to ₱268.7 million (U.S.$5.4 million) for the year ended December 31, 2016
compared to ₱116.5 million for 2015, primarily due to the 10 CityMalls that were operational for
the year 2016. The Company also booked ₱78.9 million (U.S.$1.6 million) in hotel revenues as a
result of its acquisition of a majority stake in its new subsidiary, Hotel of Asia, Inc.

Other income also grew by ₱147.6 million or 492.0% to ₱177.6 million (U.S.$3.6 million) for
the year ended December 31, 2016 compared to ₱30.0 million for 2015, primarily due to the
increase in common usage service area revenue from operational CityMalls and other hotel
income.

The increase in consolidated revenues was slightly offset by the decrease in other income from
forfeiture by ₱56.6 million, or 81.7%, to ₱12.7 million (U.S.$0.3 million) for the year ended
December 31, 2016 compared to ₱69.3 million for the same period in 2015, as a result of higher
forfeitures of payments of defaulting unit purchasers of units in The SkySuites Tower in 2015.
The Company’s interest income for the year ended December 31, 2016 also slightly decreased by
₱1.6 million, or 1.3%, to ₱119.3 million (U.S.$2.4 million), compared to ₱120.9 million for
2015.

Cost and expenses

The Company’s consolidated costs and expenses grew by ₱772.1 million, or 74.6%, to ₱1,807.1
million (U.S.$36.2 million) for the year ended December 31, 2016 compared to ₱1,035.0 million
for 2015, mainly driven by the increase in the Company’s cost of real estate sales, interest
expense and general and administrative expenses.

The Company’s cost of real estate sales increased by ₱125.2 million, or 33.8%, to ₱495.8 million
(U.S.$9.9 million) for the year ended December 31, 2016 compared to ₱370.6 million for 2015,
due to the increase in the Company’s real estate sales.

Interest expense also increased by ₱215.8 million, or 188.6%, to ₱330.2 million (U.S.$6.6
million) for the year ended December 31, 2016, compared to ₱114.4 million for 2015, due to
interest due on the Company’s short-term and long-term notes which were used to fund the
Company’s expansion plans.

The Company’s general and administrative expenses increased by ₱296.9 million, or 69.3%, to
₱725.5 million (U.S.$14.5 million) for the year ended December 31, 2016 compared to ₱428.6
million for 2015, due to the increase in number of operational CityMalls, which resulted in the
growth in personnel cost, electricity and water charges, business taxes and licenses, depreciation,
rental cost, professional fees and repairs and maintenance. The Company’s selling and marketing
expenses also increased by ₱59.7 million, or 52.8%, to ₱172.7 million (U.S.$3.5 million) for the
year ended December 31, 2016 compared to ₱113.0 million for 2015, due to increased
advertising and marketing efforts relating to the Company’s office properties, and CityMalls.

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The Company also booked cost of hotel operations of ₱61.0 million (U.S.$1.2 million) as part of
the operations of its new subsidiary, Hotel of Asia, Inc. The Company’s cost of leasehold rights
also increased by ₱13.5 million, or 160.7%, to ₱21.9 million (U.S.$0.4 million) for the year
ended December 31, 2016 compared to ₱8.4 million for 2015 due to the increase in sales of
leasehold rights of mall stall units in Dragon8 Mall.

Income before income tax

The Company’s consolidated income before income tax for the year ended December 31, 2016
was ₱1,904.7 million (U.S.$38.2 million), an increase of ₱1,010.7 million, or 113.1%, from its
consolidated income before income tax of ₱894.0 million recorded for the year ended December
31, 2015.

Income tax expense

The Company’s income tax expense for the year ended December 31, 2016 was ₱434.4 million
(U.S.$8.7 million), an increase of ₱163.2 million, or 60.2%, from its income tax expense of
₱271.2 million recorded for the year ended December 31, 2015.

Net Income

As a result of the foregoing, the Company’s consolidated net income for the year ended
December 31, 2016 was ₱1,470.3 million (U.S.$29.5 million), an increase of ₱847.5 million, or
136.1%, from its consolidated net income of ₱622.8 million recorded for the year ended
December 31, 2015.

FINANCIAL POSITION

As of March 31, 2018 compared to as of December 31, 2017

Assets

Cash and cash equivalents

The Company’s consolidated cash and cash equivalents were ₱1,301.7 million
(U.S.$24.9 million) as of March 31, 2018, a decrease of ₱798.7 million, or 38.0%, from
consolidated cash and cash equivalents of ₱2,100.4 million as of December 31, 2017, due to
payments for additional land banking, and construction and development of CityMalls and other
projects.

Receivables – net

The Company’s consolidated net receivables were ₱3,719.3 million (U.S.$71.2 million) as of
March 31, 2018, an increase of ₱299.9 million, or 8.8%, from consolidated net receivables of
₱3,419.4 million as of December 31, 2017, due to incremental sales from the Company’s
projects and rent receivable from newly operational projects.

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Real estate inventories

The Company’s consolidated real estate inventories were ₱3.9 billion (U.S.$75.3 million) as of
March 31, 2018, an increase of ₱109.8 million, or 2.9%, from consolidated real estate inventories
of ₱3.8 billion as of December 31, 2017. This increase was primarily driven by the additional
costs incurred for DD HappyHomes and The SkySuites Tower and full swing construction of
Hotel101-Fort.

Due from related parties

The Company’s consolidated due from related parties were ₱103.4 million (U.S.$2.0 million) as
of March 31, 2018, a decrease of ₱0.1 million, or 0.1%, from ₱103.5 million as of December 31,
2017.

Prepaid expenses and other current assets - net

The Company’s consolidated prepaid expenses and other current assets (net), which includes
input taxes on expenditures related to construction and property development and creditable
withholding taxes, were ₱4.3 billion (U.S.$ 82.4 million) as of March 31, 2018, a ₱523.4 million,
or 10.9% decrease from consolidated prepaid expenses and other current assets (net) of
₱4.8 billion as of December 31, 2017. This decrease was primarily driven by a decrease in input
VAT and advances to suppliers and contractors.

Receivables – net of current portion

The Company’s consolidated noncurrent receivables were ₱304.1 million (U.S.$5.8 million) as
of March 31, 2018, an increase of ₱73.4 million, or 31.8%, from consolidated noncurrent
receivables of ₱230.7 million as of December 31, 2017, due to sales of condotel units in
Hotel101-Fort, with payment terms spread over three years. Noncurrent installment contracts
represent the portion of receivables from the sale of units from vertical and horizontal projects
collectible in two to three years’ time.

Property and equipment - net

The Company’s consolidated property and equipment (net) remained relatively flat at ₱1,010.4
million (U.S.$19.4 million) as of March 31, 2018, an increase of ₱0.5 million from consolidated
property and equipment (net) of ₱1,009.9 million as of December 31, 2017.

Goodwill and intangible assets - net

The Company’s consolidated goodwill and intangible assets (net) were ₱1,321.7 million
(U.S.$25.3 million) as of March 31, 2018, an increase of ₱7.9 million, or 0.6%, from goodwill
and intangible assets (net) of ₱1,313.8 million as of December 31, 2017, due to additional
advertising production costs incurred by the Company.

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Investment property

The Company’s consolidated investment property were ₱50.1 billion (U.S.$959.1 million) as of
March 31, 2018, an increase of ₱3.7 billion, or 7.9%, from consolidated investment property of
₱46.4 billion as of December 31, 2017 as the Company continues to secure prime commercial
property across provincial cities in the Philippines for its CityMall expansion. The increase was
also driven by the full swing construction of DD Meridian Park and Jollibee Plaza and the
ongoing development of CentralHub industrial leasing sites.

Deferred tax assets

The Company’s consolidated deferred tax assets were ₱276.4 million (U.S.$5.3 million) as of
March 31, 2018, an increase of ₱13.1 million, or 5.0%, from consolidated deferred tax assets of
₱263.3 million as of December 31, 2017. This increase was primarily driven by the recognition
of net operating loss carried forward (NOLCO) of certain of the Company’s subsidiaries and
deferred tax components of unearned revenues.

Other noncurrent assets

The Company’s consolidated other noncurrent assets were ₱847.3 million (U.S.$16.2 million) as
of March 31, 2018, an increase of ₱24.7 million, or 3.0%, from consolidated other noncurrent
assets of ₱822.6 million as of December 31, 2017. This increase was primarily driven by
additional security deposits paid to the Company’s lessors and additional deposits made by the
Company for future land acquisitions.

Liabilities

Accounts payable and other current liabilities

The Company’s consolidated accounts payable and other current liabilities were ₱4.9 billion
(U.S.$94.4 million) as of March 31, 2018, an increase of ₱866.7 million, or 21.4%, from
consolidated accounts payable and other current liabilities of ₱4.1 billion as of December 31,
2017. The increase is primarily attributable to the increase in trade payables arising from
services provided by the contractors and subcontractors for actual progress billings related to the
Company’s existing and new developmental projects.

Short-term notes payable

The Company’s consolidated short-term notes payable were ₱4.2 billion (U.S.$79.5 million) as
of March 31, 2018, an increase of ₱699.9 million, or 20.3%, from consolidated short-term notes
payable of ₱3.5 billion as of December 31, 2017 due to the Company’s availment of additional
short-term loans for its working capital requirements and to initially fund the Company’s
expansion plans in the industrial leasing space. These short-term notes are with various
Philippine commercial and universal banks, and have rates ranging from 3.50% to 5.50% per
annum and terms ranging from 60 to 360 days.

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The Company also maintains various short-term credit lines and facilities with various Philippine
commercial and universal banks to support its working capital and other requirements. These
credit lines have nominal interest rates ranging from 3.75% to 4.75%.

Due to related parties

The Company’s consolidated due to related parties were ₱946.3 million (U.S.$18.1 million) as
of March 31, 2018, an increase of ₱1.6 million, or 0.2%, from consolidated due to related parties
of ₱944.7 million as of December 31, 2017. See “Related Party Transactions” in this Prospectus.

Customer’s deposits

The Company’s consolidated deposits from customers were ₱438.6 million (U.S.$8.4 million)
as of March 31, 2018, an increase of ₱312.9 million, or 248.9%, from consolidated deposits from
customers of ₱125.7 million as of December 31, 2017. This increase was primarily driven by the
increase in deposits from DD Meridian Park’s new tenants as well as deposits from persons who
purchased units of Hotel 101-Fort.

Dividends payable

The Company’s dividends payable of ₱177.1 million (U.S.$3.4 million) as of March 31, 2018
pertain to the dividends declared by certain of the Company’s Subsidiaries and dividends
payable to preferred stockholders of the Company.

Income tax payable

The Company’s income tax payable was ₱63.6 million (U.S.$1.2 million) as of March 31, 2018,
an increase of ₱40.5 million, or 175.3%, compared to ₱23.1 million as of December 31, 2017, as
a result of higher income of certain Subsidiaries of the Company.

Long-term notes payable – net of debt issue costs

The Company’s consolidated long-term notes payable remained at ₱14.7 billion

(U.S.$280.8 million) as of March 31, 2018.

Bonds payable – net of bond issuance cost

The Company’s consolidated bonds payable were ₱14.8 billion (U.S.$283.5 million) as of
March 31, 2018. These bonds are with various Philippine commercial and universal banks, and
have interest rates ranging from 5.9721% to 6.0952% per annum, and original terms ranging
from seven to ten years (and remaining terms ranging from six and a half to eight and a half
years as of March 31, 2018).

Deferred tax liability

The Company’s consolidated deferred tax liability was ₱3.1 billion (U.S.$60.2 million) as of
March 31, 2018, an increase of ₱293.1 million, or 10.3%, from consolidated deferred tax liability

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of ₱2.8 billion as of December 31, 2017. This increase was mainly due to the deferred tax
component of unrealized gain.

Retirement benefits liability

The Company’s retirement benefits liability was ₱8.6 million (U.S.$0.2 million) as of March 31,
2018, an increase of ₱0.9 million, or 11.7%, from retirement benefits liability of ₱7.7 million as
of December 31, 2017.

Other noncurrent liabilities

The Company’s consolidated other noncurrent liabilities were ₱1.0 billion (U.S.$19.1 million)
as of March 31, 2018, an increase of ₱122.2 million, or 13.9%, from consolidated other
noncurrent liabilities of ₱878.4 million as of December 31, 2017. This increase was primarily
driven by the increase in additional security deposits received from new tenants.

As of December 31, 2017 compared to as of December 31, 2016

Assets

Cash and cash equivalents

The Company’s consolidated cash and cash equivalents were ₱2.1 billion (U.S.$42.1 million) as
of December 31, 2017, a decrease of ₱3.4 billion, or 61.6%, from consolidated cash and cash
equivalents of ₱5.5 billion as of December 31, 2016, due to the construction of additional
CityMalls and vertical projects.

Receivables – net

The Company’s consolidated net receivables were ₱3.4 billion (U.S.$68.5 million) as of
December 31, 2017, a ₱1.7 billion, or 99.7% increase from consolidated net receivables of
₱1.7 billion as of December 31, 2016, due to incremental sales from the Company’s ongoing
interim residential projects.

Real estate inventories

The Company’s consolidated real estate inventories were ₱3.8 billion (U.S.$76.5 million) as of
December 31, 2017, a ₱633.2 million, or 19.9% increase from consolidated real estate
inventories of ₱3.2 billion as of December 31, 2016. This increase was primarily driven by the
completion of certain phases of DD HappyHomes’ projects in 2017 and the groundbreaking of
Hotel 101 Fort in 2017.

Due from related parties

The Company’s consolidated due from related parties were ₱103.5 million (U.S.$2.1 million) as
of December 31, 2017, a ₱1.7 million, or 1.7% increase from ₱101.8 million as of December 31,
2016.

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Prepaid expenses and other current assets - net

The Company’s consolidated prepaid expenses and other current assets (net), which includes
input taxes on expenditures related to construction and property development and creditable
withholding taxes, were ₱4.8 billion (U.S.$96.6 million) as of December 31, 2017, a ₱1.6 billion,
or 48.3% increase from consolidated prepaid expenses and other current assets (net) of
₱3.3 billion as of December 31, 2016. The increase was primarily driven by the increase in input
VAT related to construction services provided to and other construction-related costs incurred by
the Company in the ordinary course of business.

Receivables – net of current portion

The Company’s consolidated noncurrent receivables were ₱230.7 million (U.S.$4.6 million) as
of December 31, 2017, a ₱412.6 million, or 64.1% decrease from consolidated noncurrent
receivables of ₱643.3 million as of December 31, 2016, due to the decrease in noncurrent
installment contracts receivable, which are collectible in two to three years’ time, arising from a
decrease in sale of units from the Company’s horizontal and vertical projects in 2017.

Property and equipment - net

The Company’s consolidated property and equipment (net) were ₱1.0 billion (U.S.$20.2 million)
as of December 31, 2017, a ₱146.5 million, or 17.0% increase from consolidated property and
equipment (net) of ₱863.4 million as of December 31, 2016. This increase is due to a dditions to
property and equipment during the year in the Company’s ordinary course of business, including
leasehold improvements, equipment and showroom, room fixtures and components, furniture
and fixtures, and building.

Goodwill and intangible assets - net

The Company’s consolidated goodwill and intangible assets (net) were ₱1.3 billion (U.S.$26.3
million) as of December 31, 2017, a ₱58.8 million, or 4.7% increase from goodwill and
intangible assets (net) of ₱1.3 billion as of December 31, 2016, due to additional advertising
productions costs and computer software licenses. A portion of computer software licenses were
reclassified to other noncurrent assets in 2017 and was subsequently adjusted during the year.

Investment property

The Company’s consolidated investment property were ₱46.4 billion (U.S.$930.0 million) as of
December 31, 2017, a ₱13.9 billion, or 42.7% increase from consolidated investment property of
₱32.5 billion as of December 31, 2016, due to the continuing acquisition by the Company of
prime commercial property across provincial cities in the Philippines for its CityMalls expansion
(i.e., 15 CityMalls completed in 2017), and the construction of DD Meridian Park (including
DoubleDragon Plaza which was close to completion as of December 31, 2017) and Jollibee
Tower.

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Deferred tax assets

The Company’s consolidated deferred tax assets were ₱263.3 million (U.S.$5.3 million) as of
December 31, 2017, a ₱247.8 million, or 1,596.8% increase, from consolidated deferred tax
assets of ₱15.5 million as of December 31, 2016. This increase was due to the recognition of net
operating loss carried forward (NOLCO) of certain of the Company’s Subsidiaries.

Other noncurrent assets

The Company’s consolidated other noncurrent assets were ₱822.6 million (U.S.$16.4 million) as
of December 31, 2017, a ₱200.0 million, or 19.6% decrease from consolidated other noncurrent
assets of ₱1.0 billion as of December 31, 2016. This decrease was due to the shifting of advances
to contractors that are due in less than a year to the Company’s current account.

Liabilities

Accounts payable and other current liabilities

The Company’s consolidated accounts payable and other current liabilities were ₱4.1 billion
(U.S.$81.3 million) as of December 31, 2017, a ₱1.4 billion, or 53.7% increase from
consolidated accounts payable and other current liabilities of ₱2.6 billion as of December 31,
2016. This increase was due to the overall increase in construction activities relating to the
Company’s projects. Accounts payable consist primarily of trade payables from services
provided by contractors and subcontractors for actual progress billings relating to existing and
new developmental projects of the Company.

Short-term notes payable

The Company’s consolidated short-term notes payable were ₱3.5 billion (U.S.$69.2 million) as
of December 31, 2017, a ₱33.8 million, or 1.0% decrease from consolidated short-term notes
payable of ₱3.5 billion as of December 31, 2016. These short-term notes are with various
Philippine commercial and universal banks, and have rates ranging from 3.00% to 5.30% per
annum and terms ranging from 60 to 360 days.

The Company also maintains various short-term credit lines and facilities with various Philippine
commercial and universal banks to support its working capital and other requirements. These
credit lines have nominal interest rates ranging from 3.75% to 4.75%.

Due to related parties

The Company’s consolidated due to related parties were ₱944.7 million (U.S.$18.9 million) as of
December 31, 2017, a ₱136.3 million, or 12.6% decrease from consolidated due to related parties
of ₱1.1 billion as of December 31, 2016. This decrease was due to the settlement of the amounts
due to certain related parties of the Company in relation to the acquisition of Hotel of Asia, Inc.
See “Related Party Transactions” in this Prospectus.

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Customer’s deposits

The Company’s consolidated deposits from customers were ₱125.7 million (U.S.$2.5 million) as
of December 31, 2017, a ₱94.2 million, or 42.8% decrease from consolidated deposits from
customers of ₱219.9 million as of December 31, 2016. This decrease was due to the movement
of deposits and downpayments relating to units in The SkySuites Tower and W.H. Taft to sales.

Dividends payable

The Company’s dividends payable decreased to ₱152.1 million (U.S.$3.0 million) as of

December 31, 2017, a ₱9.9 million, or 6.1% decrease from ₱162.0 million as of December 31,
2016.

Income tax payable

The Company’s income tax payable was ₱23.1 million (U.S.$0.5 million) as of December 31,
2017, a ₱22.0 million, or 2,000.0% increase compared to ₱1.1 million as of December 31, 2016
as a result of the higher net income realized by the Company in 2017.

Long-term notes payable – net of debt issue costs

The Company’s consolidated long-term notes payable were ₱14.7 billion (U.S.$295.0 million) as
of December 31, 2017, a ₱300.2 million, or 2.0% decrease from consolidated long-term notes
payable of ₱15.0 billion as of December 31, 2016. These long-term notes are with various
Philippine commercial and universal banks, and have interest rates ranging from 5.7990% to
6.5934% per annum, and original terms ranging from six to ten years (and remaining terms
ranging from four to six years as of December 31, 2017).

Bonds payable – net of bond issuance cost

The Company’s consolidated bonds payable were ₱14.8 billion (U.S.$296.4 million) as of
December 31, 2017, a ₱9.6 billion, or 183.6% increase from consolidated bonds payable of ₱5.2
billion as of December 31, 2016, as a result of the Company’s issuance of ₱9.7 billion of bonds
in July 2017. These bonds are with various Philippine commercial and universal banks, and have
interest rates ranging from 5.9721% to 6.0952% per annum, and original terms ranging from
seven to ten years (and remaining terms ranging from seven to nine years as of December 31,
2017).

Deferred tax liability

The Company’s consolidated deferred tax liability was ₱2.8 billion (U.S.$57.1 million) as of
December 31, 2017, a ₱1.7 billion, or 147.9% increase from consolidated deferred tax liability of
₱1.1 billion as of December 31, 2016. This increase was due to the recognition of ₱4.2 billion in
unrealized gains from change in fair values of investment property in 2017.

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Retirement benefits liability

The Company’s retirement benefits liability was ₱7.7 million (U.S.$0.2 million) as of December
31, 2017, a ₱1.6 million, or 26.2% increase from retirement benefits liability of ₱6.1 million as
of December 31, 2016.

Other noncurrent liabilities

The Company’s consolidated other noncurrent liabilities were ₱878.4 million (U.S.$17.5
million) as of December 31, 2017, a ₱34.2 million, or 4.1% increase from consolidated other
noncurrent liabilities of ₱844.2 million as of December 31, 2016. This increase was due to the
increase in security deposits received in relation to leases in DD Meridian Park and the
Company’s CityMalls.

As of December 31, 2016 compared to as of December 31, 2015

Assets

Cash and cash equivalents

The Company’s consolidated cash and cash equivalents were ₱5,466.9 million
(U.S.$109.5 million) as of December 31, 2016, an increase of ₱4,506.4 million, or 469.2%, from
consolidated cash and cash equivalents of ₱960.5 million as of December 31, 2015, primarily
due to the issuance of Preferred Shares and bonds, and other short-term and long-term
borrowings of the Company in 2016, the proceeds of which were used for the construction of
CityMalls, Jollibee Tower, The SkySuites Tower, and DoubleDragon Plaza, and for general
corporate requirements of the Company.

Receivables – net

The Company’s consolidated net receivables were ₱1,712.3 million (U.S.$34.3 million) as of
December 31, 2016, a ₱993.1 million, or 138.1%, increase from consolidated net receivables of
₱719.1 million as of December 31, 2015, due to sales from the Company’s ongoing interim
residential projects.

Real estate inventories

The Company’s consolidated real estate inventories were ₱3,186.3 million (U.S.$63.8 million) as
of December 31, 2016, a ₱545.9 million, or 20.7%, increase from consolidated real estate
inventories of ₱2,640.4 million as of December 31, 2015, due to additional developmental
projects of the Company.

Due from related parties

The Company’s consolidated due from related parties was ₱101.8 million (U.S.$2.0 million) as
of December 31, 2016, an increase of ₱43.2 million, or 73.7%, from consolidated due from
related parties of ₱58.6 million as of December 31, 2015.

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Prepaid expenses and other current assets - net

The Company’s consolidated prepaid expenses and other current assets (net) were
₱3,251.3 million (U.S.$65.1 million) as of December 31, 2016, a ₱1,968.6 million, or 153.5%,
increase from consolidated prepaid expenses and other current assets (net) of ₱1,282.7 million as
of December 31, 2015.

Receivables – net of current portion

The Company’s consolidated noncurrent receivables were ₱643.3 million (U.S.$12.9 million) as
of December 31, 2016, a ₱184.6 million, or 40.2%, increase from consolidated noncurrent
receivables of ₱458.7 million as of December 31, 2015, due to the additional take up of sales via
installment plans.

Property and equipment - net

The Company’s consolidated property and equipment (net) were ₱863.4 million
(U.S.$17.3 million) as of December 31, 2016, a ₱717.6 million, or 492.2%, increase from
consolidated property and equipment (net) of ₱145.8 million as of December 31, 2015, as a
result of the adjustment in the fair values of the identifiable net assets of HOA which the
Company acquired in August 2016.

Goodwill and intangible assets - net

The Company’s consolidated goodwill and intangible assets (net) were ₱1,255.0 million
(U.S.$25.1 million) as of December 31, 2016, a ₱1,160.7 million, or 1,230.9%, increase from
goodwill and intangible assets (net) of ₱94.3 million as of December 31, 2015, primarily due to
the recognition of the brand equity of Hotel 101 and Jinjiang Inn and goodwill as a result of the
independent valuation of Hotel of Asia, Inc. following its acquisition in August 2016 and the
purchase and implementation of SAP enterprise software in 2016.

Investment property

The Company’s consolidated investment property were ₱32,535.1 million (U.S.$651.7 million)
as of December 31, 2016, an increase of ₱12,605.2 million, or 63.2%, from consolidated
investment property of ₱19,929.9 million as of December 31, 2015, due to the continuing
acquisition by the Company of prime commercial property across provincial cities in the
Philippines for its CityMalls expansion, and the construction of the Company’s CityMalls and
other projects.

Deferred tax assets

The Company’s consolidated deferred tax assets were ₱15.5 million (U.S.$0.3 million) as of
December 31, 2016, a decrease of ₱403.3 million, or 96.3%, from consolidated deferred tax
assets of ₱418.8 million as of December 31, 2015.

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Other noncurrent assets

The Company’s consolidated other noncurrent assets were ₱1,022.6 million (U.S.$20.5 million)
as of December 31, 2016, a decrease of ₱31.9 million, or 3.0%, from consolidated other
noncurrent assets of ₱1,054.5 million as of December 31, 2015.

Liabilities

Accounts payable and other current liabilities

The Company’s consolidated accounts payable and other current liabilities were
₱2,640.0 million (U.S.$52.9 million) as of December 31, 2016, an increase of ₱1,036.8 million,
or 64.7%, from consolidated accounts payable and other current liabilities of ₱1,603.2 million as
of December 31, 2015. Accounts payable consist primarily of trade payables from services
provided by contractors and subcontractors for actual progress billings relating to existing and
new developmental projects of the Company.

Short-term notes payable

The Company’s consolidated short-term notes payable were ₱3,486.0 million

(U.S.$69.8 million) as of December 31, 2016, a decrease of ₱788.0 million, or 18.4%, from
consolidated short-term notes payable of ₱4,274.0 million as of December 31, 2015, due to
repayment of the current portion of the Company’s short-term notes payable in 2016.

Due to related parties

The Company’s consolidated due to related parties were ₱1,081.0 million (U.S.$21.7 million) as
of December 31, 2016, an increase of ₱527.3 million, or 95.2%, from consolidated due to related
parties of ₱553.7 million as of December 31, 2015.

Customer’s deposits

The Company’s consolidated current portion of deposits from customers were ₱219.9 million
(U.S.$4.4 million) as of December 31, 2016, an increase of ₱162.1 million, or 280.4%, from
consolidated deposits from customers of ₱57.8 million as of December 31, 2015.

Dividends payable

The Company’s dividends payable as of December 31, 2016 was ₱162.0 million
(U.S.$3.2 million).

Income tax payable

The Company’s income tax payable was ₱1.1 million (U.S.$0.0 million) as of December 31,
2016, compared to ₱0.7 million as of December 31, 2015.

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Long-term notes payable – net of debt issue costs

The Company’s consolidated long-term notes payable were ₱15,027.8 million (U.S.$301.0
million) as of December 31, 2016, a decrease of ₱3,913.3 million, or 35.2%, from consolidated
long-term notes payable of ₱11,114.5 million as of December 31, 2015, as the Company
obtained additional unsecured long-term loans from various financial institutions.

Bonds payable – net of bond issuance cost

The Company’s consolidated bonds payable were ₱5,217.7 million (U.S.$104.5 million) as of
December 31, 2016, as the Company issued its first tranche of ten-year bonds in 2016. The
proceeds from this issuance and the Company’s long-term loans were used to partially finance its
capital expenditures, primarily for the development of DD Meridian Park, The SkySuites Tower,
Jollibee Tower, land acquisition, and construction of CityMalls, as well as for general corporate
purposes.

Deferred tax liability

The Company’s consolidated deferred tax liability was ₱1,149.4 million (U.S.$23.0 million) as
of December 31, 2016, an increase of ₱364.3 million, or 46.4%, from consolidated deferred tax
liability of ₱785.1 million as of December 31, 2015.

Retirement benefits liability

The Company’s retirement benefits liability was ₱6.1 million (U.S.$0.1 million) as of December
31, 2016, an increase of ₱1.1 million, or 22.0%, from retirement benefits liability of ₱5.0 million
as of December 31, 2015.

Customer’s deposits – net of current portion

The Company’s consolidated customer’s deposits (net of current portion) were ₱111.3 million as
of December 31, 2015.

Other noncurrent liabilities

The Company’s consolidated other noncurrent liabilities were ₱844.2 million

(U.S.$16.9 million) as of December 31, 2016, an increase of ₱230.7 million, or 37.6%, from
consolidated other noncurrent liabilities of ₱613.5 million as of December 31, 2015.

LIQUIDITY AND CAPITAL RESOURCES

The Company mainly relies on the following sources of liquidity: (1) cash flow from operations,
(2) financing lines provided by banks, and (3) issuance of debt and equity securities. The
Company knows of no demands, commitments, events, or uncertainties that are reasonably likely
to result in a material increase or decrease in liquidity. The Company is current on all of its loan
accounts and outstanding notes, and has not had any issues with banks or noteholders to date.
The Company does not anticipate having any cash flow or liquidity problems over the next
12 months. The Company is not in breach or default on any loan or other form of indebtedness.

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The Company expects to meet its operating assets and liabilities, capital expenditure, dividend
payment and investment requirements for the next 12 months primarily from its operating cash
flows, borrowings and proceeds of the Firm Offer. It may also from time to time seek other
sources of funding, which may include debt or equity financings, depending on its financing
needs and market conditions.

Cash Flows

The following table sets forth selected information from the Company’s consolidated statements
of cash flows for the periods indicated:
For the years ended December 31, For the three months ended March 31,
2015 2016 2017 2017 2017 2018 2018
₱ ₱ ₱ U.S.$ ₱ ₱ U.S.$
(Audited) (Unaudited) (Reviewed) (Unaudited)
(millions)

Net cash provided by (used in)

operating activities ...................... (728.3) (2,909.4) (3,492.4) (69.9) 70.5 1,143.3 21.9
Net cash provided by (used in)
investing activities ....................... (9,064.9) (9,774.9) (8,624.1) (172.8) (2,798.9) (2,525.3) (48.4)
Net cash provided by (used in)
financing activities ...................... 6,936.5 17,190.7 8,750.0 175.3 (460.6) 583.3 11.2
Net increase (decrease) in cash
and cash equivalents. ................... (2,856.7) 4,506.4 (3,366.5) (67.4) (3,189.0) (798.7) (15.3)
Cash at beginning of the period ... 3,817.2 960.5 5,466.9 109.5 5,466.9 2,100.4 40.2
Cash at end of the period ............. 960.5 5,466.9 2,100.4 42.1 2,277.9 1,301.7 24.9

Cash flow used in /from operating activities

The Company’s consolidated net cash used in operating activities is primarily affected by the
revenues and expenses related to its operations, primarily construction and sale of residential
units, sale of leasehold rights, construction and revenues from hotel operations. The Company’s
consolidated net cash used in operating activities were ₱728.3 million, ₱2,909.4 million and
₱3,492.4 million (U.S.$69.9 million) for the years ended December 31, 2015, 2016, and 2017,
respectively, and the consolidated net cash provided by operating activities amounted to ₱70.5
million and ₱1,143.3 million (U.S.$21.9 million) for the three months ended March 31, 2017 and
2018, respectively.

Cash flows used in investing activities

Consolidated net cash flow used in investing activities for the years ended December 31, 2015,
2016, and 2017, were ₱9,064.9 million, ₱9,774.9 million and ₱8,624.1 million (U.S.$172.8
million), respectively, and were ₱2,798.9 million and ₱2,525.3 million (U.S.$48.4 million) for
the three months ended March 31, 2017 and 2018, respectively, which primarily reflected
acquisitions of land for future development, as well as purchases of property and equipment.

Cash flow provided by financing activities

Consolidated net cash flow provided by financing activities for the years ended December 31,
2015, 2016, and 2017, were ₱6,936.5 million, ₱17,190.7 million and ₱8,750.0 million

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(U.S.$175.3 million), respectively and were ₱460.6 million and ₱583.3 million (U.S.$11.2
million) for the three months ended March 31, 2017 and 2018, respectively. Consolidated net
cash flow provided by financing activities was attributable mainly to the proceeds from the
Company’s issuance of Preferred Shares, availment of notes, and issuance of bonds, as offset by
certain notes repayments and payment of dividends.

CAPITAL EXPENDITURES

The Company’s capital expenditures for the years ended December 31, 2015, 2016, and 2017,
were ₱9,318.6 million, ₱12,088.9 million and ₱10,904.8 million (U.S.$218.4 million),
respectively, and its capital expenditures for the three months ended March 31, 2017 and 2018
were ₱2,587.3 million and ₱3,427.8 million (U.S.$65.7 million), respectively. The table below
sets forth the primary capital expenditures of the Company over the same periods.

For the years ended December 31, For the three months ended March 31,
2015 2016 2017 2017 2017 2018 2018
₱ ₱ ₱ U.S.$ ₱ ₱ U.S.$
(Audited) (Unaudited) (Reviewed) (Unaudited)
(millions)
Inventories...................................... 767.6 1,039.7 992.4 19.9 232.3 240.4 4.6
Land ............................................... 3,294.6 1,469.9 1,264.6 25.3 315.5 224.5 4.3
Building.......................................... - 137.0 99.2 2.0 64.9 237.3 4.5
Leasehold improvements ................ 2.8 2.1 190.2 3.8 0.1 3.4 0.1
Equipment and showrooms ............ 47.6 38.1 60.4 1.2 14.4 7.2 0.2
Furniture and fixtures ..................... 7.3 9.1 5.3 0.1 - 3.5 0.1
Room fixtures and components ...... - 0.2 17.4 0.3 1.4 12.3 0.2
Construction-in-progress ................ 5,198.8 9,392.8 8,275.3 165.8 1,958.7 2,699.2 51.7
Total capital expenditures ........... 9,318.6 12,088.9 10,904.8 218.4 2,587.3 3,427.8 65.7

Aside from the items described in the immediately preceding paragraphs, the Company has no
other material commitments for capital expenditure.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

The following table sets forth the Company’s consolidated contractual obligations and
commitments as of March 31, 2018:
Contractual Obligations and Commitments
Principal Payments Due by Period
(₱ millions)
April 1, 2018 - March
Total 31, 2023 After March 31, 2023
Notes payable ............................... 22,690.03 20,329.53 2,360.50
Bonds payable .............................. 23,413.26 4,553.91 18,859.35
Operating leases ........................... 2,994.04 432.78 2,561.26
Total ............................................ 49,097.33 25,316.22 23,781.11

DEBT OBLIGATIONS AND FACILITIES

As of March 31, 2018, the Company’s total outstanding indebtedness was ₱33.6 billion,
comprising various short-term loans mainly from local banks, with interest rates ranging from

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3.50% to 5.50% per annum, long-term corporate notes mainly from local banks, with interest
rates ranging from 5.7990% to 6.5934%, and fixed-rate bonds with an interest rate of 5.9721%
and 6.0952%. The Company’s debt obligations have maturities ranging from two months to ten
years.

In July 2017, the Company issued ₱9.7 billion of 6.0952% bonds due 2024 to fund the
development of its various projects and general corporate requirements.

OFF BALANCE SHEET ARRANGEMENTS

As of the date of this Prospectus, the Company has no material off-balance sheet transactions,
arrangements, obligations. The Company also has no unconsolidated subsidiaries.

QUALITATIVE AND QUANTITATIVE DISCLOSURE OF MARKET RISK

Credit Risk

Credit risk represents the risk of loss the Company would incur if credit customers and
counterparties fail to perform their contractual obligations. The risk arises principally from the
Company’s cash and cash equivalents, receivables, due from related parties and refundable
deposits.

In respect of installments contracts receivable, credit risk is managed primarily through credit
reviews and an analysis of receivables on a continuous basis. The Company has stringent
customer requirements and performs credit investigation and evaluation of buyers to establish
paying capacity and creditworthiness. The Company also performs supplemental credit review
procedures for certain installment payment structures. Buyer payments are facilitated by post-
dated checks. Receivable balances are being monitored on a regular basis to ensure timely
execution of necessary intervention efforts. Exposure to bad debts is not significant as titles to
real estate properties are not transferred to the buyers until full payment has been made and there
are no large concentrations of credit risk given the Company's diverse customer base.

If the buyer fails to pay the monthly amortization of the unit, the Company’s credit and
collection department issues a demand letter to the buyer. If the account remains unsettled after
the deadline stated in the demand letter, it will be endorsed to the Company’s legal department.
Legal will then issue the notice of rescission and then the notice of cancellation for the actual
cancellation of the account.

Below are the guidelines for default accounts:

Past due accounts Issuance of demand letters by credit &
collection department
Buyer may be allowed to restructure
and update account
None payment of past due amount after Endorsement to legal department for the
deadline issuance of notice of rescission
Maceda Law is applied
Accounts cancelled Issuance of notice of cancellation

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 Issuance of letter to HLURB for the cancelled
units
Client may be allowed to purchase
again (new sale) after one year from
cancellation

All cancelled accounts will be reopened for sale at current selling price of the similar units. The
Company recognized an impairment loss on receivables for 2015, as indicated in Notes 7 and 20
of the Company’s audited financial statements elsewhere in this Prospectus.

Credit risk arising from rent receivable is primarily managed through a tenant selection process.
Prospective tenants are evaluated on the basis of payment track record and other credit
information. In accordance with the provisions of the lease contracts, the lessees are required to
deposit with the Company security deposits and advance rentals which helps reduce the
Company’s credit risk exposure in case of defaults by the tenants. For existing tenants, the
Company has put in place a monitoring and follow-up system. Receivables are aged and
analyzed on a continuous basis to minimize credit risk associated with these receivables.

Liquidity Risk

The Company faces the risk that it will not have sufficient cash flows to meet its operating
requirements and its financing obligations when they come due.

The Company manages liquidity risks by forecasting projected cash flows and maintaining
balance between continuity of funding and flexibility in operations. Treasury controls and
procedures are in place to ensure that sufficient cash is maintained to cover daily operational
working capital requirements. Management closely monitors the Company’s future and
contingent obligations and set up required cash reserves as necessary in accordance with internal
requirements.

Interest Rate Risk

Fluctuations in interest rates could make it more difficult for the Company to procure new debt
on attractive terms, or at all. The Company currently does not, and does not plan to, engage in
interest rate derivative or swap activity to hedge its exposure to increases in interest rates.

The Company’s current borrowings are at fixed interest rates. As such, the Company is not
subject to the effect of changes in interest rates with respect to its short-term and long-term loan
obligations.

Commodity Risk

As a property developer, the Company is exposed to the risk that prices for construction
materials used to build its properties (including, among others, cement and steel) will increase.
These materials are global commodities whose prices are cyclical in nature and fluctuate in
accordance with global market conditions. The Company is exposed to the risk that it may not
be able to pass its increased costs to its customers, which would lower the Company’s margins.
The Company does not engage in commodity hedging, but attempts to manage commodity risk

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by generally requiring its construction and development contractors to supply raw materials for
the relevant construction and development projects (and bear the risk of price fluctuations). See
“— Factors Affecting Results of Operations — Price Volatility of Construction Materials and
Other Development Costs.”

ACCELERATION OF FINANCIAL OBLIGATIONS

There are no known events that could trigger a direct or contingent financial obligation that
would have a material effect on the Company’s liquidity, financial condition and results of
operations.

INCOME OR LOSSES ARISING OUTSIDE OF CONTINUING OPERATIONS

The Company has no sources of income or loss coming from discontinued operations. All of its
Subsidiaries are expected to continue to contribute to the Company’s operating performance on
an ongoing basis and/or in the future.

SEASONALITY

There is no significant seasonality in the Company’s sales or revenues, as most of the

Company’s existing leases are based on fixed annual rates. The Company may experience
seasonality with respect to its leases that are based on a percentage of its tenants’ revenues, and
such seasonality may become more significant as the percentage of the Company’s variable rate
leases increases. Generally, the Company may experience seasonal fluctuations with respect to
its revenue from its variable rate leases in its CityMalls as tenants’ sales are expected to peak in
December of each year. Tenants’ sales thereafter are expected to slowdown in the first quarter of
the year and begin to increase in the second quarter, driven by the summer season, the school
break in April and May and particularly the beginning of the school year in the month of June.
This is expected to be followed by a slowdown in sales in the third quarter due to the rainy
season.

The Company’s hospitality operations may also be subject to seasonality, with sales expected to
increase during the holiday seasons and the dry season in the Philippines and, specifically with
respect to the Company’s Jinjiang Inns, holidays in China.

The Company tends to experience higher operating expenses during the fourth quarter of the year
related to payments of year-end compensation, incentives and/or bonuses, whether required by
law or based on internal polices, to executives, employees and salespersons, as well as other
expenses.

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 BUSINESS

OVERVIEW

DoubleDragon Properties Corp. is an emerging real estate company in the Philippines,

principally engaged in the ownership and operation of a portfolio of leasable properties through
its four principal business segments: retail leasing, office leasing, hospitality and industrial
leasing, with the aim of becoming one of the leading property players in the Philippines with the
highest percentage of recurring revenue. The Company’s two principal shareholders are Injap
Investments Inc., controlled by the Sia family, and Honeystar Holdings Corp. controlled by the
Tan and Ang families, who also control Jollibee Foods Corporation (“JFC”), the largest fast food
company in the Philippines.

As of December 31, 2017, through its subsidiary, CityMall Commercial Centers Inc.
(“CMCCI”), the Company owns and operates 25 CityMalls, with a total leasable area of
147,806.0 sq. m., primarily located in the provincial areas of the Philippines. The Company also
has 21 CityMalls under construction, with an additional land bank for 17 CityMalls. CMCCI is
66% owned by the Company and 34% owned by SM Investments Corp. (“SMIC”), the holding
company for one of the largest conglomerates in the Philippines.

The Company’s office leasing segment primarily consists of two key projects under
development, DD Meridian Park and Jollibee Tower. DD Meridian Park, a 4.8 hectare project
located in the Manila Bay area of Pasay City, and which is 70%-owned by the Company, is
expected to consist of 280,000 sq. m. of leasable space. The space will primarily be used for
BPO, outsourcing and support service offices, and corporate offices and is to be constructed in
four phases. The first phase, DoubleDragon Plaza, was inaugurated and unveiled on May 7,
2018, while the second phase is expected to be completed in the fourth quarter of 2018. Jollibee
Tower is a Grade A 41-storey commercial and office tower with 47,909 sq. m. of leasable space
and is situated in the heart of the Ortigas central business district in Metro Manila. The project,
which is expected to be completed in 2018, is a joint venture between the Company and JFC,
who will serve as the building’s anchor tenant.

The Company’s hospitality segment is operated through its subsidiary, Hotel of Asia, Inc.
(“HOA”), which is 70%-owned by the Company, and HOA’s wholly owned subsidiary, Hotel
101 Management Inc. The hospitality operations comprise 866 operating hotel rooms, including
the Company’s own hotel brand, “Hotel 101”, which currently has one operating hotel in the Bay
Area near the Mall of Asia. CSI Hotels, Inc., a 50%-owned subsidiary of HOA, is the
Philippines’ master franchisee of the “Jinjiang Inn” brand, with two hotels in operation in
Ortigas and Makati, Metro Manila primarily targeted at Chinese tourists. Hotel 101 Management
Corporation, a wholly owned subsidiary of HOA, operates Injap Tower, a 21-storey condotel
located in Iloilo City. As of December 31, 2017, the Company had one hotel under construction,
Hotel101 Fort, and five more hotels in the planning and development stage, specifically
Hotel101 Bohol, Hotel101 Davao, Hotel101 Boracay, Jinjiang Inn Boracay (Newcoast) and
Jinjiang Inn Cagayan de Oro which are estimated to be completed in 2020. The Company
recently announced the entry by HOA into a joint venture for the development of Hotel 101
Resort-Boracay in Megaworld’s Boracay Newcoast estate. See “Business—Hospitality—Future

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Hotel Developments”. The Company aims to have 5,000 rooms under management by 2020. The
Company also intends to subfranchise its “Jinjiang Inn” brand in the future.

The Company’s latest venture into the growing industrial leasing segment is through its wholly
owned subsidiary, CentralHub Industrial Centers Inc. (“CHICI”). The Company, through CHICI,
recently acquired a 6.2 hectare parcel of land in Luisita Industrial Park, Tarlac and a 3.9 hectare
parcel of land in Iloilo for industrial leasing, and the Company intends to acquire six additional
sites strategically located across Luzon, Visayas and Mindanao. See “Business—Industrial
Leasing”. The industrial centers will contain standardized, multi-use, and industrial quality
warehouses suited for commissaries, cold storage and logistics centers to be leased to locators
operating nationwide.

For the years ended December 31, 2015, 2016 and 2017, the Company had total revenues of
₱1,929.0 million, ₱3,711.8 million and ₱6,611.9 million (U.S.$132.4 million), respectively. The
Company also had net income of ₱622.8 million, ₱1,470.3 million and ₱2,526.3 million
(U.S.$50.6 million), respectively, over the same periods. For the three months ended March 31,
2017 and 2018, the Company had total revenues of ₱649.0 million and ₱1,830.3 million,
respectively. The Company’s recurring revenue, consisting of its rental income and income from
hotel operations, was 6.0%, 9.4%, 19.8%, 29.9% and 29.0% of its total revenues for the years
ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018,
respectively.

RECENT DEVELOPMENTS

On April 6, 2018, CMCCI entered into 10-year lease contracts for an additional 22 SM
Savemore Supermarkets in CityMall sites slated for opening in 2018 and located in various parts
of Luzon, Visayas and Mindanao. On June 7, 2018, the Company also unveiled “Islas Pinas”, a
food and heritage village located within DoubleDragon Plaza.

HISTORY

The Company, formerly named Injap Land Corporation, was incorporated and registered with
the SEC on December 9, 2009, and began commercial operations in November 2010 with the
primary purpose of engaging in real estate development and real estate related ventures. The
Company was originally a wholly owned subsidiary of Injap Investments Inc., the holding
company of the Sia family. On June 29, 2012, the Company became a 50-50 joint venture
between Injap Investments and Honeystar Holdings Corporation (“Honeystar”) when Honeystar,
headed by Tony Tan Caktiong, Founder and Chairman of JFC, invested in the Company. The
Company eventually changed its corporate name to DoubleDragon Properties Corp. on July 30,
2012.

The Company, prior to the entry of Honeystar, was originally the Sia family’s initial foray into
real estate development. The Company’s first venture, People’s Condominium project, was the
first condominium project in Iloilo City. People’s Condominium was completed in November
2011 and was fully sold within a few months from commencing pre-selling activities. Other
projects developed by the Company in Iloilo City include Injap Tower, a 21-storey commercial
and condotel tower, The Uptown Place, a five-storey premium commercial and residential

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condominium, as well as horizontal developments FirstHomes and HappyHomes, both located in
Mandurriao – Iloilo.

It was after the entry of Honeystar and the renaming of the Company into DoubleDragon
Properties Corp. that the Company’s Chairman and Co-Chairman, Edgar “Injap” Sia II and Tony
Tan Caktiong, both born in the year of the dragon, established a clear vision for the Company’s
future. They identified a unique opportunity to capitalize on the modernization of retail in the
provinces by building a chain of community malls to become the venue for this transition. The
Company targeted second and thirdtier provincial cities for the rollout of their CityMall branded
concept. CMCCI was incorporated on December 27, 2013 to serve as the vehicle for this rollout.
Seeing the potential of the CityMall concept, SMIC, one of the largest conglomerates in the
Philippines with a portfolio of leading retail stores, took a 34% stake in CMCCI in 2014.

To further diversify and attain the goal of operating mostly recurring revenue properties, the
Company began to develop commercial office projects in Metro Manila through its flagship
commercial office project, DD Meridian Park. The Company’s further entry into the office space
segment occurred in August 2015 when it entered into joint venture with JFC to build a 41-storey
commercial and office tower in the Ortigas central business district that will serve as the
corporate center for JFC, one of the country’s leading fast food companies.

The Company’s shares debuted on the Philippine Stock Exchange’s (“PSE”) Small, Medium,
and Emerging Board (“SME Board”) on April 7, 2014 under the stock symbol “DD” through an
initial public offering of 26% of its outstanding common shares. On July 6, 2015, the Company’s
shares transferred from the SME Board to the PSE Main Board. On November 30, 2015, the
Company’s shares were included in the Morgan Stanley Capital International Small Cap
Philippine Index. On March 14, 2016 the Company was included in the property sector index of
the PSE. On April 14, 2016, the Company issued ₱10,000,000,000 worth of Preferred Shares,
which were subsequently listed in the PSE Main Board on July 26, 2016. On September 12,
2016, the Company was included as one of five listed companies in the PSEi reserve list.

As of June 8, 2018, the Company’s market capitalization was ₱62.2 billion.

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CORPORATE STRUCTURE

The Company’s corporate structure is presented in the diagram below:

See “—Subsidiaries” for more information on each of the Company’s Subsidiaries.

COMPETITIVE STRENGTHS

Fast growing real estate property group transitioning to a business that will be supported by a
diversified recurring income platform from four property pillars across retail, office,
hospitality and industrial segments
The Company is predominantly a developer and owner of a portfolio of investment properties
with a total leasable area of 191,106.5 sq. m. as of December 31, 2017. The Company continues
to ramp up its pace of growth and widen its presence and deepen penetration across the
Philippines, with plans to increase its portfolio’s leasable area to 1.2 million sq. m., spanning
across the retail, office, hospitality and industrial segments by 2020. The Company is moving
towards a business model which is expected to derive a significant majority of its revenues from
recurring income streams. For the year ended December 31, 2017 and for the three months ended
March 31, 2018, 19.8% and 29.0%, respectively, of its total revenue was contributed by the retail
and hospitality business segments.
As of December 31, 2017, the Company has 25 operational CityMalls with a total leasable area
of approximately 147,806.0 sq. m. and an occupancy of 95.3%. As of December 31, 2017, 21
CityMalls are under construction, and the Company has additional land bank for 17 new
CityMalls. The Company intends to establish a nationwide presence of 100 CityMalls with a
total leasable area of 700,000 sq. m. by 2020. All CityMall sites are in prime locations within the
natural daily movement of the general population that the Company serves. CityMall sites are
secured in areas located along main roads to increase visibility and maximize exposure and
accessibility to its target market.
The Company believes that there remains significant organic growth within its CityMalls
business model. Same-store sales growth for FoodWorld which comprises brands owned by

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Jollibee Foods Corp. in the first five operational CityMalls which were completed in 2015 was
approximately 12.3% from the year ended December 31, 2016 to the year ended December 31,
2017, underpinned by positive market reversions and fixed annual escalation ranging from 5% to
10%. Moreover, there is potential for further upside with the transition to a turnover rent
structure from the base rent structure, as its business scales up and its tenants’ retail sales
continue to increase.
DD Meridian Park is being developed as an office-led mixed-use development with leasable area
of 280,000 sq. m. DoubleDragon Plaza, which comprises phase 1 of the DD Meridian Park
project, opened in December 2017 and was inaugurated and unveiled on May 7, 2018.
DoubleDragon Center East and DoubleDragon Center West, which comprise phase 2 of the DD
Meridian Park project, are 23.3% complete as of December 31, 2017. Further, as of December
31, 2017, towers one, two, three and four of DoubleDragon Plaza are 89.8%, 100.0%, 100.0%
and 100.0% pre-committed, while the retail area of DoubleDragon Plaza is 61.7% pre-
committed. Complementing DD Meridian Park is Jollibee Tower, a premium-grade office
building which will be the future headquarters of JFC. As of December 31, 2017, the building is
14.2% completed and 30.0% pre-committed. Construction is estimated to be completed within
the fourth quarter of 2018.
Through the Company’s three star hotel chains – Hotel 101, Jinjiang Inn and Injap Tower –
under the Company’s Subsidiary, HOA, the Company expects to benefit from the strong growth
of the Philippine economy and the expected healthy tourism sector performance. CSI Hotels,
Inc., a 50% subsidiary of HOA, is the exclusive master franchisee of the Chinese hotel chain
Jinjiang Inn in the country – awarded the Best Local Hotel Brand in 2016 / 2017 by City
Traveler. With Jinjiang Inn’s strong mainland China customer base and familiarity with the
brand, the Company believes that it is well positioned to benefit from the growing inbound
Chinese tourists which is expected to increase to 1 million in 2017 according to Savills.
According to the Department of Tourism, there were 675,700 arrivals from China in 2016,
making China the third largest source of foreign tourists in the Philippines.
All of the hotels under both brands are strategically located in areas which are in close proximity
to one or all of the following: business hubs, shopping malls, and dining options. As of
December 31, 2017, Hotel 101 Manila, Jinjiang Inn Ortigas, Jinjiang Inn Makati and Injap
Tower have 518, 95, 59 and 194 rooms, respectively, with a target to grow the hotel portfolio to
5,000 rooms with a leasable area of 100,000 sq. m. by 2020, offering investors the opportunity to
gain exposure to one of the largest potential portfolios of hospitality assets in the Philippines by
room count.
In addition, the Company formed its wholly owned subsidiary CentralHub Industrial Centers Inc.
(“CHICI”) as its industrial leasing arm. The Company envisions CHICI to be a branded modern
institutional quality logistics facility suited for commissaries, cold storage and logistic centers.
The Company has secured a 6.2 hectare site in Tarlac and a 3.9 hectare lot in Iloilo, as part of its
plan to build eight industrial centers by 2020 (two in North Luzon, two in South Luzon, two in
Visayas and two in Mindanao), adding 100,000 sq. m. to its leasing portfolio.
Finally, the Company believes that its recurring income stream is underpinned by a portfolio of
quality assets that will likely appreciate in value given their location. The Company believes that
these assets, collectively, will generate strong cash flows and a well-capitalized balance sheet.

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Well-defined execution capability with proven track record of delivering growth
Leveraging the Company’s end-to-end capabilities as a real estate developer and owner,
encompassing site identification, master planning, development, marketing, leasing, events,
client relationship management, data analytics, the Company believes that it has the ability and
resources to create a market leading business model.

• Standard project blueprint enables a highly cost efficient rapid roll-out strategy across
its business segments. The Company remains focused on growing its business segments to
achieve economies of scale and drive cost efficiencies. For example, with its aim to be the
largest community mall player in first class municipalities and second and third class cities,
the rollout of its expansion plans allows the Company to achieve operational efficiencies as it
has the optionality to offer multiple CityMall construction projects to the contractors within
the same province. As a result of repeated transactions with the local contractors, not only
does the Company have direct interaction with workers who have better on-the-ground
experience in sourcing labor and local materials, the Company believes that it gains
familiarity with the execution process to ensure that its development timelines are met.
Similar to CityMalls, the Company plans to scale up significantly to dominate and be the
largest player in the Philippines hospitality and industrial segments to benefit from
economies of scale. To ensure rapid roll-out to achieve economies of scale, the Company has
developed and adopted a standardized approach to the development and marketing of its
business segments. For example, the timeline for the start of development to stabilized
operations for each of its CityMalls is approximately 18 months (construction permit to
opening of 12 months and a further six months to stabilize), which has enabled the Company
to deliver new malls to the market in an expedited manner – delivered 25 operational
CityMalls as of December 31, 2017. Similarly, the Company is adopting a standardized
approach in developing its hotels and industrial leasing businesses to shorten the
development-to-cash generating cycle.

• Proven execution ability in delivery. The Company believes that it has an established
execution track record. Just over three years since listing, the Company has managed to build
up an investment property portfolio with a leasable area of 191,106.5 sq. m. as of December
31, 2017, representing 19.1% of the Company’s initial planned 1.0 million sq. m. of leasable
space.

Given the pace of the Company’s growth and success in sourcing and securing new sites, the
Company has increased its leasable area target to 1.2 million sq. m. by 2020. As of December
31, 2017, the Company believes it has also secured 77% of its land bank needs for its
enhanced 2020 plan of 1.2 million sq. m. leasable area. The Company’s confidence in
raising its target is also due to its standardized and scalable operational model, which enables
it to establish a track record of timely delivery of its projects. In addition, the Company has
also displayed a track record of delivering high committed occupancies for its investment
properties:
o Average committed occupancy for its 25 operational CityMalls as of December 31,
2017, is approximately 90% at opening; and
o as of December 31, 2017, towers one, two, three and four of DoubleDragon Plaza are
89.8%, 100.0%, 100.0% and 100.0% pre-committed, while the retail area of

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 DoubleDragon Plaza is 61.7% pre-committed, and Jollibee Tower is 30.0% pre-
committed.

• Strategic acquisitions to enter into new business segments. In line with a revised target
leasable portfolio from 1.0 million sq. m. to 1.2 million sq. m. by 2020, the Company has
already made swift and strategic acquisitions to enter into the hospitality and industrial
leasing businesses. In October 2016, the Company acquired 70% of HOA, an existing hotel
business contributing approximately 19,064.5 sq. m. to the leasable portfolio as of December
31, 2017, with plans to expand HOA to eventually contribute 100,000 sq. m. of leasable
space through the operation of 5,000 rooms by 2020. In August 2017, the Company
announced its acquisition of a 6.2 hectare industrial lot expected to contribute approximately
32,000 sq. m. of industrial leasing area, with a target to acquire more sites to eventually
contribute 100,000 sq. m. towards the Company’s leasable portfolio by 2020. Recently, the
Company has also announced its new joint venture on the development of Hotel 101 Resort-
Boracay on Megaworld’s Boracay Newcoast development, and its acquisition of a 3.9
hectare industrial lot in Iloilo for its second CentralHub site. See “Business—Hospitality—
Future Hotel Developments” and “Business—Industrial Leasing” for more information.

• Proven ability to raise funding. The Company has demonstrated a strong ability to secure
funding, raising approximately ₱40 billion in capital in the last four years, the majority of
which was used to ensure that the Company’s initial target plan of 1.0 million sq. m. of
leasable area was fully funded. The Company has also been able to diversify sources of funds
which include bank borrowings, and issuance of Preferred Shares and fixed-rate corporate
bonds, which enhance the Company’s financial flexibility in raising capital. Importantly, this
has allowed the Company to react faster to growth and any potential inorganic opportunities
that is value accretive for its business, such as the acquisition of HOA and CHICI.

Leading community mall business model in first class municipalities and second and third
class cities
The Company believes that it is currently the dominant player in the modern format branded
community mall segment across Philippines. As of December 31, 2017, the Company has
secured 63 CityMall sites.
According to Savills’ estimates, the Company is expected to hold approximately 37.9% of the
community mall stock in first class municipalities and second and third class cities by 2020. The
Company believes that it is one of the first movers at the forefront of retail modernization in first
class municipalities and second and third class cities, and has created a business model that is
positioned to significantly benefit from the transition from traditional retail to modern retail,
attributed to high barriers of entry for foreign players and varying strategic focus of local players.
Foreign players face issues including the following: (i) constitutional restrictions, which limit
foreign ownership to not more than 40% for companies that own land and retail businesses,
among others, and (ii) a lack of local relationships, existing local network and knowledge,
preventing them from gaining access to land bank and expanding on a similar scale. Based on
Savills’ research, there is little competition from foreign developers present in the market. Other
domestic entrants in the community malls segment include Waltermart Supermarket, Inc.,
Gaisano Grand Group, Gaisano Capital, Robinsons and Vista Land, but the pace of their

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expansion and existing network across first class municipalities and second and third class cities
has not been as extensive as CityMall’s. In addition, most of these companies’ business models
focus on supermarkets, unlike a typical CityMall which seeks to offer the all-in-one modern
shopping retail format (e.g. cinema, shopping, food and beverage, and grocery shopping). Even
for the larger local players, the focus remains on Metro Manila and bigger cities.

Well-positioned to benefit from positive macroeconomic fundamentals, political tailwinds and

emerging opportunities within the industry sectors
The Philippines’s positive macroeconomic fundamentals support its strong growth story
trajectory. Philippine 2016 GDP growth of 6.9% was the highest witnessed in the last three
years, and its 2017 GDP growth of 6.7%, continued to exhibit strength. According to Savills, the
Philippines is expected to have one of the strongest real GDP growth outlook forecast for 2018 in
ASEAN with a GDP growth rate of approximately 6.8%, and continues to be one of the largest
economy in the region, after Indonesia and Thailand.
The Philippine retail market is currently evolving from unorganized retail formats to multi-
tenanted malls, the latter providing a compelling alternative to traditional retail pathways such as
wet markets and provision shops, and introducing the modern shopping experience to the local
communities. According to Savills, the modern retail format is attractive to customers as this
provides them a one-stop platform for both discretionary and non-discretionary consumption. In
particular, the presence of a clean, air-conditioned indoor one-stop mall in first class
municipalities and second and third class cities is expected to be highly attractive to the cities’
population. Savills also believes that this is also attractive to tenants given significantly higher
footfall and sales per sq. m. achieved compared to unorganized retail, and this format provides
quality control with guaranteed infrastructure and logistics that helps to build brand equity. The
Company believes this trend is only starting to occur in first class municipalities and second and
third class cities, and its entry into these markets is well-timed to take advantage of this shift.
President Duterte’s administration plans to refocus development towards the agriculture,
manufacturing and trade industries in the countryside and disperse economic opportunity across
all socioeconomic levels. In addition, initiatives are being put in place to minimize red tape and
streamline regulatory procedures in order to accelerate development. This could accelerate
economic growth in first class municipalities and second and third class cities, increasing
populations as more businesses entering such areas, and potentially prompting increased demand
for retail space in such areas given stronger expected foot traffic amid new population migrating
for jobs, and increased disposable income. According to Savills, the current political thrust to
decentralize economic growth is also expected to benefit the Company’s CityMalls in first class
municipalities and second and third class cities.
Moreover, the Philippine economy has been expanding by greater than 6% per annum for the last
five years based on publicly available data from the Philippine Statistics Authority. The robust
growth reflects not just the sustained dynamism of the BPO-led services sector but also the
expansion of other key economic sub-sectors such as construction, telecommunications, banking
and finance, warehousing and logistics, and manufacturing. Companies engaged in these
businesses were compelled to expand and thus occupy larger and high-quality office space.
Demand for office real estate is also expected to benefit from the growing trend of offshore
gaming in the Philippines given similar space and infrastructure requirements as BPO offices.

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The Philippine Amusement and Gaming Corp. (PAGCOR) has been granting recently
established POGO licenses for foreign nationals, as revenues from online gaming is expected to
eventually match revenues from traditional casinos.
According to Savills, inbound tourism expenditure grew 2.3% in 2016 compared to 2015, and
tourist arrivals are estimated to increase to 10 million by 2020 compared to 5.8 million in 2016.
The growth of the Philippine tourism sector is expected to be sustained by the influx of visitors
from the country’s traditional markets such as South Korea, USA, Japan, and China. The four
economies account for nearly 60% of annual tourist arrivals in the country. Warming relations
between the Chinese and Philippine governments should also result in more Chinese tourists. In
late 2016, the Philippine and Chinese governments signed an agreement on tourism cooperation
that includes exploring a possible increase in capacity entitlements in air services and
encouraging airlines to open new flights between Philippine cities in the Visayas and Mindanao
regions and Chinese cities. The sector should also benefit from the spillover impact of the
successful hosting of major international events in the past two years such as APEC Summit,
ASEAN Tourism Forum, Routes Asia, and Miss Universe. With robust international arrivals and
sustained rise in visitor receipts (₱230 billion in 2016 from ₱227.6 billion in 2015), hotel
occupancy in Metro Manila increased by two-percentage points from 69% in the first half of
2016 to 71% by end-2016. There are also major tourism-related infrastructure projects under the
public-private partnership (PPP) program. For example, the government is working on a
comprehensive international airport development plan that covers the expansion and
privatization of Ninoy Aquino International Airport (NAIA); development of another
international airport in Bulacan or Sangley Point, Cavite; and expansion of Clark airport. This is
expected to bridge the country’s infrastructure gaps and enable the government to meet or even
surpass its visitor arrival target and entice more foreign and local businessmen to invest in the
country’s travel and tourism sector.
The Philippines’ favorable macroeconomic dynamics is expected to translate into strong and
sustainable demand for logistics facilities underpinned by limited stock of logistics facilities, in
particular modern logistics facilities in the Philippines. Strong real GDP growth, private
consumption, as well as a large and rapidly growing middle-income population is expected to
boost the Philippine consumer market. Notably, most of the Company’s current CityMall tenants
are heavy users of logistics space. However, a majority of the current stock of logistics
warehouses is old generation properties and fragmented, which provide less efficient
warehousing conditions. In contrast, modern logistics warehouses carry features such as large
floor areas, high ceilings of 14 meters high, high load tolerances, wide column spacing within the
warehousing area, modern loading docks and enhanced safety systems which provide greater
accessibility and efficiency. According to Savills, demand for logistics facilities and
warehousing facilities is expected to grow with the expansion of the modern retailing format in
the Philippines and the growth of the manufacturing sector, together with the improved
infrastructure in the Philippines as a result of Government-initiated infrastructure projects
nationwide.

Strong shareholders and partnerships with Philippines’ leading business groups validate the
Company’s vision and business model
The ability to attract and establish strategic relationships with the JFC, SM, and ABS-CBN
Groups validates its vision, positioning and execution capabilities as the leading owner, operator,

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and developer of branded community malls across first class municipalities and second and third
class cities in the Philippines. The SM Group’s “SaveMore” supermarket brand is the anchor
tenant in a majority of CityMalls, along with several best-in-category SM brands represented in
various CityMall branches. The JFC Group food brands anchor the “FoodWorld” section of
every CityMall and the Company consider this to be an irreplaceable advantage of the
partnership and highly attractive for its consumers. In addition, the Company has also teamed up
with broadcasting giant ABS-CBN to roll out cinemas in CityMalls branches nationwide.
Together, these strategic partnerships are expected to solidify the dominance of CityMalls all
over the Philippines.
Its partnerships with other business groups have also provided it with the ability to rapidly and
significantly expand into the hospitality and office sectors and gain access to valuable land sites.
The Company acquired a 70% stake in HOA, which will now serve as its hospitality arm through
three star hotels Hotel 101, Jinjiang Inn and Injap Tower located in prime locations across key
cities in the Philippines. Its strategic partnership with JFC also includes the establishment of a
joint venture to develop Jollibee Tower, a 40-storey commercial and office tower on a prime
commercial lot in Ortigas. DD Meridian Park, a joint venture between DD (70%) and the initial
land owner (30%), is strategically located as it is situated in the corner of EDSA, Roxas
Boulevard and Macapagal Avenue, main thoroughfares in Metro Manila close to the
Entertainment City and the SM Mall of Asia complex.

Experienced board and management team with strong corporate governance

The Company’s board of directors is highly experienced, with an average of 30 years of
experience in the Philippine real estate and commercial sectors. The board is led at the helm by
its Chairman and Chief Executive Officer, Edgar “Injap” Sia, whose experience stems from
growing the Mang Inasal chain from one branch in his hometown of Iloilo City in 2003 to over
338 branches nationwide by 2010. Its Co-Chairman Tony Tan Caktiong opened his first ice
cream parlor at the age of 22, and since then, Jollibee has grown to become the largest fast food
chain in the Philippines. Injap’s and Tony’s foresight in entering the quick service restaurants
business ahead of competitors and the knowledge they have obtained from expanding their
businesses in first class municipalities and second and third class cities will be instrumental in
growing the Company and enabling it to achieve its targets.
Similarly, the Company’s senior management team has a proven track record in developing,
investing in, managing, and enhancing commercial real estate, possessing an average of 12 years
of experience on average in the Philippine real estate and commercial sectors. The team covers
the entire value chain of the business, including asset development and enhancement, asset
management, and commercial operations.
The Company has also adopted governance policies and mechanisms to serve as its foundation
and guiding principle for good governance. The Company also continues to adopt policies and
mechanisms in accordance with established rules and best practices.

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BUSINESS STRATEGIES

A nationwide expansion plan to grow recurring income stream across 4 property pillars:
retail, office, industrial and hospitality
The Company is working towards building a strong base of recurring revenue through the
accumulation of 1.2 million sq. m. of leasable space nationwide by 2020, across the retail, office,
industrial and hospitality property segments. The Company has established a successful track
record of expansion by accumulating an investment property portfolio with a leasable area of
191,106.5 sq. m. as of December 31, 2017, representing 19.1% of the Company’s initial planned
1.0 million sq. m. of leasable space. The significant pace of execution was achieved through two
key success factors:
• Direct access to land bank opportunities, and a high level of familiarity with first class
municipalities and second and third class cities resulting in the ability to transact quickly; and
• Adaptable approach to site acquisition by entering into joint ventures or strategic alliances
with landowners, which contribute land to the joint venture while the Company provides its
development expertise.
The Company believes that it remains on track to achieve the 2020 target, with the Company
raising its 2020 leasable area target from 1.0 million sq. m. to 1.2 million sq. m. Of its 2020
leasable area target, 1.0 million sq. m. of leasable area has been funded by capital raised to date,
and the diversified business model that the Company is building out will broaden its earnings
base and provide stable and recurring sources of cash flows to fund its next stage of growth.
The Company intends to establish a nationwide footprint through strategically selected projects
that are located in prime locations both in Metro Manila and the different provinces in the
Philippines. The Company believes that the combination of macroeconomic factors and sector
trends across the country is expected to support a robust outlook in the near and medium term
period. This would allow the Company to diversify its recurring income source through a
balance of stable growth and high growth industries. Specifically, while the Metro Manila office
leasing space provides a stable base of income stream, the Company believes that the remaining
portfolio is well positioned for upside given exposure to the following trends:
• Transition of traditional retail to modern retail. According to Savills, modern retail is still
in its early stages in first class municipalities and second and third class cities, which,
coupled with the significant GDP and population growth the Philippines, indicates that the
Philippine retail market is geared towards significant growth.
• Strong and sustainable demand for logistics facilities underpinned by limited supply, in
particular modern logistics facilities in the Philippines. According to Savills, the current
supply of quality logistics facilities in the Philippines is fragmented, as there is no one major
owner of logistics facilities across the country.
• Tourism sector expected to remain a key contributor of the Philippines economy.
According to Savills, inbound tourism expenditure grew 2.3% in 2016 compared to 2015,
and tourist arrivals are estimated to increase to 10 million by 2020 compared to 5.8 million in
2016.

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Identifying shifts and capitalizing on real estate segments where it can be a leading player
Prior to entering a segment, the Company put in significant effort to conduct in-depth market
research and analysis to help it identify markets where the Company has the resources and ability
to dominate either now, or over a period of time.
One of the transitions that the Company had observed earlier was the evolution of traditional
retail into modern retail in first class municipalities and second and third class cities –
particularly notable in the supermarket segment, which is relevant to the its business model since
the supermarket typically occupies one-third of the leasable space of CityMalls. To leverage on
this trend, the Company conceptualized CityMalls such that it was able to utilize the growing
shift of retailers from traditional to modern formats, offering select retail stores in addition to its
anchor hardware, appliance and supermarket stores, among others. The Company continues to
reinforce that CityMall is a replacement to traditional retail, tapping its existing demand. Given
its success in this segment, one of the focus points is to entrench its market-leading position as
the largest and fastest-growing retail developer, owner and operator of community malls in
provincial areas of the Philippines
• The Company’s target is to achieve a portfolio of 100 CityMalls across first class
municipalities and second and third class cities by 2020. Its key strategy is to continue to
develop, own and operate a nationwide retail mall network, funding further expansion by
using recurring income from its operating malls as well as profits from the sale of its
development properties, supported by additional debt funding if required.
• The Company will continue to innovate, to implement optimal tenant mixes best suited to the
Philippine consumer, to introduce new retail experiences adapted to market dynamics, and to
adapt best practices and concepts from retail leaders elsewhere in Southeast Asia; and
• Outside capitalizing on the Jollibee and SM brands, the Company will also continue to create
barriers into the community mall segment, by targeting underserved lower tier areas. The
Company chooses such sites based on the following criteria: (i) sites that give the Company a
first-mover advantage in areas where there is less operational baggage from costs, but also
(ii) sites where the Company are familiar with and (iii) sites with scarce presence of
competitors and suitably sized lots within and in surrounding prime city center areas.
The Company continues to believe that the tourist segment will be an important economic sector
for the country. For example, according to Savills, tourist arrivals from China for the first half of
2017 surged by 33.4% to 455,000 compared to 341,000 for the same period in 2016, and the
Philippine Department of Tourism estimates that visitors from China will hit the one million
mark in 2017. As of December 31, 2017, the Company had a total of 866 operational hotel rooms
and plans to increase this to 5,000 rooms under its Jinjiang and Hotel 101 brands – essentially
giving it a market dominating position over other major real estate players which have around
3,000 hotel rooms.
Another major observation is that warehousing in the Philippines is currently fragmented, and
there remains favorable local macroeconomic dynamics to translate into strong and sustainable
demand for logistics facilities and underpinned by limited stock of existing logistics facilities.
Given the significant overlap of tenants in its retail mall business and their corresponding needs
for industrial space, the Company believes that it is in a position to not only tap into this existing
demand but to also help its tenants achieve operating efficiencies. The current industrial
landscape is such that majority of the current stock of logistics warehouse is old generation and

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fragmented properties that often provide less efficient warehousing conditions – existing
warehouses are not suitable for distribution needs as one of the key specifications requires the
floor-to-ceiling height to be 14 meters high, while most of the current facilities are only six
meters high.
The Company’s industrial business model is focused on providing modern logistics warehouses
with features to drive greater accessibility and efficiency, and its ability to execute this strategy is
underpinned by its shareholders who have experience in food and beverage, commissaries, cold
storage logistics – a large part of each industrial center’s leasable space is catered to these
specific segments. The Company sees its CentralHub industrial centers as the first branded
modern industrial center chain in the Philippines, and like CityMall and Hotel 101, all industrial
centers will look the same and will be located in strategic locations around the country. The
Company believes that through this segment, it will be able to provide an additional layer of
service to its retail tenants, and increase their level of stickiness to its overall ecosystem, thus
allowing the Company to dominate in this segment.
The Company believes that its overall business model is highly sustainable. The Company is
positioned to capitalize on emerging industry trends, and more importantly, its businesses are
setup to serve the “sweet-spot” of the demographics i.e. the low to middle income population.
The Company intends to leverage its leading market position, exploit economies of scale and its
local market knowledge to consolidate and continue to grow its market share over time.

Focus on building recurring revenue based on a foundation of appreciating assets and operate
a capital efficient business model
The Company is focused on developing properties that will create a steady stream of cash flows
backed by a string of appreciating assets. The Company believes that cash flows sourced from
recurring revenue streams are of greater quality than cash flows generated from sale of properties
which are non-recurring in nature and are dependent on continued reinvestment. The Company
has successfully grown its recurring revenues as a percentage of total revenues from 6.0% and
9.4% in 2015 and 2016, respectively, to 19.8% in 2017. As of March 31, 2018, the Company’s
recurring revenues as a percentage of total revenues was 29.0%.
The Company’s envisioned 1.2 million sq. m. of leasable space by 2020 is expected to generate
cash flows and project yields that will organically grow without continuous capital outlay,
primarily driven by the embedded escalation rates in its lease contracts with its tenants.
The Company books its assets held for lease as investment property. As the Company has
adopted the fair value method, its investment property is generally revalued on an annual basis
by a third party appraiser based on comparable market transactions relative to the location of its
properties held for lease. Generally, the Company’s investment property has seen substantial
gains from revaluation on top of cash flows contributed from leasing operations.
The Company’s business model is also geared to be highly capital efficient in deployment of
capital once it achieves scale in its CityMalls expansion, coupled with the completion of other
developments that are earmarked to provide recurring income. This is mostly driven by
CityMall’s relatively quick churn rate, with an estimated time to completion of 12 months and a
further six months to stabilize, thus ensuring that raised capital is quickly converted into cash-
generating hard assets.

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For its Hotel 101 business, the Company has adopted a “sale-and-managed” model, where
individual condotel units are sold to third party investors but the Company continues to manage
the condotel units post-sale. Sale proceeds are consequentially used to fund the development
cost, which reduces its equity requirements for any project. In addition, the Company plans to
subfranchise its Jinjiang Inn brand, and under this model, the capital expenditure for any repairs
of these subfranchised hotels is to be borne by the subfranchisee. Overall, these streams of
income will reduce the equity contribution required from the Company to fund any future capital
expenditure plans.

Maintain a strong balance sheet, prudent risk and capital management and good governance
By maintaining a strong balance sheet, the Company believes that it is in a position to withstand
economic and financial cycles, while allowing it to fund its planned expansion. This will also
give it the flexibility to make acquisitions or fund capital expenditures when opportunities arise.
In addition, the Company believes that its strong balance sheet is reinforced by its cost efficient
business model – rollout of expansion plans for CityMall, Hotel 101 and industrial centers via
the same format allows for economies of scale and reduces any cost inefficiencies that could
result from unnecessities.
The Company intends to take a disciplined approach to the allocation of capital across its
projects, with the strict application of hurdle rates and benchmarks for each investment. Its
planned capital expenditure is principally earmarked for the expansion of its mall network. The
Company plans to fund its capital expenditure plan through its recurring income, pre-sales,
external financing, and its access to diverse sources of funds will increase its financial flexibility.
Of its 2020 leasable area target, 1.0 million sq. m. of leasable area has been funded by capital
raisings raised till date. The Company has been a repeat issuer in the domestic bond market,
including bonds arranged by BPI Capital Corporation, BDO Capital & Investment Corporation,
Maybank ATR Kim Eng Capital Partners Inc., and RCBC Capital Corporation, demonstrating its
established relationships across both domestic and international banks. Besides the domestic
bond market, the Company has also tapped into diversified sources of funding which include
Preferred Shares and bank funding, highlighting its diversified capital base, comprising of retail
and institutional investors.
The Company also plans to manage its debt maturity profile, reduce cost of funding and diversify
its sources of funding, including potentially accessing the capital markets in the future. To
achieve these objectives, its key areas of focus are as follows:
• Company’s focus on developments with a “for-sale” component, pre-sale proceeds from the
sales can be used to partially fund the development costs of the project components;
• Reduce cost of funding by growing a steady stream of recurring rental income while utilizing
pre-sales to reduce overall funding needs;
• Continue to diversify funding sources and lower its cost of capital by monitoring the markets
for favorable opportunities to build up its capital resources through various financing options
such as equity issuances, loans and public debt issuances, among others; and
• Continue to look at longer-term and fixed rate funding to reduce refinancing risk and ensure
little interest rate volatility. As of March 31, 2018, the debt maturity of the Company’s long-
term debt is 5.6 years, indicating minimal near-term refinancing risk. As of March 31, 2018,
the average cost of funding of the Company’s long-term funding (excluding short-term lines

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 for working capital) is 6.11%, which is at an approximate spread of 0.058% to the 10-year
Philippines government bond yield to maturity of approximately 6.052% (Source: Bloomberg,
as of March 27, 2018).

RETAIL LEASING

The Company operates its retail leasing segment primarily through its subsidiary, CMCCI. As of
December 31, 2017, the Company owns and operates 25 CityMalls, with a total leasable area of
147,806.0 sq. m., primarily located in the provincial areas of the Philippines. As of December
31, 2017, the Company also has 21 CityMalls under construction, with an additional land bank
for 17 CityMalls. CMCCI is 66% owned by the Company and 34% owned by SMIC, the
holding company for one of the largest conglomerates in the Philippines. The Company believes
CityMall is the first branded independent community mall chain to focus on the provincial areas
in the Philippines. The table below sets forth the number of the Company’s operational
CityMalls as of December 31, 2015, 2016 and 2017:

As of December 31,
2015 2016 2017
Number of Operational CityMalls .......... 5 10 25
CityMall Sites Secured ........................... 40 54 63

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The map below shows the locations of the Company’s existing malls and under construction as
of December 31, 2017:

Of the 63 sites, 25 are now operational and the status of the remaining 38 sites as of December
31, 2017 is as follows:

CityMall Status Target Completion Year

CM-Mayombo Under construction 2018
CM-Bulua Under construction 2018
CM-Iponan, CDO Under construction 2018
CM-Isulan Under construction 2018
CM-San Carlos, Pangasinan Under construction 2018
CM-Cadiz Under construction 2018
CM-Tuguegarao Under construction 2018
CM-General Trias Planning & Design Stage 2018
CM-Los Baños Under construction 2018

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 CityMall Status Target Completion Year

CM-Bacalso Under construction 2018

CM-Sorsogon Under construction 2018
CM-Dipolog Under construction 2018
CM-Pavia Under construction 2018
CM-Roxas Ave. Under construction 2018
CM-Calapan Under construction 2018
CM-Guiwan Under construction 2018
CM-Aparri Under construction 2018
CM-Antique Under construction 2018
CM-Ormoc Under construction 2018
CM-Pagadian Planning & Design Stage 2018
CM-Palo Under construction 2018
CM-Ozamiz Under construction 2018
CM-Surigao Under construction 2018
Planning & Design Stage
CM-Balibago, Sta. Rosa 2018-2019
Planning & Design Stage
CM-Guimaras 2018-2019
Planning & Design Stage
CM-Dinalupihan 2018-2019
Planning & Design Stage
CM-Arayat 2018-2019
Planning & Design Stage
CM-Northtown Davao 2018-2019
Planning & Design Stage
CM-Tagbilaran 2018-2019
Planning & Design Stage
CM-Bongabon, NE 2018-2019
Planning & Design Stage
CM-Basilan 2018-2019
Planning & Design Stage
CM-Lucena 2018-2019
Planning & Design Stage
CM-Lam-an Ozamiz 2018-2019
Planning & Design Stage
CM-San Enrique 2018
Planning & Design Stage
CM-Baler 2018-2019
CM Bais Planning & Design Stage 2018-2019

CM La Carlota Planning & Design Stage 2018-2019

CM-Bocaue, Bulacan Planning & Design Stage 2018-2019

The Company was granted an option to purchase a property in Barrio Darasa, Tanauan City for
its 64th CityMall. Considering that transfer of the title in the name of the seller remains pending,
the Company and the seller agreed to execute definitive agreements for the purchase of the
property after title has been completely transferred in the name of the seller.

A majority of the costs for the acquisition and development of the foregoing CityMall sites are
expected to be taken from the proceeds of the bonds and Preferred Shares issued by the
Company as well as internally generated funds.

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All CityMalls have a standard color, design, look, feel and approximate size. The Company
believes that the standardization of the CityMalls makes the mall design a brand unto itself. The
photos below depict the typical look of a CityMall:

Above: Photo of CityMall Boracay

CityMall provides prime and strategic locations in the heart of the community that it serves,
locating the malls close to national highways in order to amplify visibility and ensure the mall is
in the city center for maximum exposure. CityMall caters to top Philippine fast food brands such
as Jollibee, Mang Inasal, Chowking, Greenwich, Red Ribbon and Highlands Coffee, as well as to
leading retailers, including SM Group brands Savemore, Ace Hardware, Watson’s, SM
Appliance, Simply Shoes, and banks such as BDO and Chinabank Savings Bank. The Company
believes that CityMall provides the platform in which modern retail brands can expand into the
provinces because it is the first modern retail format in most of the cities that it is penetrating.

The photo below shows how a typical “FoodWorld” in a CityMall would look like.

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In December 2016, CMCCI and ABS-CBN Corporation partnered to roll out cinemas in various
CityMall locations. As of December 31, 2017, eight cinemas have been opened (CM-Anabu,
CM-Consolacion, CM-Tagum, CM-Sta. Rosa, Nueva Ecija, CM-Dumaguete, CM-Victorias,
CM-Mandalagan and CM-Boracay.) Each cinema is expected to have a seating capacity of 100
to 120 seats. The Company believes that CityMall can serve to fill the entertainment gap that
currently exists in the provincial areas since a majority of the 140 cities in the Philippines
currently do not have cinemas.

As part of its commitment to sustainable development, the Company intends to “greenergize” its
CityMalls, deploying rainwater collection systems and/or solar panels when possible.

The following table sets forth certain information regarding the leasable area of the following
CityMalls as of December 31, 2017:

Tenant Leasable Area(1)

Store Name Year Opened (sq. m.) % Leased Out
CM - Arnaldo, Roxas 2015 4,972.90 99.20%
CM - Consolacion 2015 5,438.09 98.16%
CM - Anabu, Imus Cavite 2015 8,318.21 99.90%
CM - Tetuan, Zamboanga 2015 5,626.44 99.89%
CM - Tagbak, Jaro 2015 4,495.79 100.00%
CM - Kalibo 2016 4,809.69 99.92%
CM - Tiaong, Quezon 2016 4,528.39 97.71%
CM - Parola, Iloilo 2016 2,602.54 99.69%
CM - Cotabato City 2016 7,909.08 93.81%
CM - Mandalagan,Bacolod 2016 9,643.72 85.84%
CM - Kabankalan City 2017 6,146.54 99.84%
CM - Victorias City 2017 6,172.93 94.96%
CM - San Carlos 2017 3,561.44 86.15%
CM - Boracay 2017 5,460.55 99.93%
CM - Tagum 2017 8,960.92 94.54%
CM - SCTEX 2017 2,527.56 83.56%
CM - Tarlac 2017 6,399.49 89.44%
CM - Dumaguete 2017 7,131.19 94.66%
CM - Goldenfields 2017 6,397.64 95.57%
CM - Dau 2017 5,151.44 97.44%
CM - Passi 2017 3,915.65 99.85%
CM - Santa Rosa 2017 8,819.83 99.41%
CM - Danao 2017 7,291.18 78.80%
CM - Calamba 2017 5,761.17 99.36%
CM - Koronadal 2017 5,763.59 99.62%
TOTAL 147,805.97 95.27%
Note:
(1) “Tenant Leasable Area” means the actual area occupied by the tenants of the relevant CityMall.
(2) The leasable area for the other 38 CityMalls have yet to be finally determined.

Leasing Policies

The Company’s leasing policies in relation to each of its CityMalls is to screen applicants
carefully and to secure an appropriate mix of tenants, both in terms of the nature of their business
and their size, which cater to the needs and demands of the community which each such
CityMall serves. The Company aims to not have any duplication within its tenant mix.

The Company’s tenancies are generally granted for a term of three to five years, with the
exception of some of the larger anchor tenants, whose tenancies can last for up to 15 years, and
kiosks which are on annual lease terms, with each renewable on an annual basis thereafter.

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Generally, six months’ notice is required for termination of leases for a term of three to five
years, and three months’ notice is required for annual leases. Further, tenants are generally
required to pay a six-month deposit at the commencement of the lease. A majority of the
Company’s leases are on fixed annual rates, subject to annual escalation clauses. Certain tenants
of the Company, such as fast food tenants, pay rent based on a percentage of their revenues.

Leasable spaces are delivered bare by the Company to its tenants. The Company’s tenants are
responsible for the fit-out of their respective leased spaces, and are required to return such spaces
to the Company in bare shell at the end of the lease term.

The leasable spaces in a CityMall are typically allocated in accordance with the following table:

Est. % of
Category
Leasable Space
Supermarket 35%
Appliance 12%
FoodWorld 10%
Hardware 7%
Cinema 4%
Shoe Store 3%
Pharmacy 3%
Bookstore 3%
Salon 2%
Optical Shop 2%
Convenience Store 2%
Amusement Center 2%
Others 15%

There is no distinction for locals or foreigners with respect to the allocation of leasable space
since the Company believes that its categories should have brands that the Company believes are
best in each category that are also best suited for the market. Due to the limited space inside the
CityMalls, competing brands within the same categories are discouraged.

Marketing and Management of the Malls

The Company employs an in-house leasing team of 12 people to find tenants for the Company’s
CityMalls. The Company’s leasing team is in charge of the general promotion and marketing of
CityMalls.

The Company also deploys a mall manager and technical head to each CityMall to oversee day-
to-day operations. Other services such as maintenance, engineering, janitorial and security
services are outsourced by the Company to reputable third party service providers on an annual
contractual basis. These contracts can usually be terminated at any time, such as if the contractor
fails to perform at an acceptable level. The Company, through its subsidiary DoubleDragon
Property Management Corp. (“DDPMC”), charges the tenants CUSA fees for such services.
DDPMC likewise charges tenants for service fees for the provision of utilities such as water and
electricity.

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Mall Layout

The Company employs uniform standards for mall layout and design, equipment, quality of
construction and the composition of building and finishing materials. The Company believes that
employing uniform standards across stores not only helps develop the layout as a brand unto
itself, but also helps limit construction and refurbishment costs, as well as improve customer
satisfaction and loyalty, since customers are able to experience a similar environment with a
familiar shopping experience regardless of location.

The floor plan below is a sample layout of a CityMall.

Mall Development

With the guidance and supervision of the Company’s CEO, the Company identifies viable sites
for the construction of new CityMalls. The Company determines the viability of a potential plot
of land for a new CityMall site based on the demographics of the area, including the size of the
population, its income levels, local government and the local infrastructure. Once a suitable site
is selected, based on the factors described above, the Company then determines the size of the
mall, with each CityMall having a gross floor area between 4,000 to 22,000 sq. m. The
construction and development of each CityMall is overseen by a third party project management
company appointed by the Company. The average time for construction of each CityMall is 12
months, depending on the size of the mall. The Company has generally financed land purchases
and the construction of its CityMalls from its long-term borrowings and equity issuances.

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The Company believes it operates a cost efficient business model for mall development, whereby
each mall is built by local contractors which allows for direct interaction with personnel who
have better on-the-ground experience in sourcing labor and materials in the local area. In
addition, the Company believes that it enjoys economies of scale by offering individual
contractors the opportunity to compete for multiple construction projects.

The Company is currently in the process of identifying locations suitable for new CityMall sites
with a particular focus on the Visayas and Mindanao regions. The Company has three methods
of securing properties:

• direct acquisition: 100% ownership over the property through its subsidiary CMCCI

• joint venture: 70% ownership over the property through CMCCI; 30% ownership
retained by the landowner

• long term lease: minimum term of 26 years

The Company’s preference is to directly acquire properties for CityMall in order to benefit from
property appreciation in the city centers in the provinces. The joint venture method still allows
the Company to benefit from property appreciation by owning at least 70% of the joint venture
company that holds the land title. However, in cases where the property location is compelling
for the development of a CityMall, and there is no opportunity for a direct acquisition or a joint
venture with the landowner, then the Company will negotiate a long-term lease, with a minimum
term of 26 years with the landowner. Long-term leases include provisions such as, but not
limited to, the Company receiving the right of first refusal over the future sale of the property,
which will allow the Company to potentially directly acquire the property at a later date.

As of December 31, 2017, the Company has secured 63 site locations for its CityMalls
(including the operational CityMalls). Construction activities have begun for new CityMalls at
the following 21 sites as of December 31, 2017:

Percentage of
Completion
Area (in sq. m.)
as of December 31,
Site 2017
CM-Bulua 11,464 82.35%
CM-Isulan 19,556 78.45%
CM-Mayombo 12,817 76.21%
CM-Sorsogon 5,869 65.13%
CM-Iponan 11,957 64.90%
CM-Dipolog 12,862 60.18%
CM-Pavia 12,000 57.07%
CM-San Carlos City, Pangasinan 6,597 55.87%
CM-Roxas Ave. 4,680 51.08%
CM-Bacalso 11,000 38.45%
CM-Calapan 7,159 35.08%
CM-Surigao 10,505 30.56%

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 CM-Aparri 7,918 17.53%
CM-Cadiz 10,412 15.75%
CM-Guiwan 13,642 15.05%
CM-Tuguegarao 16,525 12.25%
CM-Ozamiz 22,262 11.78%
CM-Los Baños 24,273 3.60%
CM-Antique 15,928 3.06%
CM-Palo 20,000 1.05%
CM-Ormoc 20,732 1.89%

On March 23, 2018, CM-Pavia in Iloilo commenced commercial operations.

Competition

Since CityMall was conceptualized to be the modern alternative to traditional retailers in the
provinces, the Company believes that traditional retailers would primarily be considered as the
current competitors of CityMall. However, traditional retailers are often less organized and do
not have the branding strength or critical mass that the Company can achieve through the
nationwide roll out of its CityMalls. The existing traditional retailers are also more often than not
locally owned and specific only to that city or region. Currently, only a fraction of the pricing
advantage previously enjoyed by local retailers exists. The Company believes this pricing
advantage will continue to be reduced or eliminated in the near term as branded retailers
continue to penetrate the provinces. Other community mall developers could potentially be
considered competitors to CityMall, although the Company believes that it has the advantage of
familiarity, focus and actual business experience in these provincial areas of the Philippines.

Other Malls

Dragon8 Mall

Dragon8 Mall was a partially constructed project acquired by the Company on May 2, 2014. The
project is located on a 5,972 sq. m. prime corner lot at C.M. Recto corner Dagupan Streets,
Divisoria in Manila. In line with the area being known as a micro retail destination, Dragon8
Mall offers micro retailers a modern version of the mall stall units currently being offered within
the vicinity at similar prices.

The Company sells 16 year leasehold rights on the mall stall units, which gives locators the
exclusive right to lease the said units for the duration of the leasehold contract. A portion of the
development is also being leased out directly to tenants and form part of the leasable portfolio of
the Company. Dragon8 Mall has approximately 9,800 sq. m. of leasable space and houses
approximately 300 parking spaces for the convenience of its shoppers.

The Company resumed the construction and renovation of the property upon acquisition and
opened its doors to the public on June 30, 2015, approximately a year after its acquisition. As of
December 31, 2017, the occupancy rate of Dragon8Mall was at 99.5%.

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Umbria Mall

The Company partnered with the Aryana Group, through Piccadilly Circus Landing, Inc., to
develop the Umbria Commercial Center in Binan, Laguna. Umbria Commercial Center is a
multi-storey structure housing specialty shops, casual dining, cafes and deli shops, convenience
and drug store, wellness and beauty centers, and a supermarket. A key design feature of the mall
is its architecture which is inspired by the umbrella-like structure in L’Umbracle Gardens in
Valencia, Spain. Umbria Commercial Center opened on December 2, 2016.

OFFICE LEASING

The Company’s office leasing segment primarily consists of two key projects currently under
development, DD Meridian Park and Jollibee Tower.

DD Meridian Park

DD Meridian Park is a 4.75-hectare project in the Bay Area of Pasay City, located at the corner
of Diosdado Macapagal Boulevard and EDSA Extension. The subsidiary that owns the project,
DD-Meridian Park Development Corp. (“DDMPDC”), is 70% owned by the Company. Once
fully completed, DD Meridian Park is expected to have 280,000 sq. m. of leasable space that will
primarily be used for BPO, outsourcing and support service offices, and corporate offices.

The picture below depicts the construction progress of phase 1 of DD Meridian Park as of
December 31, 2017:

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Phase 1 of the project is the construction of DoubleDragon Plaza, consisting of four 11-storey
towers with a retail area on the ground floor, parking on the 2nd to 3rd levels, and BPO offices
from the 5th to the 11th levels. DoubleDragon Plaza is expected to provide approximately 130,000
sq. m. of leasable space. The ground floor retail area is expected to have 12,318 sq. m. dedicated
to established food concepts, basic services, a supermarket and a themed food hall. In addition,
phase 1 is expected to include 2,278 parking spaces (including lifts). Phase 1 was opened in
December 2017 and was inaugurated and unveiled on May 7, 2018. The table below shows the
leased out space of phase 1 of the project as of December 31, 2017:

Leasable Area
(in sq. m. ) % Leased Out
DD-Meridian Park (Phase 1)
Office Retail
Tower 1 34,545.11 89.80%
Tower 2 31,462.01 100.00%
61.68%
Tower 3 31,468.03 100.00%
Tower 4 29,570.62 100.00%

Phase 2 of the project includes two additional office towers, DoubleDragon Center East and
DoubleDragon Center West, both of which will be connected to DoubleDragon Plaza by an
elevated walkway. Phase 2 is expected to add approximately 30,000 sq. m. of leasable space,
and to primarily consist of corporate offices that cater to the BPO industry and provide
expansion space for tenants that may want to phase out their office space requirements. As of
December 31, 2017, phase 2 is 23.3% complete.

On June 19, 2017, the Company, through its subsidiary DDMPDC, entered into a Technical
Advisory Agreement and Serviced Residence Management Agreement with Scotts Philippines
Inc., in relation to the development and management of a five-star luxury serviced apartment as
phase 3 of DD-Meridian Park. Phase 3 is expected to cover 5,567 sq. m. and is expected to have
over 300 luxury serviced apartment units. The serviced apartment is expected carry the Ascott
Limited brand. Ascott Limited is a leading international serviced residence owner-operator, with
more than 300 properties in over 100 cities across America, Asia-Pacific, Europe and the Middle
East. The Company believes the project is an ideal site for a luxury serviced apartment complex,
given its close proximity to the Manila airport, Department of Foreign Affairs, Mall of Asia and
Entertainment City. Construction of Ascott-branded serviced residences is expected to
commence in 2018, and the development is expected to be complete and operational by 2020.

Phase 4 is expected to consist of DoubleDragon Tower, an 11-storey building with views of the
Bay Area and Pasay City. Phase 4 is to be developed on a lot area of 5,618 sq. m. The
building’s eight office floors are expected to have a leasable floor area of 35,540 sq. m. and will
be ideal for both startups and established companies. Two floors will be dedicated to
commercial establishments suitable for retails shops, restaurants and other entertainment options
which is expected to add another 5,958 sq. m. of leasable floor area. The Company expects to
complete phase 4 in 2020.

In line with the Company’s commitment to sustainable development, the Company has been pre-
certified for a silver Leadership in Energy & Environmental Design (“LEED”) certification for

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DoubleDragon Plaza. To receive LEED certification, DoubleDragon Plaza must satisfy
prerequisites and earn points to achieve different levels of certification. LEED is a green building
certification program that recognizes best-in-class building strategies and practices. LEED
certified buildings save money and resources and have a positive impact on the health of
occupants, while promoting renewable, clean energy.

Jollibee Tower

Jollibee Tower is a Grade A 41-storey commercial and office tower situated on a 3,002 sq. m lot
in the heart of the Ortigas central business district in Metro Manila. The project, which is
expected to be completed in 2018, is expected to include 47,909 sq. m. of leasable office space.
The project is a joint venture between the Company and JFC, who will serve as the building’s
anchor tenant.

The picture below depicts an artist’s rendering of Jollibee Tower upon completion.

On August 26, 2015, the Company signed a joint venture agreement with JFC to develop Jollibee
Tower. Under the joint venture agreement, JFC will contribute the land for the project in
exchange for 15% of the project’s leasable floor area, while the Company will serve as the sole
developer in exchange for the remaining 85% of the project’s leasable floor area. In addition to
the floor area received under the joint venture agreement, as anchor tenant, JFC is expected to
lease additional office space directly from the Company to accommodate their corporate office
requirements. As of December 31, 2017, no lease agreements with respect to Jollibee Tower
have been signed.

The ground floor of Jollibee Tower is expected to include commercial spaces, while the second
and third floors are expected to be used as general events space. The remaining floors will be
leased as office space and are expected to include more than 1,000 parking spaces, which will be
leased out to tenants on a monthly basis. The tower will also feature a garden deck with a

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helicopter landing pad. Construction of the project is 14.2% complete as of December 31, 2017
and is expected to be completed by the fourth quarter of 2018.

The Jollibee Tower is pre-certified for a gold LEED certification in line with the Company’s
desire to promote sustainable developments through “green” technology. To receive LEED
certification, Jollibee Tower must satisfy prerequisites and earn points to achieve different levels
of certification. The exterior of the building is expected to be made of double-glazed glass
curtain wall for increased energy efficiency. The Company believes the structure is poised to
become one of the prominent landmarks in the Ortigas skyline.

Leasing Policies

The Company’s office space tenancies are generally granted for a term of five to ten years.
Leases may not be pre-terminated prior to the fifth year of the lease term, and any pre-
termination requires six months’ prior notice. The Company also requires the payment of six
months’ of security deposit and advance rent at the commencement of the lease. The Company’s
leases are on fixed annual rates, subject to annual escalation clauses. Upon expiry of the lease,
the rental rates are adjusted to reflect the prevailing market rent.

Leasable spaces are delivered in bare shell form by the Company to its tenants. The Company’s
tenants are responsible for the fit-out of their respective leased spaces, and are required to return
such spaces to the Company in bare shell at the end of the lease term.

Management and Marketing

The Company employs an in-house project department with a headcount of two people to find
tenants for the Company’s office spaces. The Company also relies on professional, multinational
commercial real estate leasing agents such as Leechiu & Associates, Colliers, KMC Savills and
Santos Knight Frank to find tenants for its DD Meridian Park office space.

The Company intends to deploy administrative staff to each of its office projects once these are
operational to oversee day-to-day operations. Other services such as maintenance, engineering,
janitorial and security services will be outsourced by the Company to reputable third party
service providers on an annual contractual basis. These contracts can usually be terminated at
any time, such as if the contractor fails to perform at an acceptable level. The Company, through
its subsidiary DDPMC, will charge the tenants CUSA fees for such services. DDPMC will
likewise charge tenants for service fees for the provision of utilities such as water and electricity.

Competition

For the office segment, the Company will compete with a majority of property players that are
also invested in the office segment. The office segment is dependent on the continuous growth of
the BPO industry in the Philippines, which make up majority of the end users in this market.
Economic downturns could potentially affect this sector, thus, in order to minimize risk, the
Company has only developed office projects within the top five prime locations for these types
of developments.

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The Company believes DoubleDragon Plaza’s direct competition would be Tower II & III of
Filinvest Cyberzone Pasay as well as SM Three E-Com, which will also be coming online
approximately the same time. The Company believes the location of DD Meridian Park offers it
a competitive advantage as to those of its competitors because it is at the entrance of the Bay
Area and closer to the transportation hub being at the corners of Roxas Boulevard, EDSA and
Macapagal Avenue. Jollibee Tower is in direct competition with Robinsons Cyberscape Gamma
and Eton Sunrise, both of which are office developments in the Ortigas area to be turned over in
the same year.

HOSPITALITY

The Company’s hospitality segment is operated through its subsidiary, HOA, which is 70%
owned by the Company. HOA’s hospitality operations comprise 866 operating hotel rooms,
including the Company’s own hotel brand, “Hotel 101”, located in the Manila Bay Area near the
Mall of Asia. CSI Hotels, Inc., a 50%-owned subsidiary of HOA, is the Philippines’ master
franchisee of the “Jinjiang Inn” brand, one of the largest hotel brands in Asia, with two hotels in
operation in Ortigas and Makati, Metro Manila, that primarily target Chinese tourists. HOA also
operates Injap Tower, a 21-storey condotel located in Iloilo City. HOA also operates Injap
Tower, a 21-storey condotel located in Iloilo City. The Company has six hotels under
development (including one Hotel 101 under construction in Fort Bonifacio Global City), which
are expected to add 2,551 hotel rooms to the Company’s hospitality operations by 2020.

The Company believes that its foray into the hospitality sector will allow it to benefit from the
significant tourism prospects for the Philippines, as well as fully optimize the use and value of its
string of prime properties in strategic locations throughout the country.

Hotels in Operation

Hotel 101

HOA created the “Hotel 101” brand primarily to be an alternative accommodation, with services
and facilities that address the needs of a fast-paced leisure and business environment. The first
Hotel 101 branded hotel opened in June 8, 2016 and is located in the Manila Bay Area, only a
few blocks from the Mall of Asia, the largest mall in the Philippines and one of the largest malls
in Asia. The hotel has a gross floor area of 22,880.3 sq. m. across 14 floors. The hotel offers 518
uniformly sized rooms, a spacious lobby, where guests can relax, conduct business, or meet with
friends as well as a swimming pool, kiddie pool and outdoor jacuzzi, which opens to the famous
Manila Bay sunset. Located on the ground floor is its restaurant Amico, which serves breakfast
buffet, and offers a la carte lunch and dinner, serving international cuisines.

The units in Hotel 101 are sold to buyers prior to construction completion and opening. The
buyers receive individual condominium titles, and likewise are able to receive income share from
the hotel’s revenues. The Company continues to manage the hotel, and shares a portion of the
gross revenue with the individual unit owners in accordance with respective management
agreements. The hotel is managed by Hotel 101 Management Corp, a wholly owned subsidiary
of HOA, under a 25-year management contract (with an option to extend for another 25 years).

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Hotel 101 Manila offers rooms at a rack rate of ₱3,900, and recorded an average occupancy rate
of 80.1% as of the fourth quarter of 2017.

Jinjiang Inn

CSI Hotels, Inc., a 50%-owned subsidiary of HOA, is the master franchisee of the “Jinjiang Inn”
brand in the Philippines. Jinjiang is a Chinese-based hotel operator with one of the largest hotel
portfolios in Asia. Through the master franchise agreement, CSI Hotels, Inc. receives the right
to operate the Jinjiang Inn brand in the Philippines. The first Jinjiang Inn was opened on
September 2015 and is located along San Miguel Ave. in Ortigas. The hotel has a gross floor
area of 4,726.4 sq. m. on six floors. The hotel offers 95 rooms including five business suites,
with a dimension of 23 sq. m. to 56 sq. m., with known necessities to travelers. All rooms are
complete with 46” LCD TV, mini bar, in-room safe, laundry services, and an en-suite bathroom,
complete with toiletries and bath robes. Its facilities include three meeting rooms, good for six to
14 persons, and a business kiosk. Its restaurant, Five Spice Asian Bistro, serves Asian Fusion
cuisines and services buffet breakfast, a la carte lunch and dinner, and can also accept banquet
functions for up to 50 persons.

The second Jinjiang Inn was opened in September 2016 and is located along Pasay Road in
Makati. The hotel has a gross floor area of 5,097.0 sq. m. across four floors. The hotel offers 59
rooms, as well as a spacious and elegant lobby. In addition to other modern conveniences, the
hotel also has a business kiosk to help guests with their online needs. All rooms are well-
appointed with fixtures and amenities comparable to deluxe class hotels. Located on the ground
floor is the hotel’s Choi Garden Seafood Restaurant, which serves authentic Chinese cuisines and
uses quality ingredients in its dishes.

Jinjiang Inn Ortigas and Jinjiang Inn Makati offer rooms at a rack rate of ₱3,000 and ₱5,100,
respectively, for a combined occupancy rate of 70.8% as of the fourth quarter of 2017.

The Company intends to expand its Jinjiang Inn hotels from both development of Company-
owned properties and through subfranchising thereof.

Injap Tower

Injap Tower is a 21-storey commercial and condotel tower located along West Diversion Road in
Iloilo City. Situated across from SM Iloilo, the tower is Iloilo’s first high-rise building as well as
the tallest building in the Western Visayas. Injap Tower features two commercial units on the
ground floor, multi-level parking, and 196 fully furnished condotel units. Amenities and facilities
of the tower include a swimming pool, 24-hour security, four elevators, several retail shops and
the Horizon Café on the top floor.

Similar to Hotel 101, Injap Tower adopts a condotel concept, whereby rooms are sold to third
party investors. The hotel is managed by Hotel 101 Management Corp, a wholly owned
subsidiary of HOA, under a 25 year management contract (with an option to extend for another
25 years).

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Injap Tower Hotel opened in June 2014, with a gross floor area of 15,302.2 sq. m. It has 21
floors with 194 rooms available. Injap Tower Hotel offers rooms at a rack rate of ₱2,400 and had
an average occupancy rate of 84.7% as of the fourth quarter of 2017.

Future Hotel Developments

The second Hotel 101 branded hotel, located in Fort Bonifacio Global City, began construction
in 2017 and is expected to be completed in 2020. The Hotel 101 Fort will add 606 rooms to
HOA’s portfolio and is expected to feature a three-level podium with commercial areas on the
ground and second floor levels reserved for specialty retail shops and residents. The third level of
the podium will house amenities such as a gym, spa, infinity pool, conference rooms, all-day
dining and lounges. Similar to Hotel 101 Manila, Hotel 101 Fort will be a condotel concept, with
units sold to third party investors under condominium titles, and subject to a management and
revenue sharing agreement entered into with the Company or one of its Subsidiaries.

Below is an artist’s depiction of Hotel 101 Fort:

The Company also intends to expand its Hotel 101 brand to Bohol and Davao, which projects are
expected to add 502, and 519, respectively, to HOA’s portfolio. The Company has secured the
sites for these projects, which are currently in the planning and development stage.

On February 1, 2018, the Company announced that HOA entered into a joint venture with
Newcoast South Beach, Inc., for the development of Hotel 101 Resort-Boracay which will have
1,001 rooms and is expected to become the biggest hotel in the Philippines in terms of room
count. The project is expected to be located on a two hectare beachfront property in Boracay
Newcoast, a 150-hectare tourism estate owned by publicly listed Megaworld Corporation’s
subsidiary, Global-Estate Resorts, Inc. The project will support environment-friendly operations,
consistent with the sustainability efforts and green initiatives of Boracay Newcoast which

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include of electric jeepneys, solar-powered streetlamps, flood-free drainage systems,
implementation of its own waste segregation program, having its own material recovery facility
(“MRF”) for waste recycling and having its own sewage treatment plant that converts used water
to water for irrigation purposes and fire reserves.

Hotel 101 Resort-Boracay will have amenities such as room suites with balconies, expansive
retail and food and beverage offerings, pool and outdoor deck, a business center, meeting rooms
and function hall. The project will adopt sustainable best practices from design to
implementation and adopt sustainable practices to reduce and reuse energy, waste and water.
Specific areas of Hotel 101 Resort-Boracay will also be powered by solar panels and will be
equipped with a rainwater harvesting system and is expected to be a LEED (Leadership in
Energy and Environment Design) certified development. This new green eco- friendly project in
Boracay will be the fourth development under Hotel 101 brand after similar groundbreaking
undertakings in Manila, Fort Taguig and Davao City.

Below are artist’s perspectives of the planned Hotel 101 developments (clockwise: Hotel 101
Bohol, Hotel 101 Davao and Hotel 101 Resort- Boracay):

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Further, the Company intends to develop Jinjiang Inn hotels in Boracay and Cagayan de Oro,
which are expected to add 95 and 106 rooms, respectively, to HOA’s portfolio. The Company
has secured the sites for these projects, which are currently in the planning and development
stage. Below is an artist’s perspective of Jinjiang Inn Cagayan de Oro:

Title over the land where Hotel 101 Fort will be constructed is registered in the name of HOA
while the registration of the transfer of the land for Hotel 101 Davao is currently being
processed. The Hotel 101 Davao site was acquired by HOA in August 2017.

The sites for Hotel 101 Bohol and Hotel 101 Resort-Boracay are subject of two Memorandum of
Agreement executed by HOA in 2017. Ownership over the Hotel 101 Bohol site will be
transferred upon delivery by HOA of the agreed consideration to the landowner. The land where
Hotel 101 Resort-Boracay will be built will be transferred to Newcoast South Beach Inc. (“NSI”)
pursuant to its Contract to Sell with Global-Estate Resorts, Inc. and Oceanfront Properties Inc.,
and which will eventually be the joint development vehicle that will develop a condominium
building in Boracay Newcoast, Boracay Island, Malay, Aklan. Under the agreement with HOA,
the shareholders of NSI will contribute the land for the Hotel 101 Resort-Boracay project while
HOA shall infuse capital that will allow it to acquire 61.9% interest in the NSI, with current NSI
shareholders retaining 38.1%. NSI is in the process of completing the payment for the site which
must be completed within six months from the execution of the agreement, or not later than April
10, 2018. In the event that NSI fails to complete the payment with the said period, HOA shall
have the option to pay the balance needed for the full payment of the lots and the amount thus
paid shall be considered in the computation of its proportionate equity share in the company.

The sites for Jinjiang Inn Boracay (Newcoast) and Jinjiang Inn Cagayan de Oro are covered by
Contracts of Lease. HOA leases a 548.7548 square meter space located at Balabag, Boracay
Island, Malay, Aklan for Jinjiang Boracay, which lease was extended until September 26, 2018.
For Jinjiang Inn Cagayan De Oro, HOA leases a space with an area of 1,319 sq. m. from CMCCI
located at Brgy. Bulua, Cagayan De Oro City. The contract is for a period of 25 years
commencing on January 1, 2021 or opening date, whichever is earlier, and shall terminate on
January 1, 2046.

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Competition

The Company’s hotels cater to the mid-end market, and compete with other three star hotels
operating within the areas where the Company currently operates such as the Manila Bay Area,
Makati City, and Ortigas Center.

INDUSTRIAL LEASING

The Company’s latest venture into the growing industrial leasing segment is through its wholly-
owned subsidiary, CentralHub Industrial Centers Inc. The Company currently has plans for
development for eight sites strategically located across Luzon, Visayas and Mindanao with a
total of 100,000 sq. m. of leasable space by 2020:

Location Number of Sites*

North Luzon 2
South Luzon 2
Visayas 2
Mindanao 2
*inclusive of Tarlac and Iloilo

Company believes that its industrial centers will be the first branded modern industrial centers in
the Philippines and will contain standardized, multi-use, and industrial quality warehouses suited
for commissaries, cold storage and logistics centers to be leased to locators nationwide. The
Company believes that industrial leasing presents a significant growth opportunity in the
Philippines due to the lack of such industrial support infrastructure in provincial areas. The
Company believes that it can leverage the fast food experience of its CEO and significant
shareholders, as the fast food industry leases from other parties its warehouses for commissary
operations, cold storages and logistics distribution centers. The Company also believes that such
industrial centers will be able to support the tenants of its CityMalls located in nearby cities.

In 2017, the Company, through CHICI, acquired a 6.2 hectare lot in the Luisita Industrial Park in
Tarlac for its first industrial hub and as of December 31, 2017, the registration of the transfer
under CHICI is pending with the Registry of Deeds. CHICI has secured the Certificate
Authorizing Registration from the Philippine Bureau of Internal Revenue. The Tarlac project is
currently being developed, and is expected to cover 32,000 sq. m. of industrial space built over
four phases. The Company has commenced construction of phase 1 which it expects to complete
by the first half of 2018. As of February 28, 2018, construction of phase 1 of the project was
45.11% complete. Phase 2 of the project is expected to commence within the first half of 2018,
while the commencement dates for phases 3 and 4 will depend on tenant take-up. Each of phases
2 and 3 of the project shall consist of one structure subdivided into four warehouses, while phase
4 will be subdivided into three warehouses. The Company intends to complete the Tarlac project
by 2020.

On February 14, 2018, the Company, through CHICI, acquired a 3.9 hectare property in Iloilo,
located along Iloilo R3 Road approximately five kilometers from the Iloilo International Airport
and ten kilometers from the Iloilo City proper. The newly acquired site is expected to be the
Company’s second CentralHub complex in the Philippines, following its Tarlac project which is

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currently under construction. The certificate authorizing registration for the transfer is currently
pending issuance by the Philippine Bureau of Internal Revenue.

Once developed, CentralHub-Iloilo is expected to have a capacity of 22,000 sq. m. of leasable

space. The Company intends to commence the construction of phase 1 of CentralHub-Iloilo
within the second half of 2018 and to complete the construction of the first phase by the end of
2018. Phase 1 is expected to consist of three warehouses with a total leasable space of
approximately 9,720 sq. m.

A conceptual illustration of an industrial center is provided below:

Leasing Policies

The Company’s industrial space tenancies are expected to be generally granted for a term of five
to ten years. For most of the Company’s tenants, six months’ notice will be required for
termination of their leases and a six-month deposit will be required to be paid at the
commencement of the lease. The Company’s leases are expected to be on fixed annual rates,
subject to annual escalation clauses. Upon expiry of the lease, the rental rates are expected to be
adjusted to reflect the prevailing market rent.

The Company will deliver leasable spaces in bare shell form to its tenants. The Company’s
tenants will be responsible for the fit-out of their respective leased spaces, and will be required to
return such spaces to the Company in bare shell at the end of the lease term.

The Company does not distinguish between locals or foreigners or provides special privileges
generally to any third party with respect to the allocation of leasable space in its CentralHub
sites. Instead, the Company expects to focus on entering into long-term leases with large locators
for its CentralHub sites.

Management and Marketing

The Company employs an in-house leasing and marketing team to find tenants for the
Company’s industrial spaces.

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Services such as maintenance, engineering, janitorial and security services will be outsourced by
the Company to reputable third party service providers on an annual contractual basis. These
contracts can usually be terminated at any time, such as if the contractor fails to perform at an
acceptable level. The cost of such outsourced services will be charged directly to tenants on a pro
rata basis.

INTERIM PROJECTS

The Company’s long term strategy is to earn a significant majority of its revenues through
recurring income from its leasing portfolio and hospitality operations. However, the Company
has strategically acquired existing projects that have been pre-sold and partially completed by
other developers in order to enhance the Company’s profitability in the near-term and provide
capital to develop its leasing portfolio of properties. While the Company may continue to
strategically acquire such additional interim projects in the future on a case by case basis, the
Company will continue to shift its primary focus to acquiring, developing and operating leasable
properties in the future. The discussion below includes certain details on interim projects
undertaken by the Company.

The SkySuites Tower

The Company acquired The SkySuites Tower on September 1, 2014 from Rizal Commercial
Banking Corporation, the financial institution that foreclosed on the property from its original
developer four years prior to the Company’s acquisition. The SkySuites Tower was planned as a
38-storey commercial, office and residential tower sitting on a 2,812 sq. m. prime corner lot at
the corner of EDSA and Quezon Avenue, a few meters away from the Mass Rail Transit station.

The SkySuites Tower is divided into two structures with lobbies: the lower structure is dedicated
to corporate offices while the residential tower consists of lofts catering to the mid to high-end
market. The Company has continued both the construction and sale of the remaining inventory of
the residential units and parking, but intends to retain the unsold commercial and office spaces as
part of the Company’s leasable portfolio.

Prior to the Company’s acquisition of the property, 690 of the 1,012 units in The SkySuites
Tower were already sold. As of December 31, 2017, the overall completion of the project stands
at 97.0%. The office structure of The SkySuites Tower was completed and became available for
occupancy in the fourth quarter 2017, while the residential units are expected to be completed
and turned over to buyers within the fourth quarter of 2018. As of December 31, 2017, the total
number of units sold is 815, broken down into 780 residential units, 29 corporate units and six
commercial units. There have been 206 parking spaces sold, with an additional 273 spaces
remaining unsold.

W.H. Taft Residences

The Company’s first project in Metro Manila was the 31-storey W.H. Taft Residences, a
condominium development situated beside De La Salle University on Taft Ave. in Manila. W.H.
Taft Residences offers 533 low-density studios and one bedroom residential units in a prime
location to serve as a base for students from De La Salle University, College of St. Benilde and
St. Scholastica’s College, all of which are within walking distance from the project. Residents of

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the project also enjoy a full range of student-inspired features and amenities such as wireless
internet connection, a multi-purpose hall convertible into seminar, study, or focus group
discussion areas, a swimming pool, multi-level flood free podium parking, and commercial
establishments on the ground and second floors to cater to the day-to-day needs of its residents.
As of December 31, 2017, the commercial units of W.H. Taft Residences have been completely
sold, while 491 residential units have been sold, with 42 residential units remaining unsold.

The Uptown Place

The Uptown Place is a five-storey premium commercial and residential condominium located
along General Luna Street in Iloilo City. The building is across the street from the University of
the Philippines Iloilo and consists of 236 residential units, ranging from 21 sq. m. studios to 73
sq. m. three bedroom units. The ground floor consists of commercial units held for lease. The
project construction was completed in March 2014. As of December 31, 2017, 178 residential
units have been sold, while 58 units remain available for sale.

FirstHomes

FirstHomes subdivision is the Company’s first horizontal housing project. Located in Navais,
Mandurriao, Iloilo City. FirstHomes is a gated townhouse project consisting of 112 units within a
1.3 hectare property. FirstHomes offers semi-furnished two, three and four bedroom units
equipped with modern utilities and features modern minimalist design and a wide range of
amenities including swimming pools, community parks, clubhouse and CCTV security systems.
The project was completed in October 2012 and, as of December 31, 2017, 99 units have been
sold, with 13 remaining available for sale.

HappyHomes

HappyHomes-Mandurriao is a project of DD HappyHomes Residential Centers, Inc., a

subsidiary of the Company. HappyHomes is an affordable community space offering 613 lots for
development in the fast growing Mandurriao district of Iloilo City. HappyHomes offers four
variations of units with varying house and lot packages ranging from ₱1.2 million to ₱3.1
million. Each unit is built upon receipt of a 10% down payment and can be turned over four to
six months from start of construction. As of December 31, 2017, the land development is 100%
complete. Construction is on a per-block basis and commences when at least 50% of the block
has been sold. The construction period is approximately seven to eight months. As of December
31, 2017, 382 units have been sold, while 246 remain available for sale.

HappyHomes-Tanauan is a new project of DDHH, Inc. that was acquired in 2015. Located in
Tanauan, Leyte, the project consists of 1,494 lots available for development. Four variations of
units with varying house and lot packages are available, ranging from ₱0.450 million to ₱1.2
million. Land development works for phase 1 began on April 21, 2016. Similar to HappyHomes-
Mandurriao, construction is on a per-block basis and commences when at least 50% of the block
has been sold and the construction period is approximately seven to eight months. As of
December 31, 2017, 180 units have been sold, while 1,314 remain available for sale.

Buyers of units in HappyHomes-Mandurriao and HappyHomes-Tanauan may avail of financing

schemes offered by the Home Development Mutual Fund as well as accredited banks.

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Marketing and Sales

The Company employs an in-house sales department of six people to find purchasers of units in
the Company’s interim projects. The Company also has two sales executive officers who are
paid on a commission basis, and twenty four agents under such officers.

SUPPLIERS

The Company has a broad base of suppliers for materials and services and is not dependent on
any one supplier for its construction and development activities. The Company believes there is
no scarcity for the Company’s raw materials and they may be easily sourced in the market, and
therefore the Company is not, nor is it expected to be, dependent upon one or a limited number
of suppliers for its essential raw materials or any other items. The Company’s principal raw
materials are steel and cement, which are readily available in the market from a number of
sources. Contracts between the Company and its contractors or suppliers contain warranties for
quality and requirements for timely completion. In the event of delay or poor quality of work, the
contractor or supplier may be liable to pay the Company a penalty. The Company has not had
any material disputes with any of its contractors or suppliers. The Company uses a standard form
fixed-price turnkey contract for both its general and specialty construction contractors. The
contracts typically include the following key terms: a down payment of 10%-15% is required
from the contractor and is usually obtained in the form of a performance bond; progressive
billing occurs on a monthly basis; and a 10% retention and warranty provision for workmanship
is included and is typically covered by a guarantee bond.

The Company also outsources certain services for its CityMalls and hotels, such as
housekeeping, janitorial, maintenance, and security services, to reputable third-party service
provides on an annual contractual basis. These contracts can usually be terminated at any time,
such as if the contractor fails to perform at an acceptable level.

The following table lists the Company’s key suppliers and the products and services supplied to
the Company in connection with its construction and development activities.

Supplier Products/Services
Megawide Construction Corporation Construction
EEI Corporation Construction
Art Builders Construction and Management, Inc. Construction
Bon Builders Corporation Construction
Bueno Builders and Management Corporation Construction
Rapid Steel Corporation Construction
Monolith Construction & Development Corporation Construction
Brickwall Construction Corp. Construction
N1 Phil Builders Corp. Construction
Sta. Elena Construction & Development Corporation Piling Works
V.V. Aldaba Inc. Electrical Works

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 Supplier Products/Services
Lion Heart Security Agency Security Services
Unified Forces Security Security Services
Wizard Manpower and Allied Services Manpower
Jolly Management Solutions, Inc. Manpower

EMPLOYEES

As of December 31, 2017, the Company and its Subsidiaries have a total of 568 employees. This
is broken down as follows:

Company Name Total Employees

DoubleDragon Properties Corp. 239
DoubleDragon Sales Corp. 12
DoubleDragon Property Management Corp. 135
DD HappyHomes Residential Centers Inc. 10
Hotel of Asia, Inc. (“HOA”) 95
CityMall Commercial Centers Inc. (“CMCCI”) 64
Piccadilly Circus Landing, Inc. 13

The Company has no collective bargaining agreements with its employees due to the absence of
organized labor organizations in the Company. Aside from complying with the minimum
compensation standards mandated by law, the Company makes available to qualified personnel
supplemental benefits such as health insurance, car plans and bonuses. The Company has not
experienced any disruptive labor disputes, strikes or threats of strikes, and management believes
that the Company’s relationship with its employee in general is satisfactory. The Company
intends to hire approximately 126 additional employees in the next 12 months.

INTELLECTUAL PROPERTY

The operations of the Company are not dependent on any copyright, patent, trademark, license,
franchise, concession or royalty agreement. The Company and its Subsidiaries have registered
the following trademarks with the Intellectual Property Office:

Filing Registration
Trademark Type Registrant
Date date
1 DD DOUBLE DoubleDragon May 3, November
DRAGON Properties 2016 17, 2016
PROPERTIES Corp.
CORP. MAKING
GREAT THINGS
HAPPEN FOR
YOU

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 Filing Registration
Trademark Type Registrant
Date date
2 DOUBLEDRAGON DoubleDragon May 3, November
PROPERTIES Properties 2016 17, 2016
CORP. Corp.

3 DD DoubleDragon October May 30,

Properties 29, 2013
Corp. 2012

4 DOUBLEDRAGON DoubleDragon October May 30,

Properties 29, 2013
Corp. 2012

5 CITYMALL YOUR CityMall May 3, March 24,

EVERYDAY Commercial 2016 2017
MALL! Centers Inc.

6 CITYMALL SEE DoubleDragon October August 21,

YOU EVERYDAY! Properties 30, 2014
Corp. 2013

7 CITYMALL DoubleDragon October August 21,

Properties 30, 2014
Corp. 2013

8 DOUBLEDRAGON DoubleDragon May 3, November

PROPERTY Properties 2016 17, 2016
MANAGEMENT Corp.
CORP.

9 DRAGON8 MALL DoubleDragon October April 29,

THE NEWEST Properties 30, 2016
MALL IN Corp. 2015
DIVISORIA

10 WH TAFT DoubleDragon October January 21,

RESIDENCES Properties 30, 2016
Corp. 2015

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The Company also has applied for the registration of the following trademarks:

Trademark Type Applicant Filing Date

1 DOUBLEDRAGON DD - Meridian Park 28 July
PLAZA Development Corp. 2017

2 INJAP TOWER HOTEL DoubleDragon 22 May

Properties Corp. 2015

3 D8 MALL DoubleDragon 15 February

Properties Corp. 2017

These trademarks are important in the aggregate because name recognition and exclusivity of use
are contributing factors to the success of the Company’s developments. In the Philippines,
certificates of registration of a trademark filed with the Philippine Intellectual Property Office
are generally effective for a period of 10 years, unless terminated earlier.

HEALTH, SAFETY AND ENVIRONMENT

The Company regards occupational health and safety as one of its most important corporate and
social responsibilities and it is the Company’s corporate policy to comply with existing
environmental laws and regulations. The Company maintains various environmental protection
systems and conducts regular trainings on environment, health and safety. As discussed above,
the Company spends significant time and resources on being a leader in sustainable
development.

INSURANCE

The Company obtains and maintains appropriate insurance coverage on its properties, assets and
operations in such amounts and covering such risks as the Company believes are usually carried
by companies engaged in similar businesses and using similar properties in the same
geographical areas as those in which the Company operates. The Company maintains insurance
policies, including policies with Malayan Insurance Company, Incorporated and PGA Sompo
Insurance Corp., covering the following risks: business interruption, comprehensive general
liability, personal accident insurance for directors and officers, fire and lightning, bush fire and
spontaneous combustion; windstorm, storm, typhoon, flood, tidal wave and tsunami; water
damage caused by overflowing or bursting of water tanks, pipes or other apparatus, sprinkler and
related firefighting apparatus leakage; explosion, falling aircraft and article therefrom, impact by
road vehicles and smoke; earthquake shock and earthquake fire; volcanic eruption; subsidence,

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collapse and landslide; riot and strike, civil commotion and malicious acts; electrical injury;
sparkler and related firefighting apparatus leakage; robbery and burglary; mechanical or
electrical derangement failure or breakdown or boiler explosion; extra expense / standard
charges; and third-party bodily injury and property damage.

SUBSIDIARIES

The following table presents certain information regarding the Company’s Subsidiaries as of and
for the three months ended March 31, 2018.
Company
’s Share
in Net % of Total
Country of Company’s Income/(L Revenues of
incorporati Ownership oss) for the
Subsidiary on Total Assets Interest the period Revenues Company(2)
(₱ in millions, except percentages)
DoubleDragon Sales Corp. Philippines 1,858.8 100% (2.2) 0.0 0.0%
DoubleDragon Property Management Corp. Philippines 386.6 100% (48.8) 83.3 3.7%
Iloilo-Guimaras Ferry Terminal Corp. Philippines 43.5 100% (0.4) 0.0 0.0%
CentralHub Industrial Centers Inc. Philippines 360.5 100% (1.1) 0.0 0.0%
DD Meridian Park Development Corp. Philippines 21,300.2 70% 478.0 992.7 44.4%
DD HappyHomes Residential Centers Inc. Philippines 628.8 70% 12.6 75.2 3.4%
Hotel of Asia, Inc. (HOA)(1) Philippines 2,091.6 70% 41.9 248.6 11.1%
CityMall Commercial Centers Inc.
(CMCCI) Philippines 28,760.0 66% (33.6) 212.4 9.5%
Piccadilly Circus Landing, Inc. Philippines 457.9 50% 1.4 14.0 0.6%
____________
Notes:
(1) The Company acquired 70% of HOA in 2016 from Chan C. Bros. Holdings Inc. ("Chan C."), Staniel Realty and Dev't Corp. ("Staniel")
and Injap Investments, Inc. ("III"). Chan C. and Staniel were paid in cash while III will be paid with 7,774,764 Common Shares to be
issued by DD after confirmation of valuation (which is currently pending with the Philippine SEC) is secured from the Philippine SEC.
The Company has secured the Certificate Authorizing Registration ("CAR") for its acquisition of Chan C.'s shares and has recognized
HOA as a subsidiary pending issuance of the CARs for the transfers from Staniel and III. The acquisition gave the Company 70%
ownership and control of HOA effective August 11, 2016, based on PFRS 3, Business Combination.
(2) This calculated as the revenues of the respective Subsidiary divided by the total revenues of the Company (excluding revenue from the
parent company and consolidation adjustments).

The following is a brief description of each of the Company’s nine Subsidiaries:

1. DoubleDragon Sales Corp. (“DDSC”), incorporated on November 12, 2012, is engaged

in the business of selling or marketing real estate products, including, but not limited to
land, buildings, condominium units, townhouses, apartments, house and lot packages and
all other forms of real estate products.

2. DoubleDragon Property Management Corp. (“DDPMC”), incorporated on January

17, 2012, is engaged in the business of maintaining, preserving, preparing and cleaning
buildings, condominiums, townhouses, hotels, amusement or recreational places or
counters, office premises, factories, shops, equipments and facilities, as well as to render
janitorial services, window cleaning, to undertake additional carpentry works, plumbing,
electrical, painting, landscaping, gardening, ground maintenance services of any and all
kinds of buildings.

3. CityMall Commercial Centers Inc. (“CMCCI”), incorporated on December 27, 2013,

is engaged in the business of commercial shopping centers or malls.

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 4. Piccadilly Circus Landing Inc. (“PCLI”) was incorporated on October 10, 2012. Its
primary purpose is to engage, operate, hold or manage real estate business.

5. DD HappyHomes Residential Centers Inc. (“DDHH”) was incorporated on September

15, 2011. Its primary purpose is to engage, operate, hold or manage real estate business.

6. DD Meridian Park Development Corp. (“DDMPDC”) was incorporated on October

27, 2014. Its primary purpose is to engage in the business of real estate development
including but not limited to residential and commercial subdivisions, buildings, and
condominium projects in accordance with Republic Act No. 4726 (otherwise known as
The Condominium Act) as amended.

7. Hotel of Asia, Inc. (“HOA”) was incorporated on June 8, 2011. Its primary purpose is to
engage in and carry on the business of operating hotel/s and resort/s and to operate and
maintain any and all services and facilities incident thereto.

8. Iloilo-Guimaras Ferry Terminal Corp. (“IGFTC”) was incorporated on June 10,

2016. Its primary purpose is to finance, design, construct, develop, operate and maintain
the Iloilo-City Guimaras Ferry Terminal and its surrounding areas within the Parola Port.

9. CentralHub Industrial Centers, Inc. (“CHICI”) was incorporated on August 31, 2017.
Its primary purpose is to engage in and carry on a business of receiving, accepting,
unloading, storing and/or deposit of goods, chattels, fungibles, parcels, boxes, documents,
mail, products, money, vehicles, animals, articles, cargoes, and effects of all kinds and
provide facilities, amenities, conveniences, features, services and/or accommodations in
relation and necessary to said business.

The following table presents the primary business activities the Company and the Company’s
Subsidiaries are engaged in:

Industrial leasing CHICI

Hospitality business HOA
Retail Leasing CMCCI, PCLI
Office Leasing DDMPDC
Real Estate Residential DD, DDHH
Others DDSC, IGFTC

PROPERTIES

The locations and descriptions of the Company’s investment properties as of December 31, 2017
are shown below:
Project Name Location Ownership
CityMall Roxas-Arnaldo Arnaldo Avenue, Baybay, Roxas City Land - 100% directly owned
Structure – 66% owned through CMCCI

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 Project Name Location Ownership
CityMall Consolacion Sta. Lucia Town Square, Cansaga, Land and Structure - 66% owned through CMCCI
Consolacion, Cebu City
CityMall Anabu Aguinaldo Highway, Anabu, Imus, Cavite Structure – 66% owned through CMCCI
CityMall Tetuan Don Alfaro Street, Tetuan, Zamboanga City Structure - Owned Property, 46.2% effective ownership
(70% owned by CMCCI through Prime DDG
Commercial Centers Inc.)
CityMall Tagbak Tagbak, Jaro Iloilo Structure – 66% owned through CMCCI
CityMall Kalibo F. Quimpo Street, Kalibo, Aklan Land and Structure – 66% owned through CMCCI
CityMall Tiaong Maharlika Highway, Lalig, Tiaong, Quezon Structure – 66% owned through CMCCI
CityMall Parola Fort San Pedro Drive, Parola Wharf, Structure – 66% owned through CMCCI
Concepcion, Iloilo City
CityMall Cotabato Governor Gutierrez Avenue, Rosario Heights Land and Structure – 66% owned through CMCCI
VII, Cotabato City
CityMall Mandalagan Lacson Street corner G.M. Cordova Avenue, Structure - 46.2% effective ownership
Mandalagan, Bacolod City (70% owned by CMCCI through CM-Mandalagan
Bacolod Inc.)
CityMall Kabankalan Justice Perez Highway, Talubangi, Structure – 66% owned through CMCCI
Kabankalan City
CityMall Victorias Osmeña Avenue, Victorias City, Negros Land and Structure – 66% owned through CMCCI
Occidental
CityMall San Carlos Azcona Street corner CL Ledesma Avenue, Land and Structure – 66% owned through CMCCI
Poblacion, San Carlos City, Negros
Occidental
CityMall Tagum Maharlika Highway corner Lapu-Lapu Structure – 66% owned through CMCCI
Extension, Magugpo, Tagum City
CityMall Boracay Station 1, Balabag, Boracay Structure – 66% owned through CMCCI
CityMall SCTEX Santiago, Concepcion, Tarlac, SCTEX Structure – 66% owned through CMCCI
Southbound
CityMall Goldenfields Goldenfields Commercial Complex, Araneta Land and Structure - 46.2% effective ownership (70%
St., Brgy. Singcang-Airport, Bacolod City, owned by CMCCI through CM-Goldenfields Bacolod
Negros Occidental Inc.)
CityMall Tarlac McArthur Highway, Brgy. San Rafael, Tarlac Land and Structure - 46.2% effective ownership (70%
City, Tarlac owned by CMCCI through CM-Tarlac Macarthur,
Inc.)**
CityMall Dumaguete Veterans Avenue National Highway, Brgy. Structure – 66% owned through CMCCI
Daro, Dumaguete City, Negros Oriental
CityMall Dau Dau Access Road, Dau, Mabalacat, Structure – 66% owned through CMCCI
Pampanga
CityMall Passi Poblacion, Passi, Iloilo City Structure – 66% owned through CMCCI
CityMall Sta. Rosa NE Pan-Philippine Highway, Poblacion, Sta. Land and Structure – 66% owned through CMCCI***
Rosa, Nueva Ecija
CityMall Danao Danao, Cebu City Structure - 46.2% effective ownership
(70% owned by CMCCI through CM-Danao Cebu Inc.)
CityMall Calamba Manila South Rd., Brgy. Halang, Calamba, Land and Structure – 66% owned through CMCCI
Laguna
CityMall Koronadal Lacson St., Brgy. Morales, Koronadal City, Land and Structure – 66% owned through CMCCI
South Cotabato
CityMall Dipolog Filomena, Dipolog, Zamboanga Land - 46.2% effective ownership
(70% owned by CMCCI through CM-Dipolog
Zamboanga Inc.)
CityMall Mayombo Dagupan Calasiao - Dagupan Road, Brgy. Mayombo, Land – 66% owned through CMCCI
Dagupan
CityMall Bulua Bulua, Cagayan de Oro City Land – 66% owned through CMCCI
CityMall Iponan Claro M. Recto Avenue, Iponan, Cagayan de Land – 66% owned through CMCCI
Oro City
CityMall Ozamiz Catadman, Ozamiz Land – 66% owned through CMCCI
CityMall Tuguegarao Pan-Philippine Highway, Brgy. Leonarda Land – 66% owned through CMCCI***
(formerly Brgy. Pengue Ruyu), Tuguegarao
City, Cagayan
CityMall Isulan Isulan-Tacurong City Road, Brgy. Poblacion, Land – 66% owned through CMCCI
Isulan, Sultan Kudarat
CityMall San Carlos, Burgos St. cor. Posadas St. and Roxas Land – 66% owned through CMCCI
Pangasinan Boulevard, Brgy. Poblacion, San Carlos City,
Pangasinan
CityMall Cadiz Villena St., Brgy. Poblacion, Cadiz City, Land – 66% owned through CMCCI
Negros Occidental

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 Project Name Location Ownership
CityMall Lam-an Lam-an, Ozamiz City Land – 66% owned through CMCCI
CityMall San Enrique San Enrique, Negros Land – 66% owned through CMCCI
CityMall Bongabon Bongabon, Nueva Ecija Land – 66% owned through CMCCI***
CityMall Dinalupihan Tabacan, Dinalupihan, Bataan Land – 66% owned through CMCCI
CityMall Ormoc Brgy. Cogon, Ormoc City, Leyte Land – 66% owned through CMCCI
DD Meridian Park Corners Roxas Blvd., EDSA and Macapagal Land - 70% owned through DDMPDC
Avenue, Pasay City (project still under development)
Jollibee Tower Oranbo, Pasig City Leasable floor area - 85% directly owned
(project still under development)
Dragon8 Mall* C.M. Recto and Dagupan Sts., Manila Land and Structure - 100% directly owned
The SkySuites Tower Corner EDSA Quezon Ave, Commercial Units - 100% directly owned
Quezon City (project still under development)
W.H. Taft Taft Avenue, Manila Commercial Units - 100% directly owned
Injap Tower West Diversion Road, Iloilo City Commercial Units - 100% directly owned
The Uptown Place General Luna Street, Iloilo City Commercial Units - 100% directly owned
Umbria Commercial Center Binan, Laguna Land and Structure - 50% owned through PCLI
HappyHomes Tanauan Tanauan, Leyte Land – 70% owned through DDHH
Hotel 101 Manila Bay Area, Near Mall of Asia Commercial Units – 70% owned through HOA
Hotel 101 Fort Fort Bonifacio, Taguig Land – 70% owned through HOA
(project still under development)
CentralHub - Tarlac Luisita Industrial Park, Tarlac Land – 100% owned through CHICI
Jinjiang Inn- Ortigas San Miguel Ave., Ortigas Land and structure – 70% owned through HOA

*Notice of Lis Pendens entered on November 25, 2010 in relation to case for the recovery of possession of the lot and improvements (which has
been dismissed with finality) for cancellation.
** CMCCI currently holds 100% of CM-Tarlac Macarthur, Inc. but this will be reduced to 70% pursuant to the joint venture agreement.
*** Transfer of titles of some of the lots to CMCCI still pending for registration.

The Company and its subsidiaries’ investment properties are stated at fair value, which has been
determined based on valuations performed by an accredited independent appraiser. The fair
values of the investment properties were arrived at using the market data approach for land and
cost or income approach for buildings.

As of December 31, 2017, the Company has acquired the following properties for the
development of CityMalls:

Lot Area
Location* Liens**
(in sq. m.)
1 CM Dagupan 12,817 None
2 CM Kalibo 13,530 Estate Lien (Date of Entry: June 22, 2015)
3 CM Consolacion-Cebu 10,251 None
4 CM Cotabato 15,000 None
5 CM Sta. Rosa-Nueva Ecija 19,516 Estate Lien (Date of Entry: May 2, 2015)
6 CM Victorias-Negros 13,734 Estate Lien (Date of Entry: August 15, 2012)
7 CM San Carlos-Negros 9,387 Estate Lien (Date of Instrument: September 23, 2014 and May 18, 2015)
8 CM Koronadal-Cotabato 10,000 Estate Lien (Date of Entry: March 5, 2014)
9 CM Bulua-CDO 11,464*** Estate Lien (Date of Entry: Nov. 13, 2015)
10 CM Iponan-CDO 11,957 Estate Lien (Date of Entry: November 27, 2015)
11 CM Isulan 9,247 None
12 CM Surigao 10,505 None
13 CM Manabay-Ozamis 22,262 None
14 CM Antique 15,298 Estate Lien (Date of Entry: February 26, 2016)
15 CM Calapan 7,159 None
16 CM Pagadian 23,317 None
Deed of Sale requiring Vendee to comply with the terms of the milling
17 CM Calamba 10,309
contract (Date of Entry: May 25, 1998)
18 CM Ozamis-Lam-An 6,023 None
19 CM San Enrique 13,991 None

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 Lot Area
Location* Liens**
(in sq. m.)
20 CM Baler, Aurora 7,217 None
21 CM Ormoc, Leyte 20,732 None
22 CM Sorsogon 5,869 None
23 CM San Carlos, Pangasinan 6,597 None
24 CM Palo, Leyte 20,000 None
25 CM Cadiz City, Negros Occidental 10,412 None
26 CM Tuguegarao 16,525 None
27 CM General Trias 19,659 None
28 CM Tagbilaran, Bohol 7,583 None
29 CM Bongabon, Nueva Ecija 11,025 None
30 CM Aparri, Cagayan 7,198 None
31 CM Los Banos, Laguna 24,273 Estate Lien (Date of Entry November 28, 2013)
32 CM Basilan 8,692 None
33 CM Lucena 23,510 None
34 CM Guimaras 8,405 None
35 CM Dinalupihan 20,000 None
36 CM Balibago Sta. Rosa 15,000 None
37 CM Bais 16,944 None
38 CM La Carlota 17,439 None
39 CM Arayat 11.996 None

*Except for CM Dagupan, CM Consolacion, CM Cotabato, CM Isulan, CM Victorias Negros, CM San Carlos Negros, CM Koronadal Cotabato,
CM Bulua, CM Iponan, CM Mananabay-Ozamis, CM Calamba, Laguna, CM Ozamis-Lam-an, CM San Carlos, CM Pangasinan, CM Surigao,
CM Calapan, CM Pagadian, CM San Enrique, CM Cadiz, CM Basilan and CM Lucena with titles registered in the name of CM, transfers of
titles over the other CM sites in the name of CM are currently pending.

**Estate Lien refers to the liabilities under Section 4, Rule 74 of the Rules of Court whereby creditors, heirs and other persons unlawfully
deprived of participation in the estate of the deceased are given a period of two (2) years within which to assert their claim against the estate.

***1,319 sq. m. is currently leased to Hotel of Asia, Inc. for the construction of Jinjiang Inn Cagayan de Oro.

Joint Ventures

The Company has also entered into joint venture agreements with various landowners for the
development of CityMalls on their respective properties. Except for the joint venture agreements
for CM-Northtown Davao and CM Danao-Cebu, all joint venture agreements have standard
terms and result in the formation of a subsidiary which will proceed to own the property. CMCCI
will own 70% of the joint venture company in exchange for the development of the CityMall
while the original landowner will retain thirty 30% ownership in the joint venture company in
exchange for the value of the land infused.

For CM-Northtown Davao, CMCCI will own 79% of the joint venture company while the
original landowner will infuse cash equivalent to 21% of the outstanding capital stock after
selling the land to the joint venture company. For CM Danao-Cebu, the land that is currently
being leased for 25 years by CMCCI’s joint venture partner from the City of Danao will be
subleased in favor of the joint venture company for 25 years.

The CityMall locations that are currently being developed under the joint venture structure are as
follows:

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 Lot Area
Location (in sq. m.)
1 CM Mandalagan-Bacolod 10,000
2 CM Goldenfields-Bacolod 10,940
3 CM Tetuan-Zamboanga* 15,344
4 CM Guiwan-Zamboanga 13,642
5 CM Macarthur-Tarlac 20,000
6 CM Roxas Avenue 4,680

7 CM Danao-Cebu 5,700
8 CM Dipolog-Zamboanga 12,862
9 CM-Northtown Davao 15,605
10 CM-Bocaue 10,085
*TCT for this has recently been subdivided to carve out the CM
portion.
Long Term Lease

The Company, through CMCCI, also leases various properties for the development of CityMalls.
The leases have a tenor of 23 years or more. The locations and areas of the said leased properties
are as follows:

Location Lot Area (in sq. m.) Expiry Date Renewal Terms
1 CM Passi-Iloilo 8,588 April 10, 2045 None
On the 26th year of the lease term, Lessor and Lessee
shall start negotiating the extension of lease term;
December 31, 2046 failure to mutually agree on the extension of the lease
term after one (1) year, lease term shall be deemed not
2 CM Dumaguete* 13,361 to have been extended and shall expire on expiry date
Before the start of the 23rd year, Parties shall endeavor
August 31, 2041 to execute a lease contract over the property extending
3 CM Ungka, Pavia-Iloilo 12,000 the lease term.
After 30 years commencing
from Lessee’s commercial
Lessee shall submit written notice at least one (1) year
operations (CM Tagum has
before the expiration of lease term
not commenced commercial
4 CM Tagum 19,384 operations)
at least 60 days prior to termination of lease term; if no
March 31, 2040 agreement within 30 days, offer to renew deemed not
5 CM Roxas-Arnaldo 10,000 accepted; no automatic renewal
6 CM Imus Cavite 20,943 June 22, 2040 None
Before the start of the 23rd year, Parties shall endeavor
June 30, 2040 to execute a lease contract over the property extending
7 CM Tagbak Jaro-Iloilo** 5,500 the lease term.
The term of this contract may be extended through
June 15, 2044
8 CM Bacalso-Cebu 11,000 mutual agreement of the Parties
Lease is renewable for another 25 years at the option of
October 8, 2040 the lessee, and under such terms and conditions as
9 CM Boracay 10,000 may be acceptable to both lessor and lessee
The term of this contract may be extended through
November 2, 2044
10 CM Dau-Pampanga 5,181 mutual agreement of the Parties
11 CM Tiaong-Quezon 8,000 September 30, 2040 None
Notice to continue the sub-lease should be made One
December 11, 2038 (1) year prior to the end of this term for negotiations
12 CM SCTEX-Tarlac 17,453 on renewal, by mutual agreement of Parties
The term of this contract may be extended through
July 7, 2041
13 CM Parola-Iloilo 12,734 mutual agreement of the Parties
The term of this contract may be extended or renewed
December 31, 2056
14 CM Kabankalan 15,000 subject through mutual agreement of the Parties

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*Reclassification of the land to residential is still pending.
**The lessor for this property, Iloilo Commercial Development Corporation, is in the process of securing the TCT of the lot in its name.

Contracts of Lease for Office Space

The Company leases its corporate office space located at the 10th and 11th Floors of at
DoubleDragon Plaza, DD Meridian Park in the Manila Bay area. The office is leased by DD
from DDMPDC. The Contract of Lease for the 9,496.28 sq. m. office space was executed on
December 5, 2017 and shall be effective for a period of five years commencing on October 10,
2017 and ending on October 9, 2022.

The Company leases office and parking spaces and showrooms. The terms of the lease are for
periods ranging from one to five years, renewable for the same period under the same terms and
conditions. Generally, the rent under such leases shall escalate by an average of 5% to 10% each
year.

CORPORATE SOCIAL RESPONSIBILITY

The Company integrates and engages in corporate social responsibility by supporting the Jollibee
Group Foundation’s initiatives specifically in the areas of education, youth and entrepreneurship.
The Jollibee Group Foundation was established by JFC in 2004 as part of its commitment to
community development. The programs which the Company supported include:

• Farmer Entrepreneurship Program (“FEP”)

The FEP Leadership for Agroenterprise Development (LeAD) Training Program was
launched to help FEP farmer leaders. It aims to develop both their skills and mindset to
explore, persevere and grow as reliable suppliers, and leaders to other farmers. The
program has helped participants increase their income by honing their entrepreneurial
skills, and by linking farmers to institutional buyers such as JFC.

• Busog, Lusog, Talino (“BLT”) School Feeding Program

The BLT School Feeding Program was initiated by the Jollibee Group Foundation as part
of its support to the Philippine Department of Education’s school based feeding program.
The BLT kitchens centralize food production for a cluster of schools, with the aim of
efficiently providing nutritious food to school children. An essential component of this
initiative was the promotion of school feeding standards which were inspired by the same
global food safety and hygiene guidelines used by JFC’s stores.

• Project ACE Scholarships

The Jollibee Group Foundation has also provided tertiary education scholarships to
underprivileged but deserving youth. In 2016, scholarships were granted to 90 students in
various colleges and 150 students in vocational schools.

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RECENT SALES OF UNREGISTERED OR EXEMPT SECURITIES/EXEMPT
TRANSACTIONS

The following securities were issued as exempt from the registration requirements of the SRC
and therefore have not been registered with the Philippine SEC:

1) On October 30, 2014, the Company obtained a total of ₱7.4 billion unsecured 7-year
fixed rate corporate notes subscribed to by various financing institutions through bi-
lateral loan agreements. The loan payments are to be made in seven consecutive annual
installments to commence at the end of the 12th month after the initial borrowing date.
The proceeds from these borrowings were used by the Company to partly finance its
capital expenditures, primarily for the development of DD Meridian Park, Dragon8 Mall,
The SkySuites Tower, the roll-out of the first 12 CityMalls and for general corporate
purposes.

2) On May 11, 2015, the Company obtained a total of ₱5.0 billion unsecured 7-year fixed
rate corporate notes subscribed to by BDO Unibank, Inc. through a bilateral loan
agreement. The loan payments are to be made in five consecutive annual installments to
commence at the end of the 36th month after the initial borrowing date. The proceeds
from these borrowings will be used by the Company to finance capital expenditures for
the development of CityMall branches.

On September 25, 2017, the Philippine SEC approved the Company’s proposed issuance of
9,850,000 Common Shares in favor of 64 eligible employees pursuant to its Stock Option Plan.
The issuance of such shares shall be exempt from the registration requirements under the SRC
provided the Company files within ten days from the end of each year, while the plan is in force,
a report showing the names of the option holders and the number of shares subscribed by them.
As of December 31, 2017, no eligible employee has exercised his or her option under the Stock
Option Plan.

The Company, subject to the Philippine SEC’s confirmation of valuation, will be issuing
7,774,764 Common Shares to Injap Investment Inc., as payment for 40% of HOA which the
Company acquired in 2016.

LEGAL PROCEEDINGS

Neither the Company nor any of its subsidiaries are involved in, or the subject of, any legal
proceedings which, if determined adversely to the Company or the relevant subsidiary’s
interests, would have a material effect on the business or financial position of the Company or
any of its subsidiaries.

The Company also believes that it has all material permits and licenses necessary for its business
and that these are valid and subsisting as of the date of this Prospectus, as confirmed by
Cayetano Sebastian Ata Dado & Cruz Law Offices in its opinion dated April 17, 2018.

The Company has a policy that all customer complaints should be handled and settled within five
business days after the date the complaint is received by the Company. The period to settle

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complaints can be extended if the Company needs additional time depending on the particular
circumstances of the complaint, and after considering applicable policies, laws and regulations,
in which case the Company will inform the customer in writing.

The Company is not involved in any bankruptcy, receivership or similar proceedings. Neither is
it aware of any bankruptcy, receivership or similar proceedings involving any of its Subsidiaries.

However, in the ordinary course of business, the Company is involved in the following legal
proceedings as of December 31, 2017, which while the Company believes are nuisance cases and
without any merit, are being disclosed for the investor’s convenience only.

1. Victoria Y. Keet vs. Benedicto Y. Yujuico, DD-Meridian Park Development Corp.,

DoubleDragon Properties Corp., Edgar J. Sia II, Tony Tan Caktiong, Ferdinand J. Sia, Rizza
Marie Joy J. Sia, William Tan Untiong, Joseph Tanbuntiong, Jesus Emmanuel Yujuico, Jaime
Rafael Yujuico, Christopher Dy, Gary P. Cheng, Vicente S. Perez, Jr. and the Register of Deeds
for Pasay City (Regional Trial Court of Pasay City, Branch 108 (Civil Case No. R-PSY-14-
18101-CV))

This is a case for declaration of nullity of documents and titles with prayer for damages. Victoria
Keet (“Keet”), in her Amended Complaint dated July 15, 2015, alleges that Benedicto Yujuico’s
(“Benedicto”) ownership over eight (8) parcels of land located in Pasay City (“Subject
Property”) and his rights to enter into transactions relating thereto are based on falsified deeds of
assignment. She alleges that Benedicto, as attorney-in-fact for his father (Jesus S. Yujuico),
succeeded in transferring the titles under his name to the prejudice of the other heirs. As the sole
heir of Jesusa S. Yujuico, Benedicto’s deceased sister, Keet alleges that she has 1/6 interest in
said property, and, thus, prays for the nullification of Benedicto’s titles as well as any and all
titles issued subsequently, including the titles that are currently under the name of DD Meridian
Park Development Corp. (“DD Meridian”). The Subject Property was transferred to DD
Meridian pursuant to a sale between Benedicto and DD Meridian. Benedicto filed a Motion to
Dismiss on the following grounds: (i) failure to state a cause of action in view of Keet’s
admission that the transfers were done in accordance with the May 7, 1996 Memorandum of
Agreement, the validity of which was not contested by Keet; (ii) Keet is not a real party in
interest as she was not privy to the documents sought to be nullified; and (iii) failure to pay the
required docket fees. Benedicto also filed a Motion to Lift Annotation of Notice of Lis Pendens
praying for the lifting of the notices of lis pendens annotated on the titles. The Company, for its
part, filed an Answer dated October 7, 2015 alleging that the Amended Complaint does not
contain any allegation with respect to the Company and its directors, and as such, should be
dismissed. The Company also prayed for damages. DD Meridian and the rest of the defendants
adopted the arguments of Benedicto in his Motion to Dismiss. In an Order dated February 24,
2016, the Court granted Benedicto’s Motion to Dismiss for the following reasons: (i) non-
payment of docket fees; (ii) insufficiency in allegations of its cause of action in relation to the
reliefs prayed for; and (iii) the Memorandum of Agreement executed in 1996 is not one of those
prayed to be nullified, and the Court, therefore, will not be able to render judgment disturbing or
nullifying the titles to the properties resulting from such implementation. In another Order of
even date, the Court granted Benedicto’s Motion to Lift the Annotation of Notice of Lis Pendens.
Keet filed a Motion for Reconsideration dated March 28, 2016 assailing the Court’s ruling on the

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ground that: (i) the Court erred in ruling that she paid incorrect docket fees; and (ii) that the
Court committed a reversible error in ruling that the Amended Complaint failed to sufficiently
state a cause of action. This Motion was denied on June 16, 2016 on the ground that no new
issues were raised. Keet filed a Notice of Appeal on July 19, 2017. On July 24, 2017, the Court
ordered the forwarding of the records of the case to the Court of Appeals.

2. Vincent Pascal T. De Asis vs. DoubleDragon Properties Corporation, and Iloilo-Guimaras

Ferry Terminal Corp., through its President Ferdinand J. Sia and the Board of Directors of
DoubleDragon Properties Corporation namely: Edgar J. Sia II, Tony Tan Caktiong, Rizza Marie
Joy J. Sia, William Tan Untiong, Joseph Tanbuntiong, Gary P. Cheng, and Vicente S. Perez, Jr.
(Office of the City Prosecutor, Iloilo City (NPS Docket No. VI-10-INV-15G-00551)
Region VI – ORP (ORP Docket No. VI-ORP-PR-17E-006))

This is a case filed with the Office of the City Prosecutor of Iloilo (“OCP-Iloilo”) for violation of
Section 301 in relation to Section 213 of Presidential Decree 1096 or the National Building Code
(“Code”) and was instituted due to the alleged construction of Iloilo-Guimaras Ferry Terminal
sometime in February 2015 with no building and fencing permits. In the Verified Urgent Motion
to Dismiss dated 24 September 2015 (“Motion’), the Company moved for the dismissal of the
case claiming that: (i) Vincent Pascal de Asis (“de Asis”) has no authority to initiate actions for
violations of the Code as the authority to do so lies with the Building Official of the City of
Iloilo; (ii) non-compliance with the proper procedures for instituting complaints under the Code;
and (iii) the fact that Building Permit No. 06-02-205-1568 has been issued by the Office of the
Building Official of Iloilo City on August 12, 2015. The Motion was denied. On January 11,
2016, the OCP-Iloilo issued a Resolution finding probable cause. It was pointed out that
respondents failed to file their proper counter-affidavit. Also, while ordinarily, a director or
officer of the corporation may not be held criminally liable for the acts of the corporation, said
director or officer may be held criminally liable if he participated in the unlawful acts. On
February 2, 2016, the Company filed a Verified Motion for Reconsideration emphasizing that
there are no factual or legal basis to hold its directors criminally liable. In the said Motion, it
reiterated that a Building Permit had already been issued, showing that the corporation is
compliant with the requirements of the Code, and that the Code does not impute criminal liability
against officers and directors in case of violations of its provisions. Furthermore, the prosecutor
admitted in the January 11, 2016 Resolution that he did not know who was responsible for the
act of constructing a building without a Building Permit. Thus, there is no legal basis to find
probable cause against the members of the Board of Directors. Moreover, as pointed out by the
Company, the 2008 Manual of Prosecutors provides that a Motion to Dismiss may take the place
of a counter-affidavit if duly verified by the respondents. On April 6, 2016, the OCP-Iloilo
dismissed the case on the ground that respondents have already complied with the requirement of
securing a building permit. De Asis, in turn, simultaneously filed his Motion for
Reconsideration with the Office of the City Prosecutor and a Petition for Review with the
Department of Justice (“DOJ”). Both were denied. De Asis filed a second Petition for Review
with the DOJ which was also dismissed in the Resolution dated 26 May 2017 on the ground that
no evidence was found that OCP-Iloilo exercised grave abuse of discretion in dismissing the
complaint.

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3. The Integrated Bar of the Philippines (Guimaras Chapter) Represented by its President, Atty.
Vincent Pascal T. De Asis, Vice Governor B. De Asis, Atty. Roma Joy Jordan, Danilo
Lamparero, Sem Galve, and Jovito R. Atienza vs. The City Government of Iloilo Represented by
Mayor Jed Patrick Mabilog, The Sangguniang Panglungsod of Iloilo City, Represented by Vice
Mayor Jose Espinosa III, the DoubleDragon Properties Corp., and the Iloilo-Guimaras Ferry
Terminal Corp. (Regional Trial Court of Iloilo City, Branch 37 (Civil Case No. 15-32669))

This is a case for Rescission of Contract, Injunction with Prayer for Issuance of Restraining
Order/ Preliminary Injunction. In the Amended Complaint dated 24 June 2015, plaintiffs alleged
that the Metro Iloilo-Guimaras Development Council (“Council”) was formed under authority of
Executive Order No. 559 to spearhead the establishment and development of a unified ferry
terminal system for and in the service of both Iloilo and Guimaras. In 2012, however, plaintiffs
discovered that the City Government of Iloilo and the two defendant corporations entered into a
Joint Venture Agreement (“JVA”) intentionally omitting Guimaras and other relevant
stakeholders (LGUs of Buenavista and Jordan) from participating. The Council was not involved
in the development of said project. Moreover, the project violated Proclamation No. 207 dated
19 July 2011, which allegedly set aside the project site for the specific purpose of building an
office or headquarters for the City Government of Iloilo. The Amended Complaint further
alleged that the project started illegally and with great haste, as at the time of construction, there
was no master plan, locational clearance, building permit and electrical plan. Also, the City
Government of Iloilo had no authority to contract that the terminal fee must be pegged at ₱11.00
and that other ferry terminals (Ortiz and Parola wharfs) will be closed. Plaintiffs prayed for the
issuance of a temporary restraining order/preliminary injunction alleging that the continued
construction of the terminal will endanger the workers and the commuting public, as the project
is being constructed without the appropriate permits. Plaintiffs also prayed for the (i)
nullification of the Joint Venture Agreement between the City Government of Iloilo and the two
defendant corporations; and (ii) directive for a renegotiation of the Project with the participation
of the Provincial Government of Guimaras following the concept of the Metro Iloilo-Guimaras
Development Council.

In response, the City Government of Iloilo claimed that —

1. The issues relating to the alleged lack of necessary permits and plans are properly for the
cognizance of the City Planning and Development Office and Building Official, and not
the Courts;
2. The instant case is not a taxpayer suit as there is no allegation of illegal disbursement of
public funds;
3. The challenged JVA was executed pursuant to Section 22 of the Local Government Code
on the corporate powers of local government units;
4. Proclamation No. 207 does not make any conditions as to how the Iloilo City Government
should use the parcel of land hence the allocation/use of the property is valid;
5. P.D. No. 559 does not state that the Metro Iloilo-Guimaras Development Council shall
spearhead the establishment and development of a unified ferry terminal system in the
service of both the City of Iloilo and the Province of Guimaras but merely requires
coordination with it; and

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 6. The prayer for the issuance of preliminary injunction may not be granted in view of
Section 1 of P.D. 1818 that prohibits the courts from issuing any restraining order or
preliminary injunction against a government infrastructure program.

The Company and Iloilo-Guimaras Ferry Terminal Corp., for their part, claimed that (i) plaintiffs
are not real parties in interest not being parties to the JVA; and (ii) the corporations are in
possession of the required Master Development Plan, Locational Clearance, Building Permit and
Electrical Permit. Defendant corporations prayed for payment of damages. On June 17, 2016, the
Court issued an order denying the prayer for the issuance of a Writ of Preliminary Injunction
(“Writ”) on the grounds that plaintiffs failed to establish their right to the Writ and that the
subject Building Permit for the project had already been acquired. The case was set for mediation
and, thereafter, for Judicial Dispute Resolution. In view of the failure of the parties to settle, the
case was set for the continuation of proceedings. The arguments raised in the prayer for issuance
of the Writ are identical to the contentions raised in the Complaint. With the denial of the
issuance of the Writ, the Company believes that the dismissal of the Complaint will most likely
follow.

4. Alma S. Enano vs. Globe Asiatique Realty Holdings Corporation represented by its President
Delfin S. Lee, and Rizal Commercial Banking Corporation (Office of the President (O.P Case
No. 13-D-081; HLURB Case No. REM- 051711-14514))

This is a case for refund and payment of damages. In a Complaint dated May 16, 2011, Alma S.
Enano (“Enano) claimed that she entered into a Reservation Agreement with Globe Asiatique on
October 2, 2009 for the purchase of Unit 614 of G.A. Sky Suites (the “Project”), for the total
price of ₱3,711,000.00. Pursuant to the said Agreement, Enano paid Globe Asiatique the total
amount of ₱501, 755.70 plus ₱20, 000.00 initial payment from June 1, 2009 to December 10,
2010. On September 29, 2010, Rizal Commercial Banking Corporation (“RCBC) acquired the
Project through an extra-judicial foreclosure. Enano was advised by RCBC that she should
continue paying the amortization for the said unit. Of the aforesaid amount paid by Enano to
Globe Asiatique, only ₱33,632.60 was remitted to RCBC. The construction was completely
stopped in October 2010 prompting Enano to file a Complaint with the HLURB for: (i) refund of
₱521,755.70 plus 12% interest from the filing of the Complaint until full payment; (ii) moral
damages in the amount of ₱50,000.00; (iii) exemplary damages in the amount of ₱25,000.00; and
(iv) attorney’s fees in the amount of ₱50,000.00. In a Decision dated 11 September 2012,
HLURB ordered -- (i) Globe Asiatique to pay Enano the amount of ₱488,123.10 with legal
interest from the date of the filing of the Complaint until fully paid; (ii) RCBC to refund Enano
₱33,632.20 with legal interest from filing of the Complaint until fully paid; and (iii) Globe
Asiatique to pay ₱50,000.00 moral damages, ₱50,000.00 exemplary damages and ₱25,000.00
attorney’s fees. Upon Motion for Reconsideration, HLURB modified the Decision and directed
Globe Asiatique and RCBC to jointly and severally: (i) refund Enano ₱521, 755.70 with legal
interest at 6% from filing of the Complaint until finality of the Decision and 12% per annum
from finality until fully paid; and (ii) to pay Enano ₱50,000.00 moral damages, ₱50,000.00
exemplary damages and ₱25,000.00 attorney’s fees. RCBC appealed the instant case to the
Office of the President. On April 27, 2015, Enano filed her Motion to Implead DoubleDragon
Properties, Inc. with Manifestation praying that the Company be impleaded as indispensable
party and that RCBC’s appeal be dismissed. As of the date hereof, the Office of the President

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has not yet issued any resolution impleading the Company as the new developer of the project.
Even if not yet impleaded, the Company, as the new developer, has taken upon itself to amicably
settle the case with Enano.

5. Aldwin S. Calubad vs. Globe Asiatique Realty Holdings Corporation and Rizal Commercial
Banking Corporation
(Office of the President (O.P. Case No. 13-D-081))

Aldwin S. Calubad (“Complainant”) bought a condominium unit and parking space in G.A. Sky
Suites (“Sky Suites”) from Globe Asiatique Realty Holdings Corporation (“GARHC”), then
developer of Sky Suites. The total purchase price was fully paid as of end of June 2011 but no
deeds of sale were executed. Subsequently, RCBC acquired the project through a foreclosure
proceeding. The construction was completely stopped and that led to the filing of the complaint
with the HLURB for the rescission of the Contract to Sell and refund of payments. HLURB
rendered a Decision on 22 November 2012 in favor of the Complainant. Noting that RCBC is
now the owner, Complainant appealed and prayed that RCBC be held jointly and severally liable
with GARHC. This was granted on 11 April 2013. RCBC appealed the decision before the
Office of the President. During the pendency of the case, the Company acquired Sky Suites from
RCBC. As the new owner of Sky Suites, the Company, while not a party to the case, coordinated
with the Complainant for a possible settlement. This resulted to the execution of a new Contract
to Sell in light of the Complainant’s decision to continue with the acquisition. Complainant also
executed a Deed of Rescission rescinding the Contract to Sell with GARHC and a Deed of
Assignment of his receivables from GARHC to the Company. Complainant, on April 26, 2016,
filed a Motion to Dismiss with the Office of the President. Said motion remains pending for
resolution.

6. Sps. Regie L. Malonzo and Mariscel L. Malonzo vs. Globe Asiatique Realty Holdings
Corporation and Rizal Commercial Banking Corporation. (Office of the President (O.P. Case
No. 14-L-281))

Sps. Regie L. Malonzo and Mariscel L. Malonzo (“Complainants”) purchased a condominium

unit and a parking lot space at the G.A. Sky Suites from GARHC. They were paying their
monthly installments until they received a notice that RCBC has already acquired Sky Suites
prompting them to file a complaint with HLURB and pray that the mortgage executed over their
unit and the foreclosure sale be declared null and void. On July 31, 2014, HLURB Arbiter
ordered RCBC to execute a Contract to Sell in favor of Complainants and ordered GARHC to
pay damages. Both companies appealed and elevated the matter to the Office of the President. As
the new owner of Sky Suites, the Company, while not a party to the case, coordinated with the
Complainant for a possible settlement. This resulted to the execution of a new Contract to Sell in
light of the Complainant’s decision to continue with the acquisition. Complainant also executed a
Deed of Rescission rescinding the Contract to Sell with GARHC and a Deed of Assignment of
his receivables from GARHC to the Company. The parties executed a Compromise Agreement
and submitted it on June 29, 2016. On August 11, 2017, the Office of the President issued a
Judgment Based on the Joint Compromise dismissing the case.

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7. Valentina Cua and Teresita T. Sevilla vs. Globe Asiatique Realty Holdings Corporation and
Rizal Commercial Banking Corporation (Housing and Land Use Regulatory Board (HLURB
Case No. NCR REM-15231))

Valentina Cua and Teresita T. Sevilla (“Complainants”) signed a Reservation Agreement for the
purchase of a condominium unit and a parking lot in G.A. Sky Suites with GARHC. Similar to
the cases above, they were notified that RCBC acquired the project and were advised to continue
paying their monthly amortizations. In 2011, the construction of the condominium project was
halted. Complainants decided to terminate their Reservation Agreement and sought refund. Their
request, however, was not accommodated. This led them to the filing of the instant complaint
before the HLURB for the reimbursement or refund of all their payments with damages. As the
new owner of Sky Suites, the Company, while not a party to the case, coordinated with the
Complainant for a possible settlement. This resulted to the execution of a new Contract to Sell in
light of the Complainant’s decision to continue with the acquisition. Complainant also executed a
Deed of Rescission rescinding the Contract to Sell with GARHC and a Deed of Assignment of
his receivables from GARHC to the Company. On April 22, 2016, on motion of the Company
with the conformity of the Complainants, the case was dismissed with finality.

8. Carlito Co vs. Benisons Shopping Center, Inc. and DoubleDragon Properties Corp. (Court of
Appeals, Sixth Division (C.A. G.R. CV No. 107770))

On August 11, 2015, Carlito Co (“Plaintiff’) filed a case for Specific Performance with Damages
against Benisons Shopping Center, Inc. and the Company claiming that he has leasehold rights in
ten (10) mall stalls by virtue of a Deed of Purchase of Right executed with the former owner
(Macrogen Realty Corporation), and that he was unjustly ousted from the stalls. Claiming that
there was a breach of contract, Plaintiff also prayed for payment of damages. The subject mall is
the Dragon8 Mall that was acquired by Benisons Shopping Center, Inc. and later on by the
Company. Benisons Shopping Center, in its Answer, argued (i) that the Court has not acquired
jurisdiction over the person of the defendants as there was no service of summons; and (ii) that
the complaint was prematurely filed considering that the conditions precedent were not complied
with. It was pointed out that the conditions for default have not yet been established. There was
actual delivery of the stalls but Plaintiff failed to occupy the same. On September 11, 2015, the
Company filed a Motion to Dismiss on the ground of failure to state a cause of action, arguing
that Plaintiff failed to allege any obligation on the part of the Company to respect his leasehold
agreements with the previous owner. On May 1, 2016, the Company received the Order
dismissing the case. Plaintiff appealed the case to the Court of Appeals, which was denied on
October 25, 2017.

9. Cesar Tirol, Vicente G. Tirol, and Conception Tirol-Viray vs. CityMall Commercial Centers,
Inc. (Regional Trial Court of Buruanga, Aklan – Branch 6 (Civil Case No. 10558))

On April 30, 2015, Cesar Tirol, Vicente G. Tirol, and Conception Tirol-Viray (collectively
referred to as the “Plaintiffs”) filed a complaint for Forcible Entry with Damages against
CityMall Commercial Centers Inc. (“CM”) in relation to a parcel of land in Boracay, which is
currently being leased by CM. Plaintiffs, as second generation heirs of the late spouses Ciriaco
Tirol and Trinidad Hontiveros, claimed to be co-owners of the subject land who did not give

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their consent to the lease. On July 24, 2015, CM filed its Answer praying for the dismissal based
on the following: (i) there is no allegation that Plaintiffs have prior possession of the land; (ii)
CM did not employ strategy or stealth in entering the land; and (iii) even assuming that Plaintiffs
are co-owners of the subject property, the complaint must be dismissed for failure to implead the
co-owners. On February 4, 2016, Leonard Tirol and Antonio Cyrian Gonzales (the “Oppositors”)
filed their Motion for Leave for the admission of their Opposition where they confirmed that
Plaintiffs were never in possession of the property and that they (the Oppositors) have the right
to enter into a Lease Agreement with CM. On December 8, 2016, the case was dismissed the
case for lack of jurisdiction and lack of cause of action. Plaintiffs appealed the decision in
February 2017, and the parties were ordered by the Court to file their respective memoranda.
Both parties submitted their respective appeal memoranda, as well as a reply from Plaintiffs and
a Comment from CM. The case is now set for conciliation proceeding at the Regional Trial
Court level.

10. Plaridel C. Nava II vs. Jed Patrick E. Mabilog, Normal F. Tabud, Roberto E. Divinagracia,
Tony Tancaktiong, Edgar J. Sia and Ferdinand J. Sia (Office of the Ombudsman (OMB-V-C-16-
0353))

A complaint for violation of Section 3(e) of Republic Act 3019 was filed by Plaridel C. Nava II
(“Complainant”) against the respondents in relation to the joint venture agreement entered into
by the City Government of Iloilo with the Company and the Iloilo-Guimaras Ferry Terminal for
the development of the Iloilo Ferry Terminal. Complainant questions the development of a
community mall or “CityMall” within the ferry terminal premises. Private respondents, in their
Counter-Affidavit, questioned the merit of the Complaint for failure to identify any overt act
showing conspiracy to commit the crime alleged. Complainant failed to substantiate his
allegation that a crime was committed and that there was a conspiracy among the respondents.
Thus, the case should be dismissed. To date, the resolution of the case remains pending.

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 INDUSTRY

The information set out in this section has been extracted from a report commissioned by the
Company and prepared by KMC Savills, Inc. relating to the Philippine real estate industry (the
“Industry Report”). The information below has been taken from the Industry Report and has not
been independently verified by any of the Company, the International Bookrunners and Lead
Managers, and the Domestic Lead Underwriters and Bookrunners, or any of their respective
directors, officers, representatives, affiliates or advisors, and no representation is given as to its
accuracy. The information provided by KMC Savills, Inc. has been derived in part from publicly
available government sources, market data providers and other independent third party sources.
While the Industry Report provides that the views, opinions, forecasts and information contained
in it are based on information reasonably believed by KMC Savills, Inc. in good faith to be
reliable, KMC Savills, Inc. makes no representation as to the accuracy of the information
prepared by it set forth in this Prospectus and the information should not be relied upon in
making, or refraining from making, any investment decision.

Set forth below is the “Executive Summary” section of the Industry Report, which should be read
together with the full report elsewhere in this Prospectus. Reference to “we”, “our” or “us” in
this section means KMC Savills, Inc.

Macroeconomic

The Philippine economy has shown remarkable growth in the past few years, being one of the
fastest- growing economies in Southeast Asia. The current macroeconomic indicators are all
positive, reflected by robust underlying fundamentals: advantageous demographics, healthy
public finances, strong private consumption, a growing outsourcing industry, and a steady
inflow of Overseas Filipino Workers (“OFW”) remittances.

Despite the high private consumption and increasing business process outsourcing (“BPO”)
service exports driving growth, there are some structural challenges in the country’s
investment-light type of growth. Overall, this resulted in a weak level of infrastructure. Public
spending only accounted for 10.3% of GDP over the last five years, suggesting a conservative
fiscal policy. Historically speaking, capital formation has been only around 21.0% of GDP.
Capital formation and public spending — two factors which the country severely lacks at the
moment — are necessary for future growth as they would result to a more inclusive and
sustainable growth trajectory.

Another major challenge lies in the Philippines’ monetary policy. If the fiscal stimulus starts to
increase amid the booming economy while the country retains a rather loose monetary policy;
it creates significant pressure that might result to overheating. The current administration’s
push for full government funding on infrastructure should put a strain on the country’s
relatively stable inflation rate. Headline inflation has begun to stabilize above 3.0% in 2017
after its all-time lows in 2016. Keeping an accommodative monetary stance risks depreciating
the Philippine peso further. This should result to higher import costs and should likely spill
over to inflation. As such, some tightening from the Bangko Sentral ng Pilipinas (“BSP”) is
expected once inflation significantly exceeds its target range.

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However, the Philippine government remains rather bullish that the country can sustain a
growth of 7.0% to 8.0% for the next two to three years, whereas major institutions are more
conservative. According to the World Bank, the Philippines has achieved macroeconomic
stability along with high GDP growth rates and has established a clear growth trajectory that is
more inclusive. Therefore, the World Bank maintains its forecast on the Philippine economy’s
growth for 2017 and 2018 at 6.4% and 6.6%, respectively. Meanwhile, the International
Monetary Fund (“IMF”) has remained optimistic with its growth forecast of 6.8% for 2017.
Despite the slow global economic growth and the expected normalization of interest rates in the
US, the IMF believes that the Philippines will remain as one of the fastest growing economies
in the region.

Community Malls

The retail market environment in the Philippines is primarily driven by a growing population,
and high GDP growth resulting to rising incomes. Real household income from 2012 to 2015
increased by a CAGR of 1.8%, 0.6% and 2.2% in the National Capital Region (“NCR”), Luzon,
Visayas and Mindanao, respectively. The country’s population has also shown positive
expansion with a 5-year CAGR of 1.8% in 2015. In addition, the gradual shift of the population
from rural to urban areas has also bolstered growth of the sector. In the Visayas and Mindanao,
the population within urban areas correspondingly accounts for 36% and 44% in 2015 from 32%
and 39% in 2010.

Listed retail developers have been taking advantage of the agglomeration effect in the highly
urbanized areas in the Philippines. The top developers in the country led by SM Prime
Holdings, Ayala Land and Robinsons Land have established their regional and super regional
malls in the highly urbanized cities outside of the capital. Retail developments outside Metro
Manila and first-class cities in the provinces are going to the direction of a more formal and
modern retailing. This movement creates an opportunity for the listed developers to reach out to
local markets and venture in community malls.

The community mall stock in Luzon constitutes to 49.0% of the Philippines overall supply with
an aggregate gross leasable area (“GLA”) of around 535,000 sq. m. Among developers,
Waltermart corners the largest market share with a total of 21 malls reaching over 263,000 sq.
m. of GLA in 2016. Likewise, community malls of listed developers are mostly present in
Luzon keeping their focus on developing regional and super regional malls in other parts of the
country.

The Visayas and Mindanao regions host a number of community malls primarily situated in
second- class (e.g. Digos in Davao del Sur) and third-class (e.g. Passi City in Iloilo) cities, and
first-class municipalities (e.g. Consolacion in Cebu). The community mall segment in these
regions are mainly dominated by established local retail developers. The Gaisano Grand Group
of Companies first established its community malls in Cebu and has now reached a total of 29
community malls throughout Visayas and Mindanao with an estimated collective GLA of over
263,000 sq. m. Another pertinent player in the local market is Gaisano Capital gaining a fair
market share of almost 170,000 sq. m. of gross leasable area.

Altogether, the development in the community mall segment has continuously shown
considerable growth potential. With most top listed developers delegating majority of the

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market share to younger retail developers, there is an opportunity for further expansion towards
this segment.

Local retail players Gaisano Grand and Gaisano Capital have yet to disclose any plans of
adding new community malls. At present, Waltermart has stated its intention of acquiring more
lots for future developments to attain its target of opening at least four malls a year. By far,
DoubleDragon is expected to be the leading player in the community mall classification
targeting a total of 100 CityMalls by 2020. Its overall total then will be around 700,000 sq. m.
of GLA.

Office

The primary driver of office space demand in the Philippines is the Outsourcing and Offshoring
(“O&O”) market. As per IT and Business Process Association of the Philippines (“IBPAP”),
the Philippines is currently the top choice for voice-based services since it has a significant
advantage in terms of well-educated workforce, communication proficiency, and competitive
wage levels. Manila and Cebu have been ranked highly in Tholons’ research of top outsourcing
destinations wherein Manila has consistently been present in the top 10 since 2012.

In recent quarters, political uncertainty and onshoring have raised concerns in the O&O sector
which may likely impede its growth. Moreover, the prevailing technological trends (e.g.,
Robotic Process Automation and Artificial Intelligence) are expected to introduce ambiguity in
the sector’s growth in the coming years. This may augment the demand coming from new
technology-enabled services, but may dampen the growth of services that may become
redundant due to automation or streamlining.

On the other hand, another industry expected to drive office demand are the offshore gaming
companies. Offshore gaming is gambling conducted via internet to be offered exclusively to
offshore authorized players. Offshore gaming companies are either Philippine Offshore Gaming
Operators (“POGO”), entities who provide and participate in offshore gaming services, or
service providers who deliver components of offshore online gaming operations. The
Philippines is currently eyed as an attractive destination for offshore gaming because of
competitive costs and availability of prime-grade buildings.

The strong demand of office space from these sectors have led to a continuous rise in
construction of Grade A office buildings in Metro Manila. Around 426,400 sq. m. of new office
space were completed in the first half of 2017. Due to the availability of land for development,
bulk of building completions in the last decade came from Bonifacio Global City (“BGC”),
accounting for more than half of the new supply with 248,400 sq. m. The business district is
currently sought after as an attractive location for consolidation of operations and is considered
the next prime location.

However, declining rental growth is observed in certain submarkets in Metro Manila, indicating
significant supply pressure. However, keeping rents affordable during this massive inflow of
completions should sustain the take-up velocity in Metro Manila. A critical factor on the first
half’s impressive performance is due to landlords’ willingness to mitigate rents in order to stay
competitive. As such, we should see sustained pressure on rentals until next year as we still
expect around 892,100 sq. m. of new office space in the next 12 months.

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The Metro Manila market is expected to remain healthy especially with the diversified occupier
demand from the expanding O&O and POGO markets. In addition, occupier demand is
expected to briskly absorb the building completions in the coming quarters. Vacancies are still
expected to remain in single digits, but the influx of supply is expected to put downward
pressure on the rents. Landlords who are to remain competitive in the coming quarters should
be able to facilitate the quick absorption of new stock and keep vacancies at a reasonable level.
Hotel

As per the Philippine Statistics Authority (“PSA”), it is estimated that tourism accounts for
8.6% of GDP in 2016. Figures from the Department of Tourism (“DOT”) indicate that domestic
tourists dominate the tourism industry in the Philippines. As much as 79.5% of tourists visiting
the country’s various regions in 2016 are Filipinos while only 19.8% are foreigners. However,
foreign visitor arrivals for 2016 reached a total of 5.8 million, posting a 9.7% increase from the
previous year. The country’s largest source markets remain to be key Asian countries; Korea
(25.1%), Japan (9.1%), and China (11.5%), as well as USA with a share of 14.8% of the total
arrivals.

The Philippines still pales in comparison to its neighbors’ visitor arrivals. The infrastructure
chain— airport, access road, accommodation, and world-class attractions and activities—is the
main hindrance to the growth of tourism. Given the high potential of tourism, the sector has
become one of the priority development areas of the government, with around US$23 billion
budget over the six-year term of President Duterte for tourism infrastructure, as per the National
Tourism Development Plan of the DOT.

On the other hand, Philippines’ warmer ties with China and Korea provides a gateway for
tourism’s growth. Chinese tourist arrivals surged in the first half of the year as it jumped 33.4%
to 455,000 visitors from 341,000 in the same period last year. Beijing’s revocation of its travel
advisory against the Philippines may have led to the surge of tourist visa applications by 250%,
and is expected to increase further with the Bureau of Immigration’s grant of Visa Upon
Arrivals (“VUA”) to Chinese nationals. At the current pace of Chinese tourists, the DOT
estimates it will hit one million Chinese arrivals by 2017. Along with this, the continuous
support from South Korea’s tourism executives is expected to aid the realization of seven-
million arrivals target for 2017.

The hospitality market is seen to expand aggressively with around 6,200 upscale rooms
expected to come in Metro Manila from 2017 to 2020, and around 11,400 rooms from major
players of budget hotels in the Philippines. However, this supply is expected to cater to the
expected 10 million foreign tourists coming in by 2020. Moreover, estimates done by DOT
suggests domestic tourists are expected to grow to around 65 million travelers by 2020.

Lastly, we do not see a significant threat from other forms of hospitality establishment, such as
Airbnb as these platforms serve a specific niche in the market. It is likely the more budget
conscious travelers are, the more likely they would utilize newer and affordable options. As
such, Economy hotels are highly at risk and to a lesser extent, Standard hotels. As such, we do
not see any significant competition in the First Class and Deluxe segments.

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Industrial

The warehousing market in the Philippines is comparatively fragmented from other countries as
there is no clear player dominating a significant share. This may be due to most manufacturers
taking more control over its distribution network which may own their warehousing facilities.
Third party logistics (“3PL”) firms involvement have been limited towards delivering goods
directly from factory to distribution center to customer. In some instances, a 3PL manages the
distribution hub of the manufacturer which reduces the need for their own storage facilities (i.e.
Monde Nissin’s large distribution facilities).

However, manufacturers have only limited their involvement in the warehousing segment in the
distribution network. The Consultant has yet to observe large manufacturing companies fully
engaged in the delivery of their goods. This is because it is a non-core function which entails
high operating costs. In the medium term, it is sufficient for large manufacturers to further
obtain assistance from 3PLs to manage their distribution facilities.

Currently, internet sales have yet to make a dent on the total retail sales in the Philippines.
Although growth in this segment has been very quick, we estimate growth to be limited in the
typical hubs (i.e. Metro Manila or Cebu) where logistics networks are supported by: above-
average public infrastructure; little monopoly power from logistics firms; and sufficient
warehouse supply. Given how online platforms utilize warehouse facilities, we should expect
demand to concentrate in these hubs or in nearby regions.

Lastly, industrial property demand is likely to increase with the expansion of the modern
retailing format in the Philippines. These retailers may demand more prompt deliveries with a
higher emphasis on quality. The current distribution system in most parts of the provinces may
not be up to par to their standards. As such, we should expect a more modern logistics network
to take hold in these areas. We believe that with rising urbanization in the provinces coupled
with increasing household incomes, this transformation in the market is highly possible. Plans
of expanding smaller-format community malls in the provinces have already begun.

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 REGULATORY AND ENVIRONMENTAL MATTERS

Presidential Decree No. 957, otherwise known as The Subdivision and Condominium Buyer’s
Protective Decree (“P.D. 957”), and Batas Pambansa Blg. 220 (“B.P. 220”), as amended, are the
principal statutes which regulate the development and sale of real property as part of a
condominium project or subdivision.

P.D. 957 and B.P. 220 cover subdivision projects and all areas included therein for residential,
commercial, industrial and recreational purposes, and condominium projects for residential or
commercial purposes. The HLURB is the administrative agency of the Government which,
together with local government units (“LGUs”), enforces these decrees and has jurisdiction to
regulate the real estate trade and business.

All subdivision and condominium plans for residential, commercial, industrial and other
development projects are subject to approval by the pertinent LGU of the area in which the
project is situated. The development of subdivision and condominium projects can commence
only after the LGU has issued the development permit.

The issuance of a development permit is dependent on, among others (i) compliance with
required project standards and technical requirements which may differ depending on the nature
of the project, and (ii) issuance of the barangay clearance, the HLURB locational clearance,
DENR permits, and, as applicable, DAR conversion or exemption orders as discussed below. A
bond equivalent to 10% of the total project cost is required to be posted by the project developer
to ensure commencement of the project within one year from the issuance of the development
permit.

Further, all subdivision plans and condominium project plans are required to be filed with and
approved by the HLURB. Approval of such plans is conditional on, among other things, the
developer’s financial, technical and administrative capabilities. Alterations of approved plans
which affect significant areas of the project, such as infrastructure and public facilities, also
require the prior approval of the HLURB and the written conformity or consent of the duly
organized homeowners association, or in the absence of the latter, by the majority of the lot
buyers in the subdivision.

Owners of, or dealers in, real estate projects are required to obtain licenses to sell before making
sales or other dispositions of lots or real estate projects to the public. Dealers, brokers and
salesmen are also required to register with the HLURB pursuant to Republic Act No. 9646 or the
Real Estate Service Act of the Philippines.

Project permits and licenses to sell may be suspended, cancelled or revoked by the HLURB by
itself or upon complaint from an interested party for reasons such as insolvency or violation of
any of the provisions of P.D. 957. A license or permit to sell may only be suspended, cancelled
or revoked after a notice to the developer has been served and all parties have been given an
opportunity to be heard in compliance with the HLURB’s rules of procedure and other applicable
laws.

Subdivision or condominium units may be sold or offered for sale only after a license to sell has
been issued by the HLURB. The license to sell may be issued only against a performance bond

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posted to guarantee the completion of the construction and maintenance of the roads, gutters,
drainage, sewerage, water system, lighting systems, and full development of the subdivision or
condominium project and compliance by the owner or dealer with the applicable laws and
regulations.

Subdivision Projects

There are essentially two different types of residential subdivision developments, which are
distinguished by different development standards issued by the HLURB. The first type of
subdivision, aimed at Economic and Socialized Housing, must comply with B.P. 220, which
allows for a higher density of building and relaxes some construction standards. Other
subdivisions must comply with P.D. 957, which sets out standards for lower density
developments. Both types of development must comply with standards regarding the suitability
of the site, road access, necessary community facilities, open spaces, water supply, the sewage
disposal system, electrical supply, lot sizes, the length of the housing blocks and house
construction.

Under current regulations, a developer of a residential subdivision with an area of one hectare or
more and covered by P.D. 957 is required to reserve at least 30% of the gross land area of such
subdivision, which shall be non-saleable, for open space for common uses, which include roads
and recreational facilities. A developer of a subdivision is required to reserve at least 3.5% of
the gross project area for parks and playgrounds.

Republic Act No. 7279, otherwise known as the Urban Development and Housing Act, as
amended, further requires developers of proposed subdivision projects to develop an area for
socialized housing equivalent to at least 20% of the total subdivision area or total subdivision
project cost, at the option of the developer, within the same city or municipality, whenever
feasible, and in accordance with the standards set by the HLURB and other existing laws. To
comply with this requirement, the developers may choose to develop for socialized housing an
area equal to 20% of the total area of the main subdivision project or allocate and invest an
amount equal to 20% of the main subdivision total project cost, which shall include the cost of
the land and its development as well as the cost of housing structures therein, or they may engage
in development of a new settlement through purchase of socialized housing bonds, slum
upgrading, participation in a community mortgage program, the undertaking of joint-venture
projects and the building of a large socialized housing project to build a credit balance.

Republic Act No. 6552, otherwise known as the Realty Installment Buyer Act (the “Maceda
Law”), applies to all transactions or contracts involving the sale or financing of real estate
through installment payments, including residential condominium units. Under the Maceda Law,
buyers who have paid at least two years of installment are granted a grace period of one month
for every year of paid installment to cure any payment default. If the contract is cancelled, the
buyer is entitled to receive a refund of at least 50% of the total payments made by the buyer, with
an additional 5% per annum in cases where at least five years of installment have been paid (but
with the total not to exceed 90% of the total payments). Buyers who have paid less than two
years of installment and who default on installment payments are given a 60-day grace period to
pay all unpaid installment before the sale can be cancelled, but without right of refund.

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Condominium Projects

Republic Act No. 4726, otherwise known as The Condominium Act (“R.A. No. 4726”), as
amended, likewise regulates the development and sale of condominium projects. R.A No. 4726
requires the annotation of the master deed on the title of the land on which the condominium
project shall be located. The master deed contains, among other things, the description of the
land, building/s, common areas and facilities of the condominium project. A condominium
project may be managed by a condominium corporation, an association, a board of governors or
a management agent, depending on what is provided in the declaration of restrictions of the
condominium project. However, whenever the common areas are held by a condominium
corporation, such corporation shall constitute the management body of the project.

Local Government Code

The Local Government Code establishes the system and powers of provincial, city, municipal,
and barangay governments in the country. The Local Government Code general welfare clause
states that every local government unit (“LGU”) shall exercise the powers expressly granted,
those necessarily implied, as well as powers necessary, appropriate, or incidental for its efficient
and effective governance, and those which are essential to the promotion of the general welfare.

LGUs exercise police power through their respective legislative bodies. Specifically, the LGU,
though its legislative body, has the authority to enact such ordinances as it may deem necessary
and proper for sanitation and safety, the furtherance of the prosperity, and the promotion of the
morality, peace, good order, comfort, convenience, and general welfare of the locality and its
inhabitants. Ordinances can reclassify land, order the closure of business establishments, and
require permits and licenses from businesses operating within the territorial jurisdiction of the
LGU.

ZONING AND LAND USE

Land use may be also limited by zoning ordinances enacted by LGUs. Once enacted, land use
may be restricted in accordance with a comprehensive land use plan approved by the relevant
LGU. Lands may be classified under zoning ordinances as commercial, industrial, residential or
agricultural. While a procedure for change of allowed land use is available, this process may be
lengthy and cumbersome.

Under the agrarian reform law currently in effect in the Philippines and the regulations issued
thereunder by the DAR, land classified for agricultural purposes as of or after June 15, 1988,
cannot be converted to non-agricultural use without the prior approval of DAR.

ENVIRONMENTAL LAWS

Development projects that are classified by law as environmentally critical or projects within
statutorily defined environmentally critical areas are required to obtain ECC prior to
commencement. The DENR, through its regional offices or through the Environmental
Management Bureau (“EMB”), determines whether a project is environmentally critical or
located in an environmentally critical area. As a requisite for the issuance of an ECC, an
environmentally critical project is required to submit an Environmental Impact

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Statement (“EIS”) to the EMB while a project in an environmentally critical area are generally
required to submit an Initial Environmental Examination (“IEE”) to the proper DENR regional
office. In case of an environmentally critical project within an environmentally critical area, an
EIS is required. The construction of major roads and bridges are considered environmentally
critical projects for which EISs and ECCs are mandated.

The EIS refers to both the document and the study of a project’s environmental impact, including
a discussion of the scoping agreement identifying critical issues and concerns as validated by the
EMB, environmental risk assessment if determined necessary by EMB during the scoping,
environmental management program, direct and indirect consequences to human welfare and
ecological as well as environmental integrity. The IEE refers to the document and the study
describing the environmental impact, including mitigation and enhancement measures, for
projects in environmentally critical areas.

While the EIS or an IEE may vary from project to project, as a minimum, it contains all relevant
information regarding the projects’ environmental effects. The entire process of organization,
administration and assessment of the effects of any project on the quality of the physical,
biological and socio-economic environment as well as the design of appropriate preventive,
mitigating and enhancement measures is known as the EIS System. The EIS System
successfully culminates in the issuance of an ECC. The ECC is a Government certification, that
the proposed project or undertaking will not cause a significant negative environmental impact;
that the proponent has complied with all the requirements of the EIS System and that the
proponent is committed to implement its approved Environmental Management Plan in the EIS
or, if an IEE was required, that it shall comply with the mitigation measures provided therein
before or during the operations of the project and in some cases, during the project’s
abandonment phase. The ECC also provides for other terms and conditions, any violation of
which would result in a fine or the cancellation of the ECC.

Project proponents that prepare an EIS are required to establish an Environmental Guarantee
Fund (“EGF”) when the ECC is issued to projects determined by the DENR to pose a significant
public risk to life, health, property and the environment. The EGF is intended to answer for
damages caused by such a project as well as any rehabilitation and restoration measures. Project
proponents that prepare an EIS are mandated to include a commitment to establish an
Environmental Monitoring Fund (“EMF”) when an ECC is eventually issued. The EMF shall be
used to support the activities of a multi-partite monitoring team which will be organized to
monitor compliance with the ECC and applicable laws, rules and regulations. Aside from EIS
and IEE, engineering, geological, and geo-hazard assessments are also required for ECC
applications covering subdivisions, housing, and other development and infrastructure projects.

All development projects, installations and activities that discharge liquid waste into and pose a
threat to the environment of the Laguna de Bay Region are also required to obtain a discharge
permit from the Laguna Lake Development Authority.

The Company incurs expenses for the purposes of complying with environmental laws that
consist primarily of payments for Government regulatory fees. Such fees are standard in the
industry and are minimal.

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PROPERTY REGISTRATION

The Philippines has adopted a system of land registration which conclusively confirms land
ownership which is binding on all persons, including the Government. Once registered, title to
registered land can no longer be challenged except with respect to claims noted on the certificate
of title. Title to registered lands cannot be lost through adverse possession or prescription.
Presidential Decree No. 1529, as amended, codified the laws relative to land registration and is
based on the generally accepted principles underlying the Torrens System.

After proper surveying, application, publication and service of notice and hearing, unregistered
land may be brought under the system by virtue of judicial or administrative proceedings. In a
judicial proceeding, the Regional Trial Court within whose jurisdiction the land is situated
confirms title to the land. Persons opposing the registration may appeal the judgment within
15 days to the Court of Appeals or the Supreme Court. After the lapse of the period of appeal,
the Register of Deeds may issue an Original Certificate of Title. The decree of registration may
be annulled on the ground of actual fraud within one year from the date of entry of the decree of
registration. Similarly, in an administrative proceeding, the land is granted to the applicant by
the DENR by issuance of a patent and the patent becomes the basis for issuance of the Original
Certificate of Title by the Register of Deeds. All land patents such as homestead, sales and free
patents, must be registered with the appropriate registry of deeds since the conveyance of the title
to the land covered thereby takes effect only upon such registration.

Any subsequent transfer of encumbrance of the land must be registered in the system in order to
bind third persons. Subsequent registration and a new Transfer Certificate of Title in the name
of the transferee will be granted upon presentation of certain documents and payment of fees and
taxes.

All documents evidencing conveyances of subdivision and condominium units should also be
registered with the Register of Deeds. Title to the subdivision or condominium unit must be
delivered to the purchaser upon full payment of the purchase price. Any mortgage existing
thereon must be released within six months from the delivery of title. To evidence ownership of
condominium units, a Condominium Certificate of Title is issued by the Register of Deeds.

NATIONALITY RESTRICTIONS

The Philippine Constitution limits ownership of land in the Philippines to Filipino citizens or to
corporations the outstanding capital stock of which is at least 60% owned by Philippine
Nationals. While the Philippine Constitution prescribes nationality restrictions on land
ownership, there is generally no prohibition against foreigners owning building and other
permanent structures. However, with respect to condominium developments, the foreign
ownership of units in such developments is limited to 40%.

Republic Act No. 7042, as amended, otherwise known as the Foreign Investments Act of 1991,
and the Tenth Regular Foreign Investment Negative List, provide that certain activities are
nationalized or partly-nationalized, such that the operation and/or ownership thereof are wholly
or partially reserved for Filipinos. Under these regulations, and in accordance with the

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Philippine Constitution, ownership of private lands is partly-nationalized and thus, landholding
companies may only have a maximum of 40% foreign equity.

On May 20, 2013, the Philippine SEC issued Memorandum Circular No. 8, Series of 2013 which
provided guidelines (the “Guidelines”) on compliance with the Filipino-Foreign ownership
requirements under the Philippine Constitution and other existing laws by corporations engaged
in nationalized or partly nationalized activities (the “Nationalized Corporations”). The
Guidelines provide that for purposes of determining compliance with the foreign equity
restrictions in Nationalized Corporations, the required percentage of Filipino ownership shall be
applied to both (a) the total number of outstanding shares of stock entitled to vote in the election
of directors, and (b) the total number of outstanding shares of stock, whether or not entitled to
vote in the election of directors.

PROPERTY TAXATION

Real property taxes are payable annually based on the property’s assessed value. The assessed
value of property and improvements vary depending on the location, use and the nature of the
property. Land is ordinarily assessed at 20% to 50% of its fair market value; buildings may be
assessed at up to 80% of their fair market value; and machinery may be assessed at 40% to 80%
of its fair market value. Real property taxes may not exceed 2% of the assessed value in
municipalities and cities within Metro Manila or in other chartered cities and 1% in all other
areas. An additional special education fund tax of 1% of the assessed value of the property is
also levied annually.

OTHERS
Securities and Exchange Commission

Under the SRC, the Philippine SEC has jurisdiction and supervision over all corporations,
partnerships or associations that are grantees of primary franchises, license to do business or
other secondary licenses. As the government agency regulating the Philippine securities market,
the Philippine SEC issues regulations on the registration and regulation of securities exchanges,
the securities market, securities trading, the licensing of securities brokers and dealers and
reportorial requirements for publicly listed companies and the proper application of SRC
provisions, as well as the Corporation Code, and certain other statutes.

Department of Trade and Industry

The DTI is the primary government agency with the dual mission of facilitating the creation of a
business environment wherein participants could compete, flourish, and succeed and, at the same
time, ensuring consumer welfare. It is the enforcement of laws to protect and educate consumers
that becomes the driving factor in the relationship of DTI and real estate developers, such as the
Company.

Department of Labor and Employment

Department of Labor and Employment stands as the national government agency mandated to
formulate policies, implement programs and services, and serve as the policy-coordinating arm

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of the Executive Branch of the Government in the field of labor and employment. The
Department has exclusive authority in the administration and enforcement of labor and
employment laws and such other laws as specifically assigned to it or to the Secretary of Labor
and Employment.

Social Security System and PhilHealth

An employer, or any person who uses the services of another person in business, trade, industry
or any undertaking is required under the Social Securities Act of 1997 (Republic Act No. 8282)
to ensure coverage of employees following procedures set out by the law and the Social Security
System of the Philippines (“SSS”). The employer must deduct from its employees their monthly
contributions based on a given schedule, pay its share of contribution and remit these to the SSS
within a period set by law and/ or SSS regulations.

PhilHealth is a government corporation attached to the Department of Health of the Philippines

(“DOH”) that ensures sustainable, affordable and progressive social health insurance pursuant to
the provisions of RA 7875 or the National Health Insurance Act of 1995. Employers are required
to ensure enrollment of their employees in a National Health Program being administered by the
PhilHealth.

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 BOARD OF DIRECTORS AND SENIOR MANAGEMENT

The overall management and supervision of the Company is undertaken by the Company’s
Board of Directors. The Company’s executive officers and management team cooperate with its
Board by preparing appropriate information and documents concerning the Company’s business
operations, financial condition and results of operations for its review. Pursuant to the
Company’s current Articles of Incorporation as amended on April 14, 2016, the Board consists
of eight members. As of the date of this Prospectus, two members of the Board are independent
directors. All of the directors were re-elected at the Company’s annual shareholders meeting on
August 30, 2017 and will hold office for a period of one (1) year from their election and until
their successors have been duly elected and qualified.

The table below sets forth each member of the Company’s Board as of the date of this
Prospectus.
Name Age Nationality Position
Edgar J. Sia II. ....................... 41 Filipino Chairman of the Board and CEO
Tony Tan Caktiong ............... 65 Filipino Co-Chairman of the Board
Ferdinand J. Sia..................... 39 Filipino Director and President
Rizza Marie Joy J. Sia........... 28 Filipino Director, Treasurer and CFO
William Tan Untiong ............ 64 Filipino Director and Corporate Secretary
Director and Assistant Corporate
Joseph Tanbuntiong .............. 54 Filipino Secretary
Gary P. Cheng ....................... 53 Filipino Independent Director
Vicente S. Perez, Jr. .............. 59 Filipino Independent Director

Messrs. Artemio V. Panganiban and Ernesto Tanmantiong serve as advisors to the Board.

The business experience of each of the directors and advisors in the last five years or more is set
forth below.

Edgar J. Sia II is the Chairman and Chief Executive Officer of Injap Investments Inc. Mr Sia is
also the Founder of Mang Inasal Philippines, Inc. and various other companies. He obtained his
Doctorate Degree from the University of San Agustin Honoris Causa Major in Management in
2012.

Tony Tan Caktiong is the Chairman of Honeystar Holdings Corporation and the Founder and
current Chairman of Jollibee Foods Corp. since 1978. Mr. Tan Caktiong is also a Director of
First Gen Corporation since 2005 and a Member of the Board of Trustees of Jollibee Group
Foundation, Temasek Foundation, and St. Luke’s Medical Center. He graduated from the
University of Santo Tomas in 1975 with a degree in Chemical Engineering.

Ferdinand J. Sia is the President and Chief Operating Office of Injap Investments Inc. He also
served as a Director of Mang Inasal Philippines, Inc. from 2006-2016. He graduated from the
University of the Philippines Visayas with a degree in Bachelor of Arts in Political Science and
took up law in Arellano University College of Law.

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Rizza Marie Joy J. Sia is the Treasurer and Chief Finance Officer of Injap Investments Inc. She
serves as the Treasurer of People’s Hotel Corp. and as a Director of Hotel of Asia since 2008.
She graduated from the University of the Philippines Visayas with a degree in Bachelor of
Science in Accountancy and is a Certified Public Accountant.

William Tan Untiong has been a Director of Jollibee Foods Corp. since 1993 and likewise
serves as a director and treasurer of Honeystar Holdings Corporation. He is the Vice President
for Real Estate of Jollibee Foods Corp since 1989. He was appointed as Chief Real Estate Office
in 2015.

Joseph Tanbuntiong is the President of Jollibee Philippines starting July 1, 2013. He is the
former President of Red Ribbon Philippines, having served there since 2008. He graduated from
Ateneo de Manila University with a degree in Management Engineering.

Gary P. Cheng is an investment banking professional with over 20 years of corporate finance
and capital markets experience. He is currently the Managing Director and co-founder of
Fortman Cline Capital Markets Limited since 2007. Dr. Cheng served as the former
President/CEO of Amalgamated Investment Bancorporation from 2003 and 2008 and former
Vice President of Investment Banking at J.P. Morgan from 1993 to 2001. Dr. Cheng obtained his
doctorate in Philosophy from the University of Leeds, England in 1991.

Vicente S. Perez, Jr. served as the Secretary of the Department of Energy from 2001 to 2005
and Managing Director of the Board of Investments in 2001. He is also the current Chairman of
WWF Philippines and a member of WWF - International. Mr. Perez has a Masters in Business
Administration - International Finance from the Wharton School University of Pennsylvania and
a Bachelor’s Degree in Business Economics from the University of the Philippines.

Chief Justice Artemio V. Panganiban is a retired Chief Justice of the Republic of the
Philippines. He sits as independent director of several listed companies including Meralco,
Petron Corporation, First Philippine Holdings Corp., Philippine Long Distance Telephone
Company (PLDT); Metro Pacific Investment Corp., and GMA Network, Inc. among others.

Ernesto Tanmantiong serves as President and Chief Executive Officer of Jollibee Foods Corp.
He is also a Director of Grandworth Resources Corporation, Red Ribbon Bakeshop Inc., Fresh
N’ Famous Foods, Inc. - Chowking, Honeystar Holdings Corp., and various other companies.

INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS OF DIRECTORS AND

EXECUTIVE OFFICERS

To the best of the Company’s knowledge and belief and after due inquiry, none of the
Company’s directors, nominees for election as director, or executive officers have in the five-
year period prior to the date of this Prospectus: (1) had any petition filed by or against any
business of which such person was a general partner or executive officer either at the time of the
bankruptcy or within a two-year period of that time; (2) have been convicted by final judgment
in a criminal proceeding, domestic or foreign, or have been subjected to a pending judicial
proceeding of a criminal nature, domestic or foreign, excluding traffic violations and other minor

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offenses; (3) have been the subject of any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, domestic or foreign, permanently
or temporarily enjoining, barring, suspending or otherwise limiting their involvement in any type
of business, securities, commodities or banking activities; or (4) have been found by a domestic
or foreign court of competent jurisdiction (in a civil action), the Philippine SEC or comparable
foreign body, or a domestic or foreign exchange or other organized trading market or self-
regulatory organization, to have violated a securities or commodities law or regulation, such
judgment having not been reversed, suspended, or vacated.

CORPORATE GOVERNANCE

The Company submitted its Manual on Corporate Governance (the “Manual”) to the Philippine
SEC on May 31, 2017 in compliance with Philippine SEC Memorandum Circular No. 6, series
of 2009. The Company and its respective directors, officers and employees have complied with
the best practices and principles on good corporate governance as embodied in its Corporate
Governance Manual. An evaluation system has been established by the Company to measure or
determine the level of compliance of the Board of Directors and top level management with its
Manual of Corporate Governance.

Independent Directors

The Manual requires the Company to have at least two independent directors in the Board of
Directors, at least one of whom serves on each of the Corporate Governance, Nomination
Committee, and the Audit Committee. An independent director is defined as a person who has
not been an officer or employee of the Company, its Subsidiaries or affiliates or related interests
during the past three years counted from date of his election, or any other individual having a
relationship with the institution, its parent, subsidiaries or related interest, or to any of the
Company’s director, officer or stockholder holding shares of stock sufficient to elect one seat in
the board of directors or any of its related companies within the fourth degree of consanguinity
or affinity, legitimate or common-law, which would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director.

COMMITTEES OF THE BOARD

The Board created and appointed Board members to each of the committees set forth below.
Each member of the respective committees named below holds office as of the date of this
Prospectus and will serve until his successor is elected and qualified.

Audit Committee

The Audit Committee is composed of at least three members of the Board who have accounting
and finance backgrounds, at least one of whom is an independent director and another with audit
experience. The chair of the Audit Committee should be an independent director.

The Audit Committee has the following functions:

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(a) Assist the Board in the performance of its oversight responsibility for the financial
reporting process, system of internal control, audit process and monitoring of compliance
with applicable laws, rules and regulations;

(b) Provide oversight over the management’s activities in managing credit, market, liquidity,
operational, legal and other risks of the Company. This function shall include receiving
from management of information on risk exposures and risk management activities;

(c) Perform oversight functions over the Company’s internal and external auditors. It should
ensure that the internal and external auditors act independently from each other, and that
both auditors are given unrestricted access to all records, properties and personnel to
enable them to perform their respective audit functions;

(d) Review the annual internal audit plan to ensure its conformity with the objectives of the
Company. The plan shall include the audit scope, resources and budget, necessary to
implement it;

(e) Prior to the commencement of the audit, discuss with the external auditor the nature,
scope and expenses of the audit, and ensure proper coordination if more than one audit
firm is involved in the activity to secure proper coverage and minimized duplication of
efforts;

(f) Organize an internal audit department, and consider the appointment of an independent
internal auditor and the terms and conditions of it engagement and removal;

(g) Monitor and evaluate the adequacy and effectiveness of the Company’s internal control
system, including financial reporting control and information technology security;

(h) Review the reports submitted by the internal and external auditors;

(i) Review the quarterly, half-year and annual financial statements before their submission to
the Board, with particular focus on the following matters:

(i) Any changes in accounting policies and practices;

(ii) Major judgmental areas;

(iii) Significant adjustments resulting from the audit;

(iv) Going concern assumptions;

(v) Compliance with accounting standards; and

(vi) Compliance with tax, legal and regulatory requirements.

(j) Coordinate, monitor and facilitate compliance with laws, rules and regulations;

(k) Evaluate and determine the non-audit work, if any, of the external auditor, and review
periodically the non-audit fees paid to the external auditor in relation to their significance

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 to the total annual income of the external auditor and to the Company’s overall
consultancy expenses. The Audit Committee shall disallow any non-audit work that will
conflict with his duties as an external auditor or may pose a threat to his independence.
The non-audit work, if allowed, should be disclosed in the Company’s annual report;

(l) Establish and identify the reporting line of the internal auditor to enable him to properly
fulfill his duties and responsibilities. He shall functionally report directly to the Audit
Committee. The Audit Committee shall ensure that, in the performance of the work of
the internal auditor, he shall be free from interference by outside parties.

As of the date of this Prospectus, the Audit and Risk Management Committee is chaired by Mr.
Gary P. Cheng, while Mr. Ferdinand J. Sia and Ms. Rizza Marie Joy J. Sia serve as its members.

Nomination Committee

The Nomination Committee is composed of at least three members of the Board, one of whom is
an independent director. The Nomination Committee reviews and evaluates the qualifications of
all persons nominated to the Board and other appointments that require Board approval.

As of the date of this Prospectus, the Nomination Committee is chaired by Chief Justice Artemio
V. Panganiban, while Ms. Rizza Marie Joy J. Sia and Mr. William Tan Untiong serve as its
members.

Compensation Committee

The Compensation Committee is composed of at least three members of the Board, one of whom
is an independent director. The Compensation Committee may establish a formal and
transparent procedure for developing a policy on remuneration of directors and officers to ensure
that their compensation is consistent with the Company’s culture, strategy and the business
strategy in which it operates.

As of the date of this Prospectus, the Compensation Committee is chaired by Mr. Vicente S.
Perez Jr., while Mr. Ferdinand J. Sia and Ms. Rizza Marie Joy J. Sia serve as members.

EVALUATION SYSTEM AND COMPLIANCE

As part of its system for monitoring and assessing compliance with the Manual and the
Philippine SEC Code of Corporate Governance, each committee is required to report regularly to
the Board of Directors and the Manual is subject to quarterly review. The Compliance Officer is
responsible for determining and measuring compliance with the Manual and the Philippine SEC
Code of Corporate Governance. Any violation of the Company’s Corporate Governance Manual
shall subject the responsible officer or employee to the following penalties:

• For a first violation, the offender shall be reprimanded.

• For a second violation, suspension from office shall be imposed on the offender. The
duration of suspension shall depend on the gravity of the violation. This penalty shall not
apply to the members of the Board of Directors.

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• For a third violation, the maximum penalty of removal from office shall be imposed on
the offender. The commission of a third violation by any member of the board or the
Company or its Subsidiaries and affiliates shall be sufficient cause for removal from
directorship. In case the offender is a member of the Board of Directors, the provisions
of Section 28 of the Philippine Corporation Code shall be observed.

EXECUTIVE COMPENSATION SUMMARY

Compensation

Injap Investments Inc., through an Executive Management Services Agreement, provides

executive, corporate, strategic, administrative and financial oversight services related to the real
estate business of the Company. Total fees paid under such agreement amounted to
₱3,000,000.00 for each of the years ended December 31, 2015, 2016 and 2017 which covers the
positions of the Chairman and Chief Executive Officer, the President and the Treasurer and
Chief Financial Officer of the Company.

For each of the years ended December 31, 2015, 2016 and 2017 the total salaries and allowances
and bonuses paid to all other officers as a group unnamed are as follows:

SUMMARY ANNUAL COMPENSATION TABLE

Name and Principal Position Period Salary Bonus

Chief Investment Officer and Department Heads: 2018 ₱40,583,122 -

(Accounting, Business Development, Corporate Services, Design, Engineering, (estimated)
Information Technology, Internal Audit, Leasing, Legal, Marketing, 2017 ₱33,250,581 ₱3,807,238
Treasury & Corporate Planning, Procurement)
2016 ₱30,390,058 -
2015 ₱28,470,665 -

On November 11, 2015, the Board of Directors approved the creation of the Senior Management
Stock Option Plan. The Plan covers the Senior Management of the Company as identified by the
Chairman and Chief Executive Officer. The plan allows all covered Senior Management to
acquire at market price at grant date such number of shares of stock not exceeding 2% of the
issued and outstanding capital stock of the Company, after a vesting period of three years.
Vesting is conditional on the employment of the participant in the Company. The option will vest
at the rate of 20% of the shares granted on the first year, 30% of the shares granted on the second
year, and 50% of the shares granted on the third year. The option is exercisable within seven
years from grant date.

The approval of the Stock Option Plan was ratified by the Company’s shareholders on January 5,
2016 and submitted to the Philippine SEC for approval on November 4, 2016. The proposed
issuance of 9,850,000 Common Shares pursuant to the Stock Option Plan was approved by the
Philippine SEC on September 25, 2017. As of the date of this Prospectus, none of the eligible
employees have exercised their respective options under the Stock Option Plan.

On December 8, 2016, the Company’s Board of Directors resolved to expand the coverage of the
plan to include rank and file regular employees of DoubleDragon Properties Corp.

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Compensation of Directors

Independent directors receive a standard per diem for attendance in Board meetings. For the
years ended December 31, 2017, 2016 and 2015, the Company paid a total of ₱810,000.00,
₱480,000.00, and ₱720,000.00, respectively. Except as stated above, the Directors did not
receive other allowances or per diems for the past and ensuing year. There are no other existing
arrangements/agreements under which directors are to be compensated during the last completed
fiscal year and the ensuing year.

The chart below sets forth the compensation received by the Directors of the Company for the
past three fiscal years:

Non-Executive Directors
Independent
Remuneration Item Executive Directors (other than independent
Directors
directors)
As directors, they do not receive compensation
for services rendered. They receive
(a) Fixed Remuneration None None
compensation as officers of the corporation if
they hold position as such.

(b) Variable Remuneration None None None

(c) Per diem Allowance None None ₱2,010,000.00

(d) Bonuses None None None

(e) Stock Options and/or

None None None
other financial instruments

(f) Others (Specify) None None None

Total _ _ ₱2,010,000.00

SIGNIFICANT EMPLOYEES

The Company believes that it is not dependent on any single employee. The Company considers
the collective efforts of all its employees as instrumental to its success.

FAMILY RELATIONSHIPS

As of the date of this prospectus, family relationships (by consanguinity or affinity within the
fourth civil degree) between Directors and members of the Company’s senior management are as
follows:

Edgar J. Sia II, Chairman of the Board and CEO, Ferdinand J. Sia, Director and President, and
Rizza Marie Joy J. Sia, Director, Treasurer and CFO are siblings. Tony Tan Caktiong, Co-
Chairman of the Board, William Tan Untiong, Director and Corporate Secretary, Joseph
Tanbuntiong, Director and Asst. Corporate Secretary and Ernesto Tanmantiong Advisor to the
Board are siblings.

Other than as disclosed above, there are no other family relationships between Directors and
members of the Company’s senior management known to the Company.

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EMPLOYMENT CONTRACTS

The Company and its Subsidiaries have executed pro-forma employment contracts with its staff
and officers. These contracts basically specify the scope of services expected from these
individuals and the compensation that they shall receive.

There are no arrangements for compensation to be received by these named executive officers
from the Company in the event of a change in control.

WARRANTS AND OPTIONS OUTSTANDING

As of the date of this Prospectus, there are executive officers of the Company who were granted
options to subscribe to Common Shares of the Company pursuant to the Stock Option Plan
approved by the Board of Directors in 2015 and ratified by the shareholders in 2016.

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 PRINCIPAL SHAREHOLDERS

Common Shares

The following table sets forth the 20 largest shareholders of the Company’s Common Shares as
of March 31, 2018.
Number of Shares % of
Shareholder Subscribed Ownership
Injap Investments Inc. ............................................................ 824,996,999 37.00%
Honeystar Holdings Corp. ...................................................... 824,996,999 37.00%
PCD Nominee Corporation (Foreign)..................................... 289,317,335 12.98%
PCD Nominee Corporation (Filipino) .................................... 285,380,614 12.80%
John Michael Alerta Javelosa ................................................. 1,000,000 0.04%
Consuelo A. Tiope ................................................................. 500,000 0.02%
Charles Anthony M. Dumancas.............................................. 400,000 0.02%
Michelle Marie C. Ang........................................................... 251,100 0.01%
Katherine T. Bocala................................................................ 200,000 0.01%
Michelle Marie C. Ang........................................................... 200,000 0.01%
Ricardo G. Tiutan ................................................................... 150,000 0.01%
Inocencio G. Huyong, Jr......................................................... 150,000 0.01%
Kenneth Sio Tan..................................................................... 125,000 0.01%
Perry Arthur B. Juridico ......................................................... 100,000 0.00%
Evelyn W. Tan ....................................................................... 100,000 0.00%
Maria Ephie Angela Gicaro Sa-Onoy ..................................... 100,000 0.00%
Albert S. Tan .......................................................................... 100,000 0.00%
Jermaine M. Dulaca................................................................ 100,000 0.00%
Jeremiah R. Presnedi .............................................................. 87,000 0.00%
Jedidah R. Presnedi ................................................................ 87,000 0.00%

The Company and the DD Majority Shareholders have agreed with the International
Bookrunners and Lead Managers that, except in connection with the Over-allotment Option, they
will not, without the prior written consent of the International Bookrunners and Lead Managers,
issue, offer, pledge, sell, contract to sell, pledge or otherwise dispose of (or publicly announce
any such issuance, offer, sale or disposal of) any Common Shares or securities convertible or
exchangeable into or exercisable for any Common Shares or warrants or other rights to purchase
Common Shares or any security or financial product whose value is determined directly or
indirectly by reference to the price of the underlying securities, including equity swaps, forward
sales and options for a period of 180 days after the listing of the Offer Shares.

Preferred Shares

The following table sets forth the 20 largest shareholders of the Company’s Preferred Shares as
of March 31, 2018.
Number of Shares % of
Shareholder Subscribed Ownership
PCD Nominee Corporation (Filipino) .................................... 97,238,030 97.24%
PCD Nominee Corporation (Foreign)..................................... 688,850 0.69%
Andre Jonathan L. Ng ............................................................ 550,000 0.55%
Knights of Columbus Fraternal Association of the Philippines
............................................................................................... 426,900 0.43%
Meralco Employees Savings and Loan Association Inc. ........ 250,000 0.25%
Knights of Columbus Fraternal Association of the Philippines
............................................................................................... 68,700 0.07%
Judy O. Tan ............................................................................ 55,500 0.06%
Josefina Gutierrez Castillo or Cynthia Gutierrez .................... 55,000 0.06%
Ben Tiuk Sy or Judy Yu Sy .................................................... 50,000 0.05%
John P. Barcelona ................................................................... 37,500 0.04%
Foundation for Resource Linkage and Development Inc. ....... 35,000 0.04%
Ernesto Lim Pardinas ............................................................. 32,700 0.03%

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Republic Glass Holding Corp. ................................................ 25,100 0.03%
Chiong Ping G. Ching and/or Maria Gracia J Tan. ................. 25,000 0.03%
Sota Philippines, Inc. .............................................................. 25,000 0.03%
William O. Dizon or Susan A. Dizon ..................................... 25,000 0.03%
Ching Bun Tient Tiu and/or Ching Chiong Ping Go or 0.03%
OnkingGiovanna Joy Tan ....................................................... 25,000
Aguinaldo A. Andrada or Mira Grace Q. Andrada ................. 21,600 0.02%
Chandru Tolaram Budhrani or Avinash Chandru Budhrani.... 21,000 0.02%
Reynaldo G. Alejandro ........................................................... 20,000 0.02%

The Company and the DD Majority Shareholders have agreed with the International
Bookrunners and Lead Managers that, except in connection with the Over-allotment Option, they
will not, without the prior written consent of the International Bookrunners and Lead Managers,
issue, offer, pledge, sell, contract to sell, pledge or otherwise dispose of (or publicly announce
any such issuance, offer, sale or disposal of) any Common Shares or securities convertible or
exchangeable into or exercisable for any Common Shares or warrants or other rights to purchase
Common Shares or any security or financial product whose value is determined directly or
indirectly by reference to the price of the underlying securities, including equity swaps, forward
sales and options for a period of 180 days after the listing of the Offer Shares.

SECURITY OWNERSHIP OF CERTAIN RECORD AND BENEFICIAL OWNERS AND

MANAGEMENT

Security Ownership of Certain Record and Beneficial Owners of more than 5% of the
Company’s voting securities as of March 31, 2018
Name of Beneficial Owner and
Relationship with No. of Common % of Total Outstanding
Name and Address of Record Owners Record Owner Citizenship Shares Held Shares
Honeystar Holdings Corp. The record owner is the Filipino 824,996,999 37.00
10F Jollibee Plaza 10 F. Ortigas Jr. Ave. Ortigas beneficial owner of the
Center, Pasig City shares indicated
Injap Investments Inc. The record owner is the Filipino 824,996,999 37.00
corner Fuentes and Delgado Streets, Iloilo City beneficial owner of the
shares indicated
PCD Nominee Corporation (Filipino) The record owner is the Filipino 285,380,614 12.80
Tower I, The Enterprise Center, beneficial owner of the
6766 Ayala Ave. corner Paseo de Roxas, shares indicated
Makati City

PCD Nominee Corporation (Non-Filipino) The record owner is the Foreign 289,317,335 12.98
Tower I, The Enterprise Center, beneficial owner of the
6766 Ayala Ave. corner Paseo de Roxas, shares indicated
Makati City

As of March 31, 2018, foreign shareholders owned 12.98%, of the Common Shares, and 0.69%,
of the Preferred Shares of the Company. Immediately after the completion of the Offer, foreign
equity shall not exceed 40.0% of the Company’s total outstanding capital stock.

Security Ownership of Directors and Officers as of March 31, 2018

The following table sets forth security ownership of the Company’s Directors, and Officers, as of
March 31, 2018:
Name of Beneficial Owner Title of Class Number of Nature of Citizenship %
shares ownership
Edgar J. Sia II Common 514,790 (D) Filipino 0.02309%

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Name of Beneficial Owner Title of Class Number of Nature of Citizenship %
shares ownership
Common 453,750,055 (I) Filipino 20.35000%
Preferred - Filipino -
Tony Tan Caktiong Common 1,000 (D) Filipino 0.00004%
Common 32 (I) Filipino 0.00000%
Preferred - Filipino -
Ferdinand J. Sia Common 1,000 (D) Filipino 0.00004%
Common 247,500,030 (I) Filipino 11.10000%
Preferred - Filipino -
Rizza Marie Joy J. Sia Common 1,000 (D) Filipino 0.00004%
Common 123,749,115 (I) Filipino 5.54956%
Preferred - Filipino -
William Tan Untiong Common 3,501,000 (D) Filipino 0.15701%
Common 32 (I) Filipino 0.00000%
Preferred 50,000 (D) Filipino 0.05000%
Joseph Tanbuntiong Common 4,001,000 (D) Filipino 0.17944%
Common 103,125,013 (I) Filipino 4.62500%
Preferred - Filipino -
Gary P. Cheng Common 250,001 (D) Filipino 0.01121%
Preferred - Filipino -
Vicente S. Perez, Jr. Common 250,001 (D) Filipino 0.01121%
Preferred - Filipino -
TOTAL Common 8,519,792 (D) 0.38210%
Common 928,115,277 (I) 41.62456%
Preferred 50,000 (D) 0.05000%
_________________________________
Notes:
(D) refers to direct ownership and (I) refers to indirect ownership.

Except as disclosed above, there is no director or key officer of the Company that owns at least
10% of its issued and outstanding shares of common or preferred stock.

Voting Trust Holders of five percent or More

There were no persons holding more than 5% of a class of shares of the Company under a voting
trust or similar agreement as of the date of this Prospectus.

CHANGE IN CONTROL

As of the date of this Prospectus, there are no arrangements which may result in a change in
control of the Company.

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 RELATED PARTY TRANSACTIONS

The Company and its Subsidiaries, in their ordinary course of business, engage in transactions
with related parties and affiliates. These transactions include advances and reimbursement of
expenses. Except where indicated in the table below, settlement of outstanding balances of
advances at year end occurs in cash. As of December 31, 2015, 2016 and 2017 and March 31,
2018, the Company has not made any provision for impairment losses relating to amounts owed
by related parties.

The summary of the Company’s transactions with its related parties for the three months ended
March 31, 2018 and the years ended December 31, 2017 and the related outstanding balances as
of March 31, 2018 and December 31, 2017 are as follows:
Outstanding Balances
Due from Due to
For / As Amount of Related Related
Category of Ref/Note Transaction Parties Parties Terms and Conditions
Parent
Company’s
Key
Management -
Personnel
Management fees 2018 a ₱669,643 ₱ - ₱ - Demandable; non-interest
bearing; unsecured; payable in
cash
2017 a 2,678,571 - - Demandable; non-interest bearing;
unsecured; payable in cash
Stockholders
Rent expense 2018 b 849,302 - - Demandable; non-interest
bearing; unsecured; payable in
cash
2017 b 3,672,896 - - Demandable; non-interest bearing;
unsecured; payable in cash
Acquisition of
HOA 2018 c - - 429,944,449 Payable by way of DD shares
2017 c - - 429,944,449 Payable by way of DD shares
Other Related
Parties
Land acquired 2018 d - - 383,281,305 Demandable; non-interest
bearing; unsecured; payable in
cash
2017 d - - 383,281,305 Demandable; non-interest bearing;
unsecured; payable in cash
2018 d - - 122,400,000 Payable by way of condo units
2017 d - - 122,400,000 Payable by way of condo units
Cash advances 2018 e 1,530,298 103,414,592 10,732,414 Demandable; non-interest
received bearing; unsecured; collectible in
cash;
no impairment
2017 e 1,713,562 103,522,051 9,094,657 Demandable; non-interest bearing;
unsecured; collectible in cash;
no impairment
Rent income 2018 f 47,485,344 - - Demandable; non-interest
bearing; unsecured; collectible in
cash;
no impairment
2017 f 189,941,376 - - Demandable; non-interest bearing;
unsecured; collectible in cash;
no impairment
2018 ₱103,414,592 ₱946,358,168

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 2017 ₱103,522,051 ₱944,720,411
Note: References to 2018 in the table above are to the three months ended March 31, 2018, and references to 2017 and 2016 are to the years
ended December 31, 2017 and 2016, respectively.

a. Executive Management Services Agreement

The Company entered into an agreement with a shareholder for executive corporate,
strategic, administrative and financial oversight services relative to the real estate
business of the Company. The term of this agreement is one year effective January 1,
2012. This is renewable under the same terms and conditions upon mutual agreement
of the parties. On December 8, 2016, the Company’s Board authorized the extension
of the aforesaid agreement from January 1 to December 31, 2017 under the same
terms and conditions set out in 2016, payable on a quarterly basis. On December 6,
2017, the Company’s Board again authorized the extension of the aforesaid
agreement from January 1 to December 31, 2018. The fee, which includes staffing
costs for services rendered by the shareholders, amounted to ₱2.68 million as at
December 31, 2017 and ₱0.7 million as at March 31, 2018, respectively.

b. Rent Expenses

The Company leased showrooms and sales office from Injap Investments Inc. (“III”)
and Jollibee Foods Corporation (“JFC”), respectively. The terms of the lease are three
to five years, renewable for the same period under the same terms and conditions. The
rent shall escalate by 7% to 10% each year. The sales office rental contract with JFC
ended as of September 30, 2017.

c. Acquisition of Hotel of Asia, Inc.

DoubleDragon Properties Corp. entered into a Share Purchase Agreement (“SPA”)

with III with the consideration amounting to the fair value of its shares to be issued to
III, as consideration transferred in exchange for III’s 40% share in Hotel of Asia, Inc.
(“HOA”). As at December 31, 2017, the share swap application was pending
approval with the Philippine SEC. The shares are expected to be issued in the second
half of 2018.

d. Land Acquisitions

The Company has outstanding liabilities to minority shareholders of Prime DDG

Commercial Centers Inc. amounting to ₱383.28 million for the acquisition of certain
parcels of land which will be used for the Company’s CityMalls. The stated
unsecured, non-interest bearing liabilities are expected to be settled by the Company
in 2018.

In 2016, HOA entered into a Memorandum of Agreement and Deed of Absolute

Conveyance with a minority shareholder wherein HOA, in consideration of the land
owned by the minority shareholder, offered to pay the latter in kind by way of
condominium hotel (condotel) units in the Hotel 101 - The Fort project (32-storey)

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 totaling 60 condotel units plus a portion of the deck referred to as the “Deck Unit”.

e. Cash Advances

The amount pertains to unsecured, non-interest bearing advances granted to and

received from related parties for working capital requirements. These advances are
generally settled within one year from the date of grant.

f. Lease of Mall Spaces

The Company entered into various lease agreements with related parties covering its
investment property portfolio. The amount pertains to the rent income earned by the
Company from leasing out some of its commercial spaces in Dragon8 Mall and its
CityMalls to JFC and the SM Group. These leases generally provide for either a fixed
monthly rent subject to escalation rates or a certain percentage of gross sales. The
terms of the leases are for periods ranging from five to 15 years. The fixed monthly
rent shall escalate by an average of 5% to 10% each year. The corresponding
receivables from related party tenants are recorded in the “Rent receivables” account.

g. Key Management Personnel Compensation

The short-term benefits of other key management personnel amounted to ₱5.78

million and ₱20.1 million as of March 31, 2018 and December 31, 2017, respectively.

Except when indicated above, all outstanding due to/from related parties are to be settled in cash.

For more information, see notes to the Company’s consolidated financial statements elsewhere in
this Prospectus.

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 MARKET PRICE

MARKET PRICE

The Company’s Common Shares and Preferred Share are traded on the PSE and were listed on
April 7, 2014 and July 26, 2016, respectively. The tables below set forth the market prices of the
Common Shares and Preferred Shares in 2015, 2016, 2017 and the 1st quarter of 2018.

Common Shares

Period 2015 2016 2017 2018

High Low High Low High Low High Low

1st Quarter ₱9.00 ₱7.26 ₱39.50 ₱20.00 ₱55.50 ₱39.50 ₱41.70 ₱30.05

2nd Quarter ₱10.50 ₱8.50 ₱70.00 ₱36.25 ₱54.50 ₱46.50 - -

3rd Quarter ₱22.60 ₱9.70 ₱63.50 ₱53.70 ₱48.85 ₱39.85 - -

4th Quarter ₱25.35 ₱19.60 ₱58.30 ₱36.00 ₱44.00 ₱36.00 - -

Preferred Shares

Period 2015 2016 2017 2018

High Low High Low High Low High Low

1st Quarter - - - - ₱106.50 ₱103.50 ₱105.00 ₱100.00

2nd Quarter - - - - ₱106.00 ₱103.00 - -

3rd Quarter - - ₱106.30 ₱103.40 ₱106.60 ₱104.60 - -

4th Quarter - - ₱105.00 ₱103.20 ₱107.40 ₱104.20 - -

As of June 19, 2018, the closing price of the Company’s common shares was ₱25.25 per share
with a total market capitalization of ₱56.3 billion while the closing price of the Company’s
preferred shares was ₱101.00 per share.

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 DESCRIPTION OF THE SHARES

The shares to be offered shall be Common Shares of the Company.

Pursuant to its Articles of Incorporation as amended on April 14, 2016, the Company has
authorized capital stock of ₱20,500,000,000, divided into 5,000,000,000 Common Shares with a
par value of ₱0.10 per share and 200,000,000 preferred shares with a par value of ₱100.00 per
share (“Preferred Shares”), of which 2,229,730,000 Common Shares and 100,000,000 Preferred
Shares are outstanding as of the date of this Prospectus. The Offer Shares are Common Shares
of the Company.

The Offer Shares will be offered at a price of ₱30.00 per Offer Share (the “Offer Price”). The
determination of the Offer Price is further discussed on page 100 of this Prospectus. Assuming
full exercise of the Over-allotment Option, a total of 2,379,730,000 Common Shares will be
outstanding after the Offer, and the Offer Shares will comprise 6.3% of the outstanding Common
Shares after the Offer.

Objects and Purposes

The Company has been organized primarily to engage in the business of real estate development
including but not limited to residential and commercial subdivisions, buildings, and
condominium projects in accordance with Republic Act 4726 (otherwise known as The
Condominium Act) as amended; to buy and acquire by purchase, lease or otherwise, lands, and
interest in land and to own, hold, impose, promote, develop, subdivide and manage any land
owned, held or occupied by the Company or belonging to them; to construct, erect and manage
or administer buildings such as condominiums, apartments hotels, restaurants, stores or other
structures now or hereafter erected on any land owned, held or occupied and to mortgage, sell,
lease or otherwise dispose of lands or interests in lands and buildings or other structures at any
time owned or held by the corporation or belonging to others in the Philippines or elsewhere for
such other lawful, commercial and charitable purposes as may be deemed proper for the
corporation.

The Company’s purposes also include the following:

1. To acquire by purchase, lease, donation or otherwise, and to own, use, improve, develop,
subdivide, sell, mortgage, exchange, lease, develop, and hold for investment or otherwise
dispose of buildings, houses, apartments, and other structures of whatever kind, together
with their appurtenances;

2. To purchase, acquire, own lease, sell and convey real properties, such as lands, buildings,
factories and warehouses and machineries, equipment and other personal properties as
may be necessary or incidental to the conduct of the corporation business, and to pay in
cash, shares of its indebtedness, or other securities, as may be deemed expedient, for any
business of property acquired by the corporation;

3. To borrow or raise money necessary to meet the financial requirements of its business by
the issuance of bonds, promissory notes and others evidences of indebtedness, and to
secure the repayment thereof by mortgage, pledge, upon the properties of the corporation,

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 or to issue pursuant to law shares of its capital stock, debentures and others evidences of
indebtedness in payment for properties acquired by the corporation or for money
borrowed in the process of its lawful business;

4. To invest and deal with the money and properties of the corporation in such manner as
may from time to time be considered wise or expedient shares of stocks, bonds or
obligations or evidences of indebtedness in the same manner and to the same extent as
natural persons might, could or would do and to exercise all the rights powers and
privileges of ownership, including the right to vote thereof or consent in respect thereof
for any and all purposes without engaging in stock brokerage business;

5. To enter into any lawful arrangement for sharing profits, union of interest., reciprocal
concession, or cooperation, with any corporation, association, partnership syndicate,
entity, person or governmental, municipal or public authority, domestic or foreign, in the
carrying on of any business or transaction deemed necessary, convenient or incident to
carrying out any of the purposes of the corporation;

6. To acquire or obtain from any government or authority, national, provincial, municipal or

otherwise, or any corporation, corporation or partnership or person, such charter,
contracts, franchise, privileges, exemption, licenses and concessions as may be conducive
to any of the objects of the corporation;

7. To establish and operate one or more branch offices or agencies and to carry on any or all
of its operations and business without any restrictions as to place or amount including the
tight to hold, purchase, or otherwise acquire, lease, mortgage, pledge, and convey or
otherwise deal in and with real and personal property anywhere within the Philippines;

8. To distribute the surplus profits of the corporation to the shareholders thereof in cash or
in kind, namely, properties of the corporation, particularly any shares of stock, debentures
or securities of other companies belonging to the corporation;

9. To do or cause to be done any one or more of the acts and things herein set forth as its
purposes, within or without the Philippines, and in any and all foreign countries, and to
do everything necessary, desirable or incidental to the accomplishment of the purpose or
the exercise of any one or more of its powers, or which shall at any time appear
conducive to or expedient for the protection or benefit of the corporation;

10. To create or invest in corporations that engage in property related ventures, such as but
not limited to construction, operations and management of terminals or such other
activities related to the primary purpose and for the furtherance of the purpose of the
parent company; and

11. To create or invest in corporations engaged in the business of shopping malls, to enter
into Joint Venture Agreements with any person for the creation, development, operation
and/ or management of any shopping mall and to enter into any other lawful agreement
for the furtherance of this purpose.

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Under Philippine law, a corporation may invest its funds in any other corporation or business or
for any purpose other than the purpose for which it was organized when approved by a majority
of the board of directors and ratified by the stockholders representing at least two-thirds of the
outstanding capital stock, at a stockholders’ meeting duly called for the purpose; provided,
however, that where the investment by the corporation is reasonably necessary to accomplish its
purposes, the approval of the stockholders shall not be necessary. Per the By-laws of the
Company, its stock, property and affairs shall be exclusively managed and controlled by the
board of directors.

Share Capital

A Philippine corporation may issue common or preferred shares, or such other classes of shares
with such rights, privileges or restrictions as may be provided for in the articles of incorporation
and by-laws of the corporation. Subject to the approval by the Philippine SEC, it may increase
or decrease its authorized capital stock by amending its articles of incorporation, provided that
the change is approved by a majority of the board of directors and by shareholders representing
at least two-thirds of the outstanding capital stock of the corporation voting at a shareholders’
meeting duly called for the purpose.

Under Philippine law, the shares of a corporation may either be with or without a par value. All
of the Common Shares currently issued have a par value of ₱0.10 per share. In the case of par
value shares, where a corporation issues shares at a price above par, whether for cash or
otherwise, the amount by which the subscription price exceeds the par value is credited to an
account designated as additional paid-in capital or paid-in surplus.

Subject to approval by the Philippine SEC, a corporation may increase or decrease its authorized
capital shares, provided that the change is approved by a majority of the board of directors of
such corporation and shareholders representing at least two-thirds of the issued and outstanding
capital shares of the corporation voting at a shareholders’ meeting duly called for the purpose.

A corporation is empowered to acquire its own shares for a legitimate corporate purpose,
provided that the corporation has Unrestricted Retained Earnings or surplus profits sufficient to
pay for the shares to be acquired. Examples of instances in which the corporation is empowered
to purchase its own shares are: when the elimination of fractional shares arising out of share
dividends is necessary or desirable, the purchase of shares of dissenting shareholders exercising
their appraisal right (as discussed below) and the collection or compromise of an indebtedness
arising out of an unpaid subscription. When a corporation repurchases its own shares, the shares
become treasury shares, which may be resold at a price fixed by the board of directors of such
corporation.

The Board is authorized to issue shares from treasury from time to time. Treasury shares may be
issued to any person, corporation or association, whether or not a shareholder of the Company,
including its officers or employees for such consideration in money as the Board may determine.

Voting Rights

The Company’s Shares have full voting rights. However, the Philippine Corporation Code
provides that voting rights cannot be exercised with respect to shares declared by the board of

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directors as delinquent, treasury shares, or if the shareholder has elected to exercise his right of
appraisal referred to below.

Dividend Rights

Under the Company’s By-laws, dividends may be paid out the Unrestricted Retained Earnings of
the Company as and when the Board of Directors may elect, subject to legal requirements.
Dividends are payable to all shareholders on the basis of outstanding shares of the Company held
by them, each share being entitled to the same unit of dividend as any other share. Dividends are
payable to shareholders whose name are recorded in the stock and transfer book as of the record
date fixed by the Board of Directors. The PSE has an established mechanism for distribution of
dividends to beneficial owners of shares which are traded through the PSE which are lodged with
the PCD Nominee as required for scripless trading.

See “Dividends and Dividend Policy.”

Pre-Emptive Rights

The Philippine Corporation Code confers pre-emptive rights on the existing shareholders of a
Philippine corporation which entitle such shareholders to subscribe to all issues or other
dispositions of shares of any class by the corporation in proportion to their respective
shareholdings, regardless of whether the shares proposed to be issued or otherwise disposed of
are identical to the shares held. A Philippine corporation may, however, provide for the denial of
these pre-emptive rights in its articles of incorporation. Likewise, shareholders who are entitled
to such pre-emptive rights may waive the same through a written instrument to that effect.

The Articles of Incorporation of the Company deny the pre-emptive rights of its shareholders to
subscribe to any or all dispositions of any class of shares.

Derivative Rights

Philippine law recognizes the right of a shareholder to institute proceedings on behalf of the
corporation in a derivative action in circumstances where the corporation itself is unable or
unwilling to institute the necessary proceedings to redress wrongs committed against the
corporation or to vindicate corporate rights as, for example, where the directors of the
corporation themselves are the malefactors.

Appraisal Rights

The Philippine Corporation Code grants a shareholder a right of appraisal and demand payment
of the fair value of his shares in certain circumstances where he has dissented and voted against a
proposed corporate action, including:

• an amendment of the articles of incorporation which has the effect of adversely affecting
the rights attached to his shares or of authorizing preferences in any respect superior to
those of outstanding shares of any class;

• the extension of the term of corporate existence;

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• the sale, lease, exchange, transfer, mortgage, pledge or other disposal of all or
substantially all the assets of the corporation;

• a merger or consolidation; and

• investment by the corporation of funds in any other corporation or business or for any
purpose other than the primary purpose for which it was organized.

In any of these circumstances, the dissenting shareholder may require the corporation to purchase
its shares at a fair value, which, in default of agreement, is determined by three disinterested
persons, one of whom shall be named by the shareholder, one by the corporation, and the third
by the two thus chosen. Regional Trial Courts will, in the event of a dispute, determine any
question about whether a dissenting shareholder is entitled to this right of appraisal. From the
time the shareholder makes a demand for payment until the corporation purchases such shares,
all rights accruing on the shares, including voting and dividend rights, shall be suspended, except
the right of the shareholder to receive the fair value of such shares. No payment shall be made to
any dissenting shareholder unless the corporation has Unrestricted Retained Earnings sufficient
to support the purchase of the shares of the dissenting shareholders.

Right of Inspection

A shareholder has the right to inspect the records of all business transactions of the corporation
and the minutes of any meeting of the board of directors and shareholders at reasonable hours on
business days and may demand a copy of excerpts from such records or minutes at his or her
expense. However, the corporation may refuse such inspection if the shareholder demanding to
examine or copy the corporation’s records has improperly used any information secured through
any prior examination, or was not acting in good faith or for a legitimate purpose in making his
demand.

Right to Financial Statements

A shareholder has a right to be furnished with the most recent financial statement of a Philippine
corporation, which shall include a balance sheet as of the end of the last taxable year and a profit
or loss statement for said taxable year, showing in reasonable detail its assets and liabilities and
the results of its operations. At the meeting of shareholders, the board of directors is required to
present to the shareholders a financial report of the operations of the corporation for the
preceding year, which shall include financial statements duly signed and certificate by an
independent certified public accountant.

Board of Directors

Unless otherwise provided by law or in the articles of incorporation, the corporate powers of the
Company are exercised, its business conducted, and its property controlled by the Board.
Pursuant to its Articles of Incorporation, as amended, the Company shall have seven Directors,
two of whom are independent Directors within the meaning set forth in Section 38 of the SRC.
The Board shall be elected during each regular meeting of shareholders, at which shareholders

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representing at least a majority of the issued and outstanding capital shares of the Company are
present, either in person or by proxy.

Under Philippine law, representation of foreign ownership on the Board is limited to the
proportion of the foreign shareholding. Directors may only act collectively; individual directors
have no power as such. Four directors, which is a majority of the Board, constitute a quorum for
the transaction of corporate business. Except for certain corporate actions such as the election of
officers, which shall require the vote of a majority of all the members of the Board, every
decision of a majority of the quorum duly assembled as a board is valid as a corporate act.

Any vacancy created by the death, resignation or removal of a director prior to expiration of such
director’s term shall be filled by a vote of at least a majority of the remaining members of the
Board, if still constituting a quorum, Otherwise, the vacancy must be filled by the shareholders at
a meeting duly called for the purpose. Any director elected in this manner by the Board shall
serve only for the unexpired term of the director whom such director replaces and until his
successor is duly elected and qualified.

Change in Control

There are no existing provisions in the Articles of Incorporation or the By-laws of the Company
which will delay, defer or in any manner prevent a change in control of the Company.

Shareholders’ Meetings

Annual or Regular Shareholders’ Meetings

The Philippine Corporation Code requires all Philippine corporations to hold an annual meeting
of shareholders for corporate purposes including the election of directors. The By-laws of the
Company provide for annual meetings on the last Monday of July of each year to be held at the
principal office of the Company and at such hour as specified in the notice.

Special Shareholders’ Meeting

Special meetings of shareholders, for any purpose or purposes, may at any time be called by
either the president or a majority of the Board of Directors, whenever he or they shall deem it
necessary.

Notice of Shareholders’ Meeting

Whenever shareholders are required or permitted to take any action at a meeting, a written notice
of the meeting shall be given which shall state the place, date and time of the meeting, and the
purpose or purposes for which the meeting is called. The Company’s By-laws provide that
notices of the time and place of the annual and special meetings of the shareholders shall be
given either by mailing the same enclosed in a postage-prepaid envelope, addressed to each
shareholder of record at the address left by such shareholder with the Secretary of the Company,
or at his last known post-office address, or by delivering the same to him in person, at least two
(2) weeks before the date set for such meeting. Notice to any special meeting must state, among
others, the matters to be taken up in the said meeting, and no other business shall be transacted at

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such meeting except by consent of all the shareholders present, entitled to vote. No notice of
meeting need be published in any newspaper, except when necessary to comply with the special
requirements of the Philippine Corporation Code. Shareholders entitled to vote may, by written
consent, waive notice of the time, place and purpose of any meeting of shareholders and any
action taken at such meeting pursuant to such waiver shall be valid and binding. When the
meeting of the shareholders is adjourned to another time or place, notice of the adjourned
meeting need not be provided so long as the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken. At the reconvened meeting, any
business may be transacted that might have been transacted on the original date of the meeting.

Quorum

Unless otherwise provided by an existing shareholders’ agreement or by law, in all regular or

special meeting of shareholders, a majority of the outstanding capital shares must be present or
represented in order to constitute a quorum, except in those cases where the Philippine
Corporation Code provides a greater percentage vis-á-vis the total outstanding capital shares. If
no quorum is constituted, the meeting shall be adjourned until the requisite amount of shares
shall be presented.

Pursuant to the Company’s By-laws, the chairman of the board, or in case of his absence or
disability, the president, may then call to order any meeting of the stockholders, and proceed to
the transaction of business, provided a majority of the shares issued and outstanding be present,
either in person or by proxy; but if there be no quorum present at any meeting, the meeting may
be adjourned by the stockholders present from time to time until the quorum shall be obtained. If
neither the chairman of the board nor the president is present, then the meeting is to be conducted
by a chairman to be chosen by the stockholders.

Voting

At all meetings of shareholders, a holder of Common Shares may vote in person or by proxy, for
each share held by such shareholder.

Fixing Record Dates

Under existing Philippine SEC rules, cash dividends declared by corporations whose shares are
listed on the PSE shall have a record date which shall not be less than 10 or more than 30 days
from the date of declaration. With respect to share dividends, the record date shall not be less
than 10 or more than 30 days from the date of shareholder approval; provided, however, that the
record date set shall not be less than 10 trading days from receipt by the PSE of the notice of
declaration of share dividends. In the event that share dividends are declared in connection with
an increase in the authorized capital shares, the corresponding record date shall be fixed by the
Philippine SEC.

Matters Pertaining to Proxies

Shareholders may vote at all meetings the number of shares registered in their respective names,
either in person or by proxy duly given in writing and duly presented to the Corporate Secretary

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before or during the meeting. Unless otherwise provided in the proxy, it shall be valid only for
the meeting at which it has been presented to the Corporate Secretary.

Proxies should comply with the relevant provisions of the Philippine Corporation Code, the
SRC, the IRRs, and regulations issued by the Philippine SEC.

Dividends

The Common Shares have full dividend rights. Dividends on the Company’s Common Shares, if
any, are paid in accordance with Philippine law. Dividends are payable to all shareholders on the
basis of outstanding Common Shares held by them, each Common Share being entitled to the
same unit of dividend as any other Common Share. Dividends are payable to shareholders
whose names are recorded in the stock and transfer book as of the record date fixed by the
Company’s Board of Directors. The PSE has an established mechanism for distribution of
dividends to beneficial owners of Common Shares which are traded through the PSE which are
lodged with the PCD Nominee as required for scripless trading.

The Company’s current dividend policy provides that at least 30% of the preceding fiscal year’s
net income after tax will be declared as dividends, subject to (i) the availability of Unrestricted
Retained Earnings, (ii) implementation of business plans, (iii) contractual obligations, and (iv)
working capital requirements. There can be no guarantee that the Company will pay any
dividends in the future. The declaration and payment of dividends is subject to compliance
annually or as often as the Board of Directors may deem appropriate, in cash or in kind and/or in
additional shares from its surplus profits. The ability of the Company to pay dividends will
depend on its retained earnings level and financial condition. There is no assurance that the
Company will pay dividends in the future.

Each of the Subsidiaries intend to approve a dividend policy that would entitle its stockholders to
receive dividends equivalent to 30% to 100% of the prior year’s net income after tax subject to
(i) the availability of Unrestricted Retained Earnings, (ii) implementation of business plans, (iii)
contractual obligations, and (iv) working capital requirements. None of the Subsidiaries have
declared dividends in the past.

See “Dividends and Dividend Policy.”

Transfer of Shares and Share Register

All transfers of shares on the PSE shall be effected by means of a book-entry system. Under the
book-entry system of trading and settlement, a registered shareholder shall transfer legal title
over the shares to a nominee, but retains beneficial ownership over the shares. The transfer of
legal title is done by surrendering the stock certificate representing the shares to participants of
the PDTC System (i.e., brokers and custodian banks) that, in turn, lodge the same with the PCD
Nominee Corporation, a corporation wholly-owned by the PDTC (the “PCD Nominee”). A
shareholder may request upliftment of the shares from the PDTC, in which case a stock
certificate will be issued to the shareholder and the shares registered in the shareholder’s name in
the books of the Company. See “The Philippine Stock Market.”

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Philippine law does not require transfers of the Common Shares to be effected on the PSE, but
any off-exchange transfers will subject the transferor to a capital gains tax that may be
significantly greater than the share transfer tax applicable to transfers effected on the PSE. See
“Philippine Taxation.” All transfers of shares on the PSE must be effected through a licensed
stockbroker in the Philippines.

Issues of Shares

Subject to otherwise applicable limitations, the Company may issue additional Common Shares
to any person for consideration deemed fair by the Board, provided that such consideration shall
not be less than the par value of the issued Common Shares. No share certificates shall be issued
to a subscriber until the full amount of the subscription together with interest and expenses (in
case of delinquent Common Shares) has been paid and proof of payment of the applicable taxes
shall have been submitted to the Company’s Corporate Secretary. Under the PSE Rules, only
fully-paid shares may be listed on the PSE.

Share Certificates

Certificates representing the Common Shares will be issued in such denominations as

shareholders may request, except that certificates will not be issued for fractional shares.
Shareholders wishing to split their certificates may do so upon application to the Company’s
share transfer agent, Rizal Commercial Banking Corporation – Stock Transfer Processing
Section, Inc., which will maintain the share register. Common Shares may also be lodged and
maintained under the book-entry system of the PDTC. See “The Philippine Stock Market.”

Mandatory Tender Offers

In general, under the SRC and the IRRs, any person or group of persons acting in concert and
intending to acquire at least (1) 35% of any class of any equity security of a public or listed
corporation in a single transaction; or (2) 35% of such equity over a period of 12 months; or
(3) even if less than 35% of such equity, if such acquisition would result in ownership by the
acquiring party of over 51% of the total outstanding equity, is required to make a tender offer to
all the shareholders of the target corporation on the same terms. Generally, in the event that the
securities tendered pursuant to such an offer exceed that which the acquiring person or group of
persons is willing to take up, the securities shall be purchased from each tendering shareholder
on a pro rata basis, disregarding fractions, according to the number of securities tendered by each
security holder. Where a mandatory tender offer is required, the acquirer is compelled to offer
the highest price paid by him for such shares during the past six months. Where the offer
involves payment by transfer or allotment of securities, such securities must be valued on an
equitable basis. However, if any acquisition of even less than 35% would result in ownership of
over 51% of the total outstanding equity, the acquirer shall be required to make a tender offer for
all the outstanding equity securities to all remaining shareholders of the said corporation at a
price supported by a fairness opinion provided by an independent financial adviser or equivalent
third party. The acquirer in such a tender offer shall be required to accept any and all securities
thus tendered.

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No Mandatory Tender Offer is required in: (i) purchases of shares from unissued capital shares
unless it will result to a 50% or more ownership of shares by the purchaser; (ii) purchases from
an increase in the authorized capital shares of the target company; (iii) purchases in connection
with a foreclosure proceedings involving a pledge or security where the acquisition is made by
the debtor or creditor; (iv) purchases in connection with privatization undertaken by the
government of the Philippines; (v) purchases in connection with corporate rehabilitation under
court supervision; (vi) purchases through an open market at the prevailing market price; or
(vii) purchases resulting from a merger or consolidation.

Fundamental Matters

The Philippine Corporation Code provides that certain significant acts may only be implemented
with shareholders’ approval. The following require the approval of shareholders representing at
least two-thirds of the issued and outstanding capital shares of the corporation in a meeting duly
called for the purpose:

• amendment of the articles of incorporation;

• removal of directors;

• sale, lease, exchange, mortgage, pledge or other disposition of all or a substantial part of
the assets of the corporation;

• investment of corporate funds in any other corporation or business or for any purpose
other than the primary purpose for which the corporation was organized;

• declaration or issuance of share dividends;

• delegation to the board of directors of the power to amend or repeal by-laws or adopt new
by-laws;

• merger or consolidation;

• dissolution;

• an increase or decrease in capital shares;

• ratification of a contract of a directors or officer with the corporation;

• extension or shortening of the corporate term;

• creation or increase of bonded indebtedness; and

• management contracts with related parties;

The approval of shareholders holding a majority of the outstanding capital shares of a Philippine
corporation, including non-voting preferred shares, is required for the adoption or amendment of
the by-laws of such corporation.

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Accounting and Auditing Requirements

Philippine stock corporations are required to file copies of their annual financial statements with
the Philippine SEC. In addition, public corporations are required to file quarterly financial
statements (for the first three quarters) with the Philippine SEC. Those corporations whose
shares are listed on the PSE are additionally required to file said quarterly and annual financial
statements with the PSE. Shareholders are entitled to request copies of the most recent financial
statements of the corporation which include a statement of financial position as of the end of the
most recent tax year and a profit and loss statement for that year. Shareholders are also entitled
to inspect and examine the books and records that the corporation is required by law to maintain.

The Board is required to present to shareholders at every annual meeting a financial report of the
operations of the Company for the preceding year. This report is required to include audited
financial statements.

Preferred Shares

The Company has 100,000,000 Preferred Shares with a par value of ₱100.00 per share issued
and outstanding as of the date of this Prospectus. The Preferred Shares, issued on April 14, 2016
are cumulative non-voting, non-participating, redeemable, convertible, perpetual preferred shares
and have the following features:

Dividend Rate

The Preferred Shares have a cash dividend rate of 6.4778% per annum, payable quarterly (each
quarter a Dividend Period). If the Preferred Shares shall not have been redeemed by the
Company on the seventh anniversary of the Issue Date (the “Step Up Date”), Initial Dividend
Rate shall be adjusted on the Step Up Date to the 10-year PDST-R2 rate, or if the 10-year PDST-
R2 rate is not available or cannot be determined, the interpolated 10-year PDST-R2 rate, or if
such interpolated 10-year PDST-R2 rate is not available or cannot be determined, any such
successor rate generally accepted by the market or a self-regulatory organization in each case,
plus 150% per annum (the “Step Up Rate”).

The declaration and payment of cash dividends for the Preferred Shares will be subject to the
discretion of the Board of Directors, the covenants (financial or otherwise) in the loans and credit
agreements to which Company is a party and the requirements under applicable laws and
regulations. The Board of Directors will not declare and pay dividends where payment of the
dividend would cause the Company to breach any of its financial covenants.

The profits available for distribution are, in general and with some adjustments, equal to the
Issuer’s accumulated, realized profits less accumulated, realized loss. In general, under
Philippine law, a corporation can only declare dividends to the extent that it has unrestricted
retained earnings. Unrestricted retained earnings represent the undistributed earnings of the
corporation which have not been allocated for any managerial, contractual or legal purposes and
which are free for distribution to the shareholders as dividends.

Liquidation Preferences

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In the event of a return of capital in respect of the liquidation, dissolution or winding up of the
affairs of the Company but not on a redemption or purchase by the Company of any of its share
capital, the holders of the Preferred Shares at the time outstanding will be entitled to receive, out
of the assets of the Company available for distribution to shareholders, together with the holders
of any other shares of the Company ranking, as regards repayment of capital, pari passu with the
Preferred Shares and before any distribution of assets is made to holders of any class of shares of
the Company ranking after the Preferred Shares as regards repayment of capital, liquidating
distributions in an amount equal to the Redemption Price as of (and including) the date of
commencement of the winding up of the Issuer or the date of any such other return of capital, as
the case may be. If, upon any return of capital in the winding up of the Company, the amount
payable with respect to the Preferred Shares and any other shares of the Company ranking as to
any such distribution pari passu with the Preferred Shares are not paid in full, the holders of the
Preferred Shares and of such other shares will share proportionately in any such distribution of
the assets of the Company in proportion to the full respective preferential amounts to which they
are entitled. After payment of the full amount of the liquidating distribution to which they are
entitled, the holders of the Preferred Shares will have no right or claim to any of the remaining
assets of the Company and will not be entitled to any further participation or return of capital in a
winding up.

Redemption

As and if approved by its Board of Directors, the Company may redeem the Preferred Shares, in
whole and not in part, on the fifth anniversary of the Issue Date or on any Dividend Payment
Date thereafter, after giving not less than 30 but not more than 60 days’ written notice prior to
the intended date of redemption, at a redemption price equal to the Offer Price of the Preferred
Shares plus all dividends due them on the actual date of redemption as well as all accumulated
dividends due and payable, or dividends in which the declaration and/or payment have been
deferred, in respect of prior Dividend Periods (the “Redemption Price”). Such notice to redeem
shall be deemed irrevocable upon issuance thereof.

The Company is not legally required, has not established, and currently has no plans to establish,
a sinking fund for the redemption of the Preferred Shares.

Convertibility

At the option of the Holder of the Preferred Shares (“Holder”), the Preferred Shares may be
converted into the Company’s Common Shares at a rate of one (1) Preferred Share to one (1)
Common Share. The Holder may exercise this option at any time during the last Dividend Period
of the calendar year starting from the second anniversary of the Issue Date up to the fifth
anniversary of the Issue Date (“Conversion Period”). Only the registered Holder of the Preferred
Shares can exercise the option to convert and upon issuance of the registered Common Shares,
the Holder will cease to enjoy the benefits attached to the Preferred Shares previously owned,
including the right to dividends as provided herein.

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 THE PHILIPPINE STOCK MARKET

The information presented in this section has been extracted from publicly available documents
which have not been prepared or independently verified by the Company, the International
Bookrunners and Lead Managers, the Domestic Lead Underwriters and Bookrunners, or any of
their respective subsidiaries, affiliates or advisors in connection with the offer and sale of the
Offer Shares.

Brief History
The Philippines initially had two stock exchanges, the Manila Stock Exchange, which was
organized in 1927, and the Makati Stock Exchange, which began operations in 1963. Each
exchange was self-regulatory, governed by its respective Board of Governors elected annually by
its members.
Several steps initiated by the Government have resulted in the unification of the two bourses into
the PSE. The PSE was incorporated in 1992 by officers of both the Makati and the Manila Stock
Exchanges. In March 1994, the licenses of the two exchanges were revoked.
While the PSE maintains two trading floors, one in Makati City and the other in Pasig City, these
floors are linked by an automated trading system, which integrates all bids, and ask quotations
from the bourses.
In June 1998, the Philippine SEC granted the PSE “Self-Regulatory Organization” status,
allowing it to impose rules as well as implement penalties on erring trading participants and
listed companies. On August 8, 2001, the PSE completed its demutualization, converting from a
non-stock member-governed institution into a stock corporation in compliance with the
requirements of the SRC. The PSE has an authorized capital stock of ₱120 million, of which
₱73.5 million was subscribed and fully paid-up as of June 30, 2016. Each of the 184 member-
brokers was granted 50,000 shares of the new PSE at a par value of ₱1 per share. In addition, a
trading right evidenced by a “Trading Participant Certificate” was immediately conferred on
each member-broker allowing the use of the PSE’s trading facilities. As a result of the
demutualization, the composition of the PSE Board of Governors was changed, requiring the
inclusion of seven brokers and eight non-brokers, one of whom is the President. On December
15, 2003, the PSE listed its shares by way of introduction at its own bourse as part of a series of
reforms aimed at strengthening the Philippine securities industry.
Classified into financial, industrial, holding firms, property, services, and mining and oil sectors,
companies are listed either on the PSE’s Main Board or the Small, Medium and Emerging
Board. Recently, the PSE issued Rules on Exchange Traded Funds (“ETF”) which provides for
the listing of ETFs on an ETF Board separate from the PSE’s existing boards. Previously, the
PSE allowed listing on the First Board, Second Board or the Small, Medium and Enterprises
Board. With the issuance by the PSE of Memorandum No. CN-No. 2013-0023 dated June 6,
2013, revisions to the PSE Listing Rules were made, among which changes are the removal of
the Second Board listing and the requirement that lock-up rules be embodied in the articles of the
incorporation of the Issuer. Each index represents the numerical average of the prices of
component stocks. The PSE has an index, referred to as the PHISIX, which as of the date thereof
reflects the price movements of selected stocks listed on the PSE, based on traded prices of

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stocks from the various sectors. The PSE shifted from full market capitalization to free float
market capitalization effective as of April 3, 2006 simultaneous with the migration to the free
float index and the renaming of the PHISIX to PSEi. The PSEi is composed of 30 selected stocks
listed on the PSE. In July 2010, the PSE’s new trading system, now known as PSE Trade, was
launched. In June 2015, the PSE Trade system was replaced by PSE Trade XTS.
With the increasing calls for good corporate governance, the PSE has adopted an online daily
disclosure system to improve the transparency of listed companies and to protect the investing
public.
The PSE launched its Corporate Governance Guidebook in November 2010 as another initiative
of the PSE to promote good governance among listed companies. It is composed of ten
guidelines embodying principles of good business practice and based on internationally
recognized corporate governance codes and best practices.
The table below sets out movements in the composite index from 2005 to 2017 and shows the
number of listed companies, market capitalization, and value of shares traded for the same
period:

Aggregate Market Combined Value

Composite Index Number of Listed Capitalization of Turnover
Year at Closing Companies (₱ billions) (₱ billions)
2005 ................................................................ 2,096.0 237 5,948.4 383.5
2006 ................................................................ 2,982.5 240 7,172.8 572.6
2007 ................................................................ 3,621.6 244 7,978.5 1,338.3
2008 ................................................................ 1,872.9 246 4,069.2 763.9
2009 ................................................................ 3,052.7 248 6,029.1 994.2
2010 ................................................................ 4,201.1 253 8,866.1 1,207.4
2011 ................................................................ 4,372.0 253 8,697.0 1,422.6
2012 ................................................................ 5,812.7 254 10,930.1 1,771.7
2013 ................................................................ 5,889.8 257 11,931.3 2,546.2
2014 ................................................................ 7,230.6 263 14,251.7 2,130.1
2015 ................................................................ 6,952.1 265 13,465.2 2,151.4
2016 ................................................................ 6,840.6 265 14,438.8 1,929.5
2017 ................................................................ 8,558.4 267 17,583.1 3,596.9
_______________
Source: PSE and PSE Annual Reports.

Trading
The PSE is a double auction market. Buyers and sellers are each represented by stock brokers.
To trade, bid or ask prices are posted on the PSE’s electronic trading system. A buy (or sell)
order that matches the lowest asked (or highest bid) price is automatically executed. Buy and sell
orders received by one broker at the same price are crossed at the PSE at the indicated price.
Transactions are generally invoiced through a confirmation slip sent to customers on the trade
date (or the following trading day). Payment of purchases of listed securities must be made by
the buyer on or before the third trading day (the settlement date) after the trade.

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Equities trading on the PSE starts at 9:30 a.m. and ends at 12:00 p.m. for the morning session,
and resumes at 1:30 pm and ends at 3:30 pm for the afternoon session, with a ten-minute
extension during which transactions may be conducted, provided that they are executed at the
last traded price and are only for the purpose of completing unfinished orders. Trading days are
Monday to Friday, except legal and special holidays and days when the BSP clearing house is
closed.
Minimum trading lots range from 5 to 1,000,000 shares depending on the price range and nature
of the security traded. The minimum trading lot for the Company’s Shares is 10 shares. Odd-
sized lots are traded by brokers on a board specifically designed for odd-lot trading.
To maintain stability in the stock market, daily price swings are monitored and regulated. Under
current PSE regulations, whenever an order will result in a breach of the trading threshold of a
security within a trading day, the trading of that security will be frozen. Orders cannot be posted,
modified or cancelled for a security that is frozen. In cases where an order has been partially
matched, only the portion of the order that will result in a breach of the trading threshold will be
frozen. Where the order results in a breach of the trading threshold, the following procedures
shall apply:
• In case the static threshold is breached, the PSE will accept the order, provided the price is within
the allowable percentage price difference under the implementing guidelines of the revised trading
rules (i.e., 50% of the previous day’s reference or closing price, or the last adjusted closing price);
otherwise, such order will be rejected. In cases where the order is accepted, the PSE will adjust the
static threshold to 60%. All orders breaching the 60% static threshold will be rejected by the PSE.

• In case the dynamic threshold is breached, the PSE will accept the order if the price is within the
allowable percentage price difference under the existing regulations (i.e., 20% for security cluster
A and newly-listed securities, 15% for security cluster B and 10% for security cluster C);
otherwise, such order will be rejected by the PSE.

NON-RESIDENT TRANSACTIONS
When the purchase/sale of Philippine shares involves a non-resident, whether the transaction is
effected in the domestic or foreign market, it will be the responsibility of the securities
dealer/broker to register the transaction with the BSP. The local securities dealer/broker shall file
with the BSP, within three business days from the transaction date, an application in the
prescribed registration form. After compliance with other required undertakings, the BSP shall
issue a Certificate of Registration. Under BSP rules, all registered foreign investments in
Philippine securities including profits and dividends, net of taxes and charges, may be
repatriated.

SETTLEMENT
The Securities Clearing Corporation of the Philippines (“SCCP”) is a wholly-owned subsidiary
of the PSE, and was organized primarily as a clearance and settlement agency for SCCP-eligible
trades executed through the facilities of the PSE. SCCP received its permanent license to operate
on January 17, 2002. It is responsible for: (1) synchronizing the settlement of funds and the
transfer of securities through delivery versus payment, as well as clearing and settlement of
transactions of clearing members, who are also PSE Trading Participants; (2) guaranteeing the
settlement of trades in the event of a PSE Trading Participant’s default through the

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implementation of its “Fails Management System” and administration of the Clearing and Trade
Guaranty Fund, and; (3) performance of risk management and monitoring to ensure final and
irrevocable settlement.
SCCP settles PSE trades on a three-day rolling settlement environment, which means that
settlement of trades takes place three days after transaction date (T+3). The deadline for
settlement of trades is 12:00 noon of T+3. Securities sold should be in scripless form and lodged
under the book entry system of the PDTC. Each PSE Trading Participant maintains a Cash
Settlement Account with one of the seven existing Settlement Banks of SCCP which are Banco
De Oro Unibank, Inc. (BDO Unibank), Rizal Commercial Banking Corporation (RCBC),
Metropolitan Bank & Trust Company (Metrobank), Deutsche Bank (DB), Union Bank of the
Philippines (Unionbank), The Hongkong and Shanghai Banking Corporation Limited (HSBC)
and Maybank Philippines, Inc. (Maybank). Payment for securities bought should be in good,
cleared funds and should be final and irrevocable. Settlement is presently on a broker level.
SCCP implemented its Central Clearing and Central Settlement (“CCCS”) system in May 29,
2006. CCCS employs multilateral netting, whereby the system automatically offsets “buy” and
“sell” transactions on a per issue and a per flag basis to arrive at a net receipt or a net delivery
security position for each clearing member. All cash debits and credits are also netted into a
single net cash position for each clearing member. Novation of the original PSE trade contracts
occurs, and SCCP stands between the original trading parties and becomes the Central
Counterparty to each PSE-eligible trade cleared through it.

SCRIPLESS TRADING
In 1995, the PDTC, was organized to establish a central depository in the Philippines and
introduce scripless or book-entry trading in the Philippines. On December 16, 1996, the PDTC
was granted a provisional license by the Philippine SEC to act as a central securities depository.
All listed securities at the PSE have been converted into book-entry settlement in the PDTC. The
depository service of the PDTC provides the infrastructure for lodgment (deposit) and upliftment
(withdrawal) of securities, pledge of securities, securities lending and borrowing and corporate
actions including shareholders’ meetings, dividend declarations and rights offerings. The PDTC
also provides depository and settlement services for non-PSE trades of listed equity securities.
For transactions on the PSE, the security element of the trade will be settled through the book-
entry system, while the cash element will be settled through the current settlement banks, BDO
Unibank, RCBC, Metrobank, DB, Unionbank, HSBC and Maybank.
In order to benefit from the book-entry system, securities must be immobilized into the PDTC
system through a process called lodgment. Lodgment is the process by which shareholders
transfer legal title (but not beneficial title) over their shares of stock in favor of PCD Nominee
Corporation (“PCD Nominee”), a corporation wholly owned by the PDTC whose sole purpose is
to act as nominee and legal title holder of all shares of stock lodged into the PDTC.
“Immobilization” is the process by which the warrant or share certificates of lodging holders are
cancelled by the transfer agent and the corresponding transfer of beneficial ownership of the
immobilized shares to PCD Nominee will be recorded in the Issuer’s registry. This trust
arrangement between the participants and PDTC through PCD Nominee is established by and
explained in the PDTC Rules and Operating Procedures approved by the Philippine SEC. No

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consideration is paid for the transfer of legal title to PCD Nominee. Once lodged, transfers of
beneficial title of the securities are accomplished via book-entry settlement.
Under the current PDTC system, only participants (e.g. brokers and custodians) will be
recognized by the PDTC as the beneficial owners of the lodged equity securities. Thus, each
beneficial owner of shares, through his participant, will be the beneficial owner to the extent of
the number of shares held by such participant in the records of the PCD Nominee. All lodgments,
trades and uplifts on these shares will have to be coursed through a participant. Ownership and
transfers of beneficial interests in the shares will be reflected, with respect to the participant’s
aggregate holdings, in the PDTC system, and with respect to each beneficial owner’s holdings, in
the records of the participants. Beneficial owners are thus advised that in order to exercise their
rights as beneficial owners of the lodged shares, they must rely on their participant-brokers
and/or participant custodians.
Any beneficial owner of shares who wishes to trade his interests in the shares must execute the
trade through a participant. The participant can execute PSE trades and non-PSE trades of lodged
equity securities through the PDTC system. All matched transactions in the PSE trading system
will be fed through the SCCP and into the PDTC system. Once it is determined on the settlement
date (T+3) that there are adequate securities in the securities settlement account of the
participant-seller and adequate cleared funds in the settlement bank account of the participant-
buyer, the PSE trades are automatically settled in the CCCS system, in accordance with the
SCCP and PDTC Rules and Operating Procedures. Once settled, the beneficial ownership of the
securities is transferred from the participant-seller to the participant-buyer without the physical
transfer of stock certificates covering the traded securities.
If a shareholder wishes to withdraw his stockholdings from the PDTC System, the PDTC has a
procedure of upliftment under which PCD Nominee will transfer back to the shareholder the
legal title to the shares lodged. The uplifting shareholder shall follow the Rules and Operating
Procedure of the PDTC for the upliftment of shares lodged under the name of PCD Nominee.
The transfer agent shall prepare and send a Registry Confirmation Advice to the PDTC covering
the new number of shares lodged under PCD Nominee. The expenses for upliftment are
generally on the account of the uplifting shareholder.
The difference between the depository and the registry would be on the recording of the shares in
the issuing corporations’ books. In the depository set-up, shares are simply immobilized, wherein
customers’ certificates are cancelled and a confirmation advice is issued in the name of PCD
Nominee Corp. Transfers among/between broker and/or custodian accounts, as the case may be,
will only be made within the book-entry system of PDTC. However, as far as the issuing
corporation is concerned, the underlying certificates are in the nominee’s name. In the registry
set-up, settlement and recording of ownership of traded securities will already be directly made
in the corresponding issuing company’s transfer agents’ books or system. Likewise, recording
will already be at the beneficiary level (whether it be a client or a registered custodian holding
securities for its clients), thereby removing from the broker its current “de facto” custodianship
role.

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AMENDED RULE ON LODGMENT OF SECURITIES
On June 24, 2009, the PSE apprised all listed companies and market participants through
Memorandum No. 2009-0320 that commencing on July 1, 2009, as a condition for the listing and
trading of the securities of an applicant company, the applicant company shall electronically
lodge its registered securities with the PDTC or any other entity duly authorized by the
Philippine SEC, without any jumbo or mother certificate, in compliance with the requirements of
Section 43 of the SRC. In compliance with the foregoing requirement, actual listing and trading
of securities on the scheduled listing date shall take effect only after submission by the applicant
company of the documentary requirements stated in Article III, Part A of the PSE’s Revised
Listing Rules.
For listing applications, the amended rule on lodgment of securities is applicable to:
• The offer shares/securities of the applicant company in the case of an initial public offering;

• The shares/securities that are lodged with the PDTC, or any other entity duly authorized by the
Commission in the case of a listing by way of introduction;

• New securities to be offered and applied for listing by an existing listed company; and

• Additional listing of securities of an existing listed company.

Pursuant to the said amendment, the PDTC issued an implementing procedure in support thereof
as follows:
“For new companies to be listed at the PSE as of July 1, 2009 the usual procedure will be
observed but the Transfer Agent of the companies shall no longer issue a certificate to PCD
Nominee Corp. but shall issue a Registry Confirmation Advice, which shall be the basis for the
PDTC to credit the holdings of the Depository Participants on listing date.”
“On the other hand, for existing listed companies, the PDTC shall wait for the advice of the
Transfer Agents that it is ready to accept surrender of PCNC jumbo certificates and upon such
advice the PDTC shall surrender all PCNC jumbo certificates to the Transfer Agents for
cancellation. The Transfer Agents shall issue a Registry Confirmation Advice to PCNC
evidencing the total number of shares registered in the name of PCNC in the issuer’s registry as
of confirmation date.”

ISSUANCE OF STOCK CERTIFICATES FOR CERTIFICATED SHARES

On or after the listing of the shares on the PSE, any beneficial owner of the shares may apply
with PDTC through his broker or custodian-participant for withdrawal from the book-entry
system and return to the conventional paper-based settlement. If a shareholder wishes to
withdraw his stockholdings from the PDTC system, the PDTC has a procedure of upliftment
under which the PCD Nominee will transfer back to the shareholder the legal title to the shares
lodged. The uplifting shareholder shall follow the Rules and Operating Procedures of the PDTC
for the uplifting of the shares lodged under the name of the PCD Nominee. The transfer agent
shall prepare and send a Registry Confirmation Advice to the PDTC covering the new number of
shares lodged under the PCD Nominee.

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Upon the issuance of stock certificates for the shares in the name of the person applying for
upliftment, such shares shall be deemed to be withdrawn from the PDTC book-entry settlement
system, and trading on such shares will follow the normal process for settlement of certificated
securities. The expenses for upliftment of the shares into certificated securities will be charged to
the person applying for upliftment. Pending completion of the upliftment process, the beneficial
interest in the shares covered by the application for upliftment is frozen and no trading and book-
entry settlement will be permitted until the relevant stock certificates in the name of the person
applying for upliftment shall have been issued by the relevant company’s transfer agent.

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 PHILIPPINE TAXATION

The following is a general description of certain Philippine tax aspects of the investment in the
Company. The following discussion is based on the laws, regulations, rulings, income tax
treaties, administrative practices and judicial decisions in effect as of the date of this Prospectus
and is subject to any changes in law or regulation occurring after such date, which changes can
be made on a retroactive basis. The following discussion does not purport to be a comprehensive
description of all of the tax considerations that may be relevant to a decision to purchase, own,
or dispose of the Common Shares.

The tax treatment of a prospective investor may vary depending on such investor’s particular
situation and certain investors may be subject to special rules not discussed below. This
summary does not purport to be a comprehensive description of all of the tax considerations that
may be relevant to a decision to invest in the shares and does not purport to deal with the tax
consequences applicable to all categories of investors, some of which (such as dealers in
securities) may be subject to special rates. This discussion does not provide information
regarding the tax aspects of acquiring, owning, holding or disposing of the shares under
applicable tax laws of other applicable jurisdictions and the specific Philippine tax consequence
in light of particular situations of acquiring, owning, holding and disposing of the shares in such
other jurisdictions.

EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR AS

TO THE PARTICULAR TAX CONSEQUENCES OF THE ACQUISITION,
OWNERSHIP AND DISPOSITION OF THE SHARES, INCLUDING THE
APPLICABILITY AND EFFECT OF LOCAL AND NATIONAL TAX LAWS

As used herein, the term “resident alien” refers to an individual whose residence is within the
Philippines and who is not a citizen thereof. A “non-resident alien” is an individual whose
residence is not within the Philippines and who is not a citizen thereof. A non-resident alien who
is actually within the Philippines for an aggregate period of more than 180 days during any
calendar year is considered a non-resident alien engaged in trade or business in the Philippines;
otherwise, such non-resident alien who is actually within the Philippines for an aggregate period
of 180 days or less during any calendar year is considered a non-resident alien not engaged in
trade or business in the Philippines. A “domestic corporation” is created or organized under the
laws of the Philippines; a “resident foreign corporation” is a non-Philippine corporation engaged
in trade or business in the Philippines; and a “non-resident foreign corporation” is a non-
Philippine corporation not engaged in trade or business in the Philippines.

This discussion incorporates the new tax rates provided under Republic Act No. 10693,
otherwise known as the Tax Reform for Acceleration and Inclusion (“TRAIN”) which took
effect on January 1, 2018. TRAIN amended and repealed certain provisions of the Tax Code on
individual income taxation, passive income taxation for both individuals and corporations, estate
tax, donor’s tax, value-added tax, excise tax and documentary stamp tax, among others.

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Corporate Income Tax

A domestic corporation is subject to a tax of 30% of its taxable income (gross income less
allowable deductions) from all sources within and outside the Philippines except, among other
things, (a) gross interest income from Philippine currency bank deposits and yield from deposit
substitutes, trust funds and similar arrangements as well as royalties from sources within the
Philippines which are generally taxed at the lower final withholding tax rate of 20% of the gross
amount of such income; and (b) interest income from a depository bank under the expanded
foreign currency deposit system which is subject to a final tax at the rate of 15% of such income.

A minimum corporate income tax of 2% of the gross income as of the end of the taxable year is
imposed on a domestic corporation beginning on the fourth taxable year immediately following
the year in which such corporation commenced its business operations, when the minimum
corporate income tax is greater than the ordinary corporate income tax.

Nevertheless, any excess of the minimum corporate income tax over the ordinary corporate
income tax shall be carried forward and credited against the latter for the three immediately
succeeding taxable years. Furthermore, subject to certain conditions, the minimum corporate
income tax may be suspended with respect to a corporation, which suffers losses on account of a
prolonged labor dispute, or because of force majeure, or because of legitimate business reverses.

Tax on Dividends

Cash and property dividends received from a domestic corporation by individual shareholders
who are either citizens or residents of the Philippines are subject to a final withholding tax at the
rate of 10%. Cash and property dividends received by non-resident alien individuals engaged in
trade or business in the Philippines are subject to a final withholding tax at 20% of the gross
amount, while cash and property dividends received by non-resident alien individuals not
engaged in trade or business in the Philippines are subject to a final withholding tax at 25% of
the gross amount, subject, however, to the applicable preferential tax rates under tax treaties
executed between the Philippines and the country of residence or domicile of such non-resident
foreign individuals.

Cash and property dividends received from a domestic corporation by another domestic
corporation or by resident foreign corporations are not subject to tax while those received by
non-resident foreign corporations are subject to withholding tax at the rate of 30%.

The 30% final withholding tax rate for inter-corporate cash and/or property dividends paid by a
domestic corporation to a non-resident foreign corporation may be reduced depending on the
country of domicile of the non-resident foreign corporation if it has an existing tax treaty with
the Philippines. A country with a tax treaty may have a reduced preferential tax rate, generally
25% depending on the provisions of the corresponding tax treaties. On the other hand, a country
without a tax treaty may be reduced to 15% if (i) the country in which the non-resident foreign
corporation is domiciled imposes no tax on foreign-sourced dividends or (ii) if the country of
domicile of the non-resident foreign corporation allows a credit equivalent to 15% for taxes
deemed to have been paid in the Philippines.

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Stock dividends distributed pro rata to any holder of shares of stock are not subject to Philippine
income tax. However, if the proportionate interests of the stockholders are changed, dividends
received are taxable as ordinary income in the year paid or accrued. The sale, exchange or
disposition of shares received as stock dividends by the holder is subject to either the capital
gains or stock transaction tax.

Philippine tax authorities have prescribed certain procedures, through an administrative issuance,
for availment of tax treaty relief. The Company shall withhold taxes at a reduced rate on
dividends to be paid to a non-resident holder, if such non-resident holder provides the Company
with the tax exemption certificate, ruling or opinion issued by the BIR confirming the tax treaty
relief or preferential rate, consularized proof of the non-resident holder’s legal domicile or
residence in the relevant treaty state, individual or corporate status (if applicable), and such other
supporting documents as may be required by the Company. Proof of legal domicile or residence
for an individual consists of certification from his embassy, consulate, or other equivalent
certifications issued by the proper government authority, or any other official document proving
residence. If the non-resident holder of Common Shares is a juridical entity, authenticated
certified true copies of its articles of incorporation or association issued by the proper
government authority should also be submitted to the BIR in addition to the certification of its
residence from the tax authority of its country of residence.

If the regular tax rate is withheld by the Company instead of the reduced rates applicable under a
treaty, the non-resident holder of the shares may file a claim for refund from the BIR. However,
because the refund process in the Philippines requires the filing of an administrative claim and
the submission of supporting information, and may also involve the filing of a judicial appeal, it
may be impractical to pursue such a refund.

Taxation on Sale, Exchange or Disposition of Shares

Capital gains tax

Net capital gains realized by a resident or non-resident other than a dealer in securities during
each taxable year from the sale, exchange or disposition of shares of stock in a Philippine
corporation listed at and effected outside of the facilities of the local stock exchange, are subject
to a 15% final withholding tax.

Gains from the sale or disposition of shares in a Philippine corporation may be exempt from
capital gains tax or subject to a preferential rate under a tax treaty. An application for tax treaty
relief must be filed (and approved) by the Philippine tax authorities in order to obtain such
exemption under a tax treaty. A prospective investor should consult its own tax adviser with
respect to the applicable rates under the relevant tax treaty.

The transfer of shares shall not be recorded in the books of the Company unless the BIR certifies
that the capital gains and documentary stamp taxes relating to the sale or transfer have been paid
or, where applicable, tax treaty relief has been confirmed by the International Tax Affairs
Division of the BIR in respect of the capital gains tax or other conditions have been met.

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Taxes on transfer of shares listed and traded at the local stock exchange

A sale, barter, exchange or other disposition of shares of stock listed at and effected through the
facilities of the PSE by a resident or a non-resident holder, other than a dealer in securities, is
subject to a stock transaction tax at the rate of 0.6% of the gross selling price or gross value in
cash of the shares of stock sold, bartered, exchanged or otherwise disposed, unless an applicable
treaty exempts such sale from the said tax. The stock transaction tax is classified as a percentage
tax and is paid in lieu of capital gains tax. In addition, a value added tax of 12% is imposed on
the commission earned by the PSE-registered broker who facilitated the sale, barter, exchange or
disposition through the PSE, and is generally passed on to the client.

On November 7, 2012, the BIR issued Revenue Regulations No. 16-2012 which provides that
the sale, barter, transfer, and/or assignment of shares of listed companies that fail to meet the
Minimum Public Ownership requirement after December 31, 2012 will be subject to capital
gains tax and documentary stamp tax. It also requires publicly listed companies to submit public
ownership reports to the BIR within 15 days after the end of each quarter.

On December 31, 2012, the Philippine SEC began imposing a trading suspension for a period of
not more than six months, on shares of a listed company that has not complied with the Rule on
Minimum Public Ownership which requires listed companies to maintain a minimum percentage
of listed securities held by the public at ten percent of the listed companies’ issued and
outstanding shares at all times. Companies which do not comply with the Minimum Public
Ownership requirement after the lapse of the trading suspension shall be automatically delisted.
The sale of such listed company’s shares during the trading suspension or such delisted company
may be effected only outside the trading system of the PSE and shall be subject to capital gains
tax and documentary stamp tax. Furthermore, if the fair market value of the shares of stock sold
is greater than the consideration or the selling price, the amount by which the fair market value
of the shares exceeds the selling price shall be deemed a gift that is subject to donor’s tax under
Section 100 of the Tax Code, provided that a sale of property made in the ordinary course of
business (a transaction which is bona fide and made on arm’s length, and free from any donative
intent) will be considered as made for an adequate and full consideration in money or money’s
worth.

Documentary Stamp Tax

The original issue of shares is subject to documentary stamp tax of ₱2.00 for each ₱200.00, or a
fractional part thereof, of the par value of the shares issued. The transfer of shares is subject to a
documentary stamp tax of ₱1.50 for each ₱200.00, or a fractional part thereof of the par value of
the shares transferred. However, the sale, barter or exchange of shares of stock listed and traded
through the local stock exchange shall not be subject to documentary stamp tax for a period of
five years from the effectiveness of Republic Act No. 9243 dated February 17, 2004. Please note
that the said exemption expired on March 20, 2009. However, Republic Act No. 9648 was issued
and that law permanently exempts the sale, barter or exchange of shares of stock listed and
traded through the local stock exchange from the documentary stamp tax, retroactive to
March 20, 2009.

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The Company’s issuance of primary shares is not subject to value added tax under Philippine
Law.

Estate and Gift Taxes

The transfer of shares of stock upon the death of an individual holder to his heirs by way of
succession, whether such holder was a citizen of the Philippines or an alien and regardless of
residence, is subject to 6% Philippine estate tax.

Individual and corporate holders, whether or not citizens or residents of the Philippines, who
transfer shares of stock by way of gift or donation are liable to pay 6% Philippine donors’ tax on
such a transfer of shares during the year exceeding ₱250,000.00.

Estate and donors’ taxes, however, shall not be collected in respect of intangible personal
property, such as shares of stock: (a) if the deceased at the time of his death or the donor at the
time of his donation was a citizen and resident of a foreign country which at the time of his death
or donation did not impose a transfer tax of any character, in respect of intangible personal
property of citizens of the Philippines not residing in that foreign country, or (b) if the laws of
the foreign country of which the deceased or donor was a citizen and resident at the time of his
death or donation allows a similar exemption from transfer or death taxes of every character or
description in respect of intangible personal property owned by citizens of the Philippines not
residing in that foreign country.

Taxation outside the Philippines

Shares of stock in a domestic corporation are considered under Philippine law as situated in the
Philippines and the gain derived from their sale is entirely from Philippine sources; hence such
gain is subject to Philippine income tax and capital gains tax and the transfer of such shares by
gift (donation) or succession is subject to the donors’ or estate taxes, each as described above.

The tax treatment of a non-resident holder of shares of stock in jurisdictions outside the
Philippines may vary depending on the tax laws applicable to such holder by reason of domicile
or business activities and such holder’s particular situation. This Prospectus does not discuss the
tax consideration on non-resident holders of shares of stock under laws other than those of the
Philippines.

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 PHILIPPINE FOREIGN EXCHANGE
AND FOREIGN OWNERSHIP CONTROLS

Registration of Foreign Investments and Exchange Controls

Under current BSP regulations, an investment in Philippine securities (such as the Offer Shares)
must be registered with the BSP if the foreign exchange needed to service the repatriation of
capital and the remittance of dividends, profits and earnings derived from such Shares is to be
sourced from the Philippine banking system. If the foreign exchange required to service capital
repatriation or dividend remittance is sourced outside the Philippine banking system, registration
is not required. BSP Circular No. 471 (Series of 2005), as amended, however, subjects foreign
exchange dealers, money changers and remittance agents to Republic Act No. 9160 or the Anti-
Money Laundering Act of 2001, as amended, and requires these non-bank sources of foreign
exchange to require foreign exchange buyers to submit supporting documents in connection with
their application to purchase foreign exchange for purposes of capital repatriation and remittance
of dividends.
The application for registration may be done directly with the BSP or through a custodian bank
duly designated by the foreign investor. A custodian bank may be a universal bank, commercial
bank or an offshore banking unit registered with the BSP to act as such and appointed by the
investor to register the investment, hold shares for the investor, and represent the investor in all
necessary actions in connection with his investments in the Philippines. Applications for
registration must be accompanied by: (1) purchase invoice, subscription agreement and/or proof
of listing on the PSE (for new/additional issues/stock rights); (2) original certificate of inward
remittance of foreign exchange and its conversion into Pesos through an authorized agent bank in
the prescribed format; and (3) Authority to Disclose in the prescribed format.
Upon registration of the investment with the BSP, proceeds of divestments, or dividends of
registered investments may be repatriated or remitted or remittable immediately and in full with
foreign exchange sourced from the Philippine banking system, net of applicable tax, without
need of BSP approval. Remittance is permitted upon presentation of: (1) the BSP registration
document; (2) the cash dividends notice from the PSE and the PCD printout of cash dividend
payment or computation of interest earned; (3) copy of the corporate secretary’s sworn statement
on the board resolution covering the dividend declaration; and (4) detailed computation of the
amount applied for in the format prescribed by the BSP. Pending reinvestment or registration,
divestment proceeds, as well as dividends of registered investments, may be lodged temporarily
in interest-bearing deposit accounts. Interest earned thereon, net of taxes, may also be remitted in
full. Remittance of divestment proceeds or dividends of registered investments may be
reinvested in the Philippines if the investments are registered with the BSP or the investor’s
custodian bank.
The foregoing is subject to the power of the BSP, through the Monetary Board and with the
approval of the President of the Philippines, to suspend temporarily or restrict the availability of
foreign exchange, require licensing of foreign exchange transactions or require delivery of
foreign exchange to the BSP or its designee when an exchange crisis is imminent, or in times of
national emergency. Furthermore, there can be no assurance that BSP foreign exchange
regulations will not be made more restrictive in the future.

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The registration with the BSP of all foreign investments in any Offer Shares shall be the
responsibility of the foreign investor.
Foreign Ownership Controls

The Philippine Constitution and related statutes set forth certain restrictions on foreign
ownership of companies that own land in the Philippines.
In connection with the ownership of private land, Article XII, Section 7 of the Philippine
Constitution, in relation to Article XII, Section 2 of the Philippine Constitution and Chapter 5 of
Commonwealth Act No. 141, states that no private land shall be transferred or conveyed except
to citizens of the Philippines or to corporations or associations organized under the laws of the
Philippines, at least 60% of whose capital is owned by such citizens.
Republic Act No. 7042, as amended, or the Foreign Investments Act of 1991, reserves to
Philippine Nationals all areas of investment in which foreign ownership is limited by mandate of
the Constitution and specific laws. Section 3(a) of said law defines a “Philippine National” as:
• A citizen of the Philippines;

• A domestic partnership or association wholly owned by citizens of the Philippines;

• A trustee of funds for pension or other employee retirement or separation benefits where the
trustee is a Philippine National and at least 60% of the fund will accrue to the benefit of Philippine
Nationals;

• A corporation organized under the laws of the Philippines of which at least 60% of the capital
stock outstanding and entitled to vote is owned and held by citizens of the Philippines; and

• A corporation organized abroad and registered as doing business in the Philippines under the
Corporation Code of the Philippines of which 100% of the capital stock outstanding and entitled to
vote is wholly owned by Filipinos.

However, the Foreign Investments Act of 1991 states that where a corporation (and its non-
Filipino shareholders) own stock in a Philippine SEC-registered enterprise, at least 60% of the
capital stock outstanding and entitled to vote of both the investing corporation and the investee
corporation must be owned and held by citizens of the Philippines. Further, at least 60% of the
members of the board of directors of both the investing corporation and the investee corporation
must be Philippine citizens in order for the investee corporation to be considered a Philippine
National.
On May 20, 2013, the Philippine SEC issued Memorandum Circular No. 8, Series of 2013 which
provided guidelines (the “Guidelines”) on compliance with the Filipino-Foreign ownership
requirements under the Philippine Constitution and other existing laws by corporations engaged
in nationalized or partly nationalized activities (the “Nationalized Corporations”). The
Guidelines provide that for purposes of determining compliance with the foreign equity
restrictions in Nationalized Corporations, the required percentage of Filipino ownership shall be
applied to both (a) the total number of outstanding shares of stock entitled to vote in the election
of directors, and (b) the total number of outstanding shares of stock, whether or not entitled to
vote in the election of directors.

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The Company owns land and is engaged in property development and, as such, is subject to
nationality restrictions found under the Philippine Constitution and other laws limiting such
activities to Philippine Nationals.

Compliance with the required ownership by Philippine Nationals of a corporation is to be

determined on the basis of outstanding capital stock whether fully paid or not.

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 PLAN OF DISTRIBUTION

At least 27,000,000 Offer Shares (the “Trading Participants and Retail Offer Shares”), or 20% of
the Firm Shares, are (subject to re-allocation as described below) being offered and sold by the
Domestic Lead Underwriters and Bookrunners at the Offer Price in the Philippines (the “Trading
Participants and Retail Offer”). Up to 108,000,000Offer Shares, or 80% of the Firm Shares, are
(subject to re-allocation as described below) being offered for subscription (i) outside the
Philippines to persons outside the United States by the International Bookrunners and Lead
Managers, and (ii) to certain qualified buyers in the Philippines, by the Domestic Lead
Underwriters and Bookrunners (the “Institutional Offer”). Any Institutional Offer Shares
allocated to buyers within the Philippines will be re-allocated to the Trading Participants and
Retail Offer for distribution by the Domestic Lead Underwriters and Bookrunners, based on
mutual agreement between the underwriters and the Company. The allocation of the Offer
Shares between the Trading Participants and Retail Offer and the Institutional Offer is subject to
adjustment as agreed between the Company, the International Bookrunners and Lead Managers
and the Domestic Lead Underwriters and Bookrunners. The International Bookrunners and Lead
Managers and the Domestic Lead Underwriters and Bookrunners will underwrite, on a firm
commitment basis, the Offer Shares, and will not organize a syndicate of sub-underwriters for
purposes of the Offer. There is no arrangement for either the Domestic Lead Underwriters and
Bookrunners or the International Bookrunners and Lead Managers to return any of the Offer
Shares relating to the Trading Participants and Retail Offer or the Institutional Offer to the
Company.

THE TRADING PARTICIPANTS AND RETAIL OFFER

The Trading Participants and Retail Offer Shares shall (subject to re-allocation as described
below) be offered by the Domestic Lead Underwriters and Bookrunners to the Selling Agents.
Based on the Company’s understanding of the PSE Rules on Additional Listing of Shares,
allocations to local small investors are required only for initial public offerings. Each PSE
Trading Participant shall initially be allocated approximately 204,500 Offer Shares (computed by
dividing the Trading Participants and Retail Offer Shares allocated to the PSE Trading
Participants among the 132 PSE Trading Participants) and subject to reallocation as may be
determined by the Domestic Lead Underwriters and Bookrunners. The remainder of 6,000 Offer
Shares, plus any Offer Shares allocated to the PSE Trading Participants but not taken up by
them, will be distributed by the Domestic Lead Underwriters and Bookrunners to their clients,
retail investors or the general public. Trading Participants and Retail Offer Shares not taken up
by the Selling Agents, the clients of the Domestic Lead Underwriters and Bookrunners, retail
investors or the general public shall be purchased by the Domestic Lead Underwriters and
Bookrunners.

To facilitate the Trading Participants and Retail Offer, the Company has appointed BPI Capital
Corporation and Maybank ATR Kim Eng Capital Partners, Inc. to act as the Domestic Lead
Underwriters and Bookrunners. The Company and the Domestic Lead Underwriters and
Bookrunners shall enter into a Domestic Underwriting Agreement to be dated on or about June
28, 2018, whereby the Domestic Lead Underwriters and Bookrunners agree to underwrite the
Trading Participants and Retail Offer Shares, subject to agreement between the Domestic Lead

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Underwriters and Bookrunners, the International Bookrunners and Lead Managers, on any
clawback, clawforward or other such mechanism, on a firm commitment basis.

BPI Capital Corporation (“BPI Capital”) offers investment banking services in the areas of
financial advisory, mergers and acquisitions, debt and equity underwriting, private placements,
project finance and loan syndication. Founded in December of 1994, BPI Capital is duly licensed
by the Philippine SEC to engage in the underwriting and distribution of securities. As of
December 31, 2017, BPI Capital had total assets of ₱3.46 billion, total liabilities of ₱0.10 billion
and total equity of ₱3.36 billion. The firm operates as a wholly owned subsidiary of the Bank of
the Philippine Islands.

Maybank ATR Kim Eng Capital Partners, Inc. (“Maybank ATRKE”) is a company incorporated
in the Philippines and registered with the Philippine SEC on September 4, 1990, primarily to
engage in corporate finance and financial and investment advisory services. In September 1993,
it obtained a license from the Philippine SEC to operate as an investment house. Maybank Kim
Eng Holdings Limited, a Singaporean conglomerate, is the parent company of Maybank ATR
Kim Eng, and its ultimate parent company is Malayan Banking Berhad, a corporation
incorporated in Malaysia. As of December 31, 2017, its total assets amounted to ₱4.0 billion and
its total stockholders’ equity amounted to ₱2.7 billion. It has an authorized capital stock of ₱1.0
billion, of which ₱870.7 million represents its issued and outstanding capital.

Other than as Domestic Lead Underwriters and Bookrunners in this Offer, none of BPI Capital
Corporation and Maybank ATR Kim Eng Capital Partners, Inc. has any other business
relationships with the Company at the present, although it may enter into such from time to time
in the future. None of the Domestic Lead Underwriters and Bookrunners is represented in the
Company’s Board of Directors, and neither is there a provision in the Domestic Underwriting
Agreement which would entitle any of the Domestic Lead Underwriters and Bookrunners to
representation in the Company’s Board of Directors as part of its compensation for underwriting
services.

On or before July 4, 2018, the PSE Trading Participants shall submit to the designated
representatives of the Domestic Lead Underwriters and Bookrunners or the Receiving Agent
their respective firm orders and commitments to purchase Offer Shares. Trading Participants and
Retail Offer Shares not taken up by the Selling Agents will be distributed by the Domestic Lead
Underwriters and Bookrunners directly to their clients and the general public and whatever
remains will be purchased by the Domestic Lead Underwriters and Bookrunners.

The Domestic Lead Underwriters and Bookrunners shall receive from the Company a fee
equivalent to 1.5% of the gross proceeds of the Trading Participants and Retail Offer, inclusive
of the amounts to be paid to the Selling Agents. The underwriting fees shall be withheld by the
Domestic Lead Underwriters and Bookrunners from the proceeds of the Trading Participants and
Retail Offer. Selling Agents who take up Trading Participants and Retail Offer Shares shall be
entitled to a selling fee of 0.25% of the Trading Participants and Retail Offer Shares taken up and
purchased by the relevant Selling Agents. The selling fee, less a withholding tax of 10%, will be
paid by the Domestic Lead Underwriters and Bookrunners to the Selling Agents within ten
banking days of the Listing Date. All of the Trading Participants and Retail Offer Shares are or
shall be lodged with the PDTC and shall be issued to the Selling Agents in scripless form. The

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Selling Agents may maintain the Trading Participants and Retail Offer Shares in scripless form
or opt to have the stock certificates issued to them by requesting an upliftment of the relevant
Trading Participants and Retail Offer Shares from the PDTC’s electronic system after the closing
of the Trading Participants and Retail Offer.

THE INSTITUTIONAL OFFER

The Institutional Offer Shares will be offered for subscription (i) outside the Philippines and the
United States in offshore transactions by the International Bookrunners and Lead Managers in
offshore transactions in reliance on Regulation S under the U.S. Securities Act, and (ii) to certain
qualified buyers in the Philippines by the Domestic Lead Underwriters and Bookrunners in
reliance on Regulation S under the U.S. Securities Act. Any Institutional Offer Shares allocated
to buyers within the Philippines will be re-allocated to the Trading Participants and Retail Offer
for distribution by the Domestic Lead Underwriters and Bookrunners, based on mutual
agreement between the International Bookrunners and Lead Managers, the Domestic Lead
Underwriters and Bookrunners and the Company. The International Bookrunners and Lead
Managers will not be involved in the offer of, or underwrite, any Offer Shares in the
Philippines. The allocation of the Offer Shares between the Trading Participants and Retail
Offer and the Institutional Offer is subject to adjustment as agreed between the Company, the
International Bookrunners and Lead Managers and the Domestic Lead Underwriters and
Bookrunners. In the event of an under-application in the Institutional Offer and a corresponding
over-application in the Trading Participants and Retail Offer, Firm Shares in the Institutional
Offer may be reallocated to the Trading Participants and Retail Offer. If there is an under-
application in the Trading Participants and Retail Offer and if there is a corresponding over-
application in the Institutional Offer, Firm Shares in the Trading Participants and Retail Offer
may be reallocated to the Institutional Offer. The reallocation shall not apply in the event of
over-application or under-application in both the Trading Participants and Retail Offer, on the
one hand, and the Institutional Offer, on the other hand.

The International Underwriting Agreement to be dated on or about June 28, 2018, entered into
among the Company and the International Bookrunners and Lead Managers is subject to certain
conditions and may be subject to termination by the International Bookrunners and Lead
Managers if certain circumstances, including force majeure, occur on or before the Offer Shares
are listed on the PSE. Under the terms and conditions of the International Underwriting
Agreement, each of the International Bookrunners and Lead Managers has agreed, severally and
not jointly, to procure purchasers for or failing which to purchase the respective number of
Institutional Offer Shares indicated in the following table. In addition, pursuant to the Domestic
Underwriting Agreement, each of the Domestic Lead Underwriters and Bookrunners agrees to
underwrite, on a firm commitment basis, the respective number of Institutional Offer Shares
indicated in the following table, subject to agreement between the International Bookrunners and
Lead Managers and the Domestic Lead Underwriters and Bookrunners on any clawback,
clawforward or other such mechanism relating to reallocation of the Offer Shares between the
Institutional Offer and the Trading Participants and Retail Offer.
Number of Institutional
Offer Shares
BPI Capital Corporation ...................................................................... 20,250,000
Credit Suisse (Singapore) Limited ....................................................... 33,750,000

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Maybank Kim Eng Securities Pte. Ltd. ............................................... 20,250,000
UBS AG, Singapore Branch ................................................................ 33,750,000

The table above does not reflect the exercise of the Over-Allotment Option that may or may not
be exercised by BPI Capital Corporation as Stabilizing Agent to purchase up to 15,000,000
additional Common Shares.

The International Bookrunners and Lead Managers and their affiliates have not engaged in
transactions with, and have not performed various investment banking, commercial banking and
other services for, the Company, and their respective subsidiaries and affiliates in the past but
may do so from time to time in the future. However, all services provided by the International
Bookrunners and Lead Managers, including in connection with the Offer, have been provided as
independent contractors and not as fiduciaries to the Company. The International Bookrunners
and Lead Managers do not have any right to designate or nominate a member of the Board. The
Lead Managers have no direct relationship with the Company in terms of share ownership and,
other than as International Bookrunners and Lead Managers for the Offer, do not have any
material relationship with the Company.

Investors in the Institutional Offer will be required to pay, in addition to the Offer Price, a
brokerage fee of up to 1% of the Offer Price.

THE OVER-ALLOTMENT OPTION

In connection with the Offer, subject to the approval of the Philippine SEC, the Company has
granted the Stabilizing Agent an Over-allotment Option, exercisable in whole or in part to
purchase up to an additional 15,000,000 Common Shares at the Offer Price and on the same
terms and conditions as the Firm Shares, as set forth herein, from time to time for a period which
shall not exceed 30 calendar days from and including the Listing Date. In connection therewith,
the Company has entered into a Greenshoe Agreement with the Stabilizing Agent to utilize up to
an additional 15,000,000 new Common Shares to cover over-allocations under the Institutional
Offer. Any Common Shares that may be delivered to the Stabilizing Agent under the Greenshoe
Agreement will be re-delivered to the Company either through the purchase of Common Shares
in the open market by the Stabilizing Agent in the conduct of stabilization activities or through
the exercise of the Over-allotment Option by the Stabilizing Agent. The Optional Shares may be
over-allotted and the Stabilizing Agent may effect price stabilization transactions for a period
beginning on or after the Listing Date, but extending no later than 30 days from the Listing Date.
The Stabilizing Agent may purchase Common Shares in the open market only if the market price
of the Common Shares falls below the Offer Price. Such activities may stabilize, maintain or
otherwise affect the market price of the Common Shares, which may have the effect of
preventing a decline in the market price of the Common Shares and may also cause the price of
the Common Shares to be higher than the price that otherwise would exist in the open market in
the absence of these transactions. If the Stabilizing Agent commences any of these transactions,
it may discontinue them at any time. Once the Over-allotment Option has been fully exercised
by the Stabilizing Agent, it will no longer be allowed to purchase Common Shares in the open
market for the conduct of stabilization activities. To the extent the Over-allotment Option is not
fully exercised by the Stabilizing Agent, the same shall be deemed cancelled.

255
#4820-0962-9519v70
LOCK-UP

The Company and the DD Majority Shareholders have agreed with the International
Bookrunners and Lead Managers and Domestic Lead Underwriters and Bookrunners that, except
in connection with the Over-allotment Option, they will not, without the prior written consent of
the International Bookrunners and Lead Managers and Domestic Lead Underwriters and
Bookrunners, issue, offer, pledge, sell, contract to sell, pledge or otherwise dispose of (or
publicly announce any such issuance, offer, sale or disposal of) any Common Shares or securities
convertible or exchangeable into or exercisable for any Common Shares or warrants or other
rights to purchase Common Shares or any security or financial product whose value is
determined directly or indirectly by reference to the price of the underlying securities, including
equity swaps, forward sales and options for a period of 180 days after the listing of the Offer
Shares.

SELLING RESTRICTIONS

Philippines

No securities, except of a class exempt under Section 9 of the SRC or unless sold in any
transaction exempt under Section 10 thereof, shall be sold or distributed by any person within the
Philippines, unless such securities shall have been registered with the Philippine SEC on
Form 12-1 and the registration statement has been declared effective by the Philippine SEC.

256
#4820-0962-9519v70
 LEGAL MATTERS

Certain legal matters as to Philippine law relating to the Offer will be passed upon by Martinez
Vergara Gonzalez & Serrano, Philippine legal counsel to the Company, and Puyat Jacinto &
Santos, Philippine legal counsel to the International Bookrunners and Lead Managers and the
Domestic Lead Underwriters and Bookrunners. Certain legal matters as to United States federal
law and New York State law will be passed upon by Milbank, Tweed, Hadley & McCloy, United
States legal counsel to the International Bookrunners and Lead Managers and the Domestic Lead
Underwriters and Bookrunners.

Each of the foregoing legal counsel has neither shareholdings in the Company nor any right,
whether legally enforceable or not, to nominate persons or to subscribe for securities in the
Company. None of the legal counsel will receive any direct or indirect interest in the Company
or in any securities thereof (including options, warrants or rights thereto) pursuant to or in
connection with the Offer. None of the foregoing legal counsels is a promoter, underwriter,
voting trustee, director, officer or employee of the Company.

257
#4820-0962-9519v70
 INDEPENDENT AUDITORS

R.G. Manabat & Co. (“RGM”), a member firm of KPMG International, has audited and rendered
an unqualified audit report on the Company’s consolidated financial statements as of and for the
years ended December 31, 2017, 2016 and 2015 and has reviewed and rendered an unqualified
review report on the Company’s consolidated financial statements as of and for the three months
ended March 31, 2018.

RGM has acted as the Company’s external auditor since 2012. Darwin P. Virocel is the current
audit partner for the Company and has served as such since September 2016. The Company has
not had any material disagreements on accounting and financial disclosures with its current
external auditor for the same periods or any subsequent interim period. RGM has neither
shareholdings in the Company nor any right, whether legally enforceable or not, to nominate
persons or to subscribe for the securities of the Company. RGM will not receive any direct or
indirect interest in the Company or its securities (including options, warrants or rights thereto)
pursuant to or in connection with the Offer. RGM is not a promoter, underwriter, voting trustee,
director, officer or employee of the Company. The foregoing is in accordance with the Code of
Ethics for Professional Accountants in the Philippines set by the Board of Accountancy and
approved by the Professional Regulation Commission.

The following table sets out the aggregate fees billed for each of the last two years for
professional services rendered by RGM, excluding fees directly related to the Offer.
2016 2017
(₱)
Audit and Audit-Related Fees(1)..................................................... 7,587,400 8,164,000
All Other Fees(2) ............................................................................. 1,034,400 1,122,300
Total ............................................................................................... 8,621,800 9,286,300

__________________
Notes:

(1) Audit and Audit-Related Fees. This category includes the audit of annual financial statements, review of interim financial statements
and services that are normally provided by the independent auditor in connection with statutory and regulatory filings or engagements
for those calendar years.

(2) All other fees above include out-of-pocket expenses incidental to the independent auditors’ work, the amounts of which do not exceed
15% of the agreed-upon engagement fees.

In relation to the audit of the Company’s annual financial statements, the Company’s Corporate
Governance Manual, which was approved by the Board of Directors on November 12, 2013,
provides that the audit committee shall, among other activities (i) evaluate significant issues
reported by the external auditors in relation to the adequacy, efficiency and effectiveness of
policies, controls, processes and activities of the Company; (ii) ensure that other non-audit work
provided by the external auditors are not in conflict with their functions as external auditors; and
(iii) ensure the compliance of the Company with acceptable auditing and accounting standards
and regulations.

258
#4820-0962-9519v70
 INDEX TO FINANCIAL STATEMENTS

Page

INDEPENDENT AUDITORS’ REVIEW REPORT AS OF MARCH 31, 2017 AND

2018, AND FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2018 ............ F-3

REVIEWED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF

FINANCIAL POSITION ....................................................................................................... F-5

REVIEWED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF

COMPREHENSIVE INCOME ............................................................................................. F-7

REVIEWED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF

CHANGES IN EQUITY........................................................................................................ F-8

REVIEWED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH

FLOWS .................................................................................................................................. F-9

NOTES TO REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL

STATEMENTS.................................................................................................................... F-11

REPORT OF INDEPENDENT AUDITORS ON SUPPLEMENTARY INFORMATION ..... F-41

INDEPENDENT AUDITORS’ AUDIT REPORT AS OF DECEMBER 31, 2017 AND

2016, AND FOR THE THREE YEARS ENDED DECEMBER 31, 2017 ......................... F-69

AUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ....................... F-75

AUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ............. F-77

AUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ........................ F-79

AUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS ...................................... F-81

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS ............................ F-83

REPORT OF INDEPENDENT AUDITORS ON SUPPLEMENTARY INFORMATION ... F-160

F-I
#4820-0962-9519v70
F-1
DOUBLEDRAGON PROPERTIES CORP. AND
SUBSIDIARIES

CONDENSED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS
As of March 31, 2018 and December 31, 2017 and
For the Three Months Ended March 31, 2018 and 2017

F-2
F-3
F-4
 DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL
POSITION

March 31, December 31,

2018 2017
Note (Unaudited) (Audited)
ASSETS
Current Assets
Cash and cash equivalents P1,301,664,277 P2,100,423,876
Receivables - net 3,719,309,870 3,419,400,769
Inventories 8 3,929,271,379 3,819,534,025
Due from related parties 14 103,414,592 103,522,051
Prepaid expenses and other current assets - net 4,299,238,942 4,822,541,217
Total Current Assets 13,352,899,060 14,265,421,938
Noncurrent Assets
Receivables - net of current portion 304,083,379 230,721,735
Property and equipment - net 1,010,355,837 1,009,930,629
Goodwill and intangible assets 9 1,321,701,563 1,313,752,483
Investment property 10 50,075,809,415 46,423,547,456
Deferred tax assets 276,379,562 263,343,007
Other noncurrent assets 847,346,494 822,599,878
Total Noncurrent Assets 53,835,676,250 50,063,895,188
P67,188,575,310 P64,329,317,126

LIABILITIES AND EQUITY

Current Liabilities
Accounts payable and other current liabilities P4,924,181,819 P4,057,604,344
Short-term loans payable and current maturities
of long-term notes payable, net of debt issue
costs 12 4,152,072,205 3,452,170,869
Due to related parties 14 946,358,168 944,720,411
Customers’ deposits 438,642,558 125,696,948
Dividends payable 177,116,771 152,131,628
Income tax payable 63,629,587 23,169,126
Total Current Liabilities 10,702,001,108 8,755,493,326
Noncurrent Liabilities
Long-term notes payable - net of
current maturities and debt issue
costs 12 14,662,496,771 14,727,597,945
Bonds payable - net of bond issue costs 12 14,799,339,265 14,795,304,275
Deferred tax liabilities 3,142,166,270 2,849,087,621
Retirement benefits liability 8,561,109 7,674,749
Other noncurrent liabilities 1,000,632,558 878,398,558
Total Noncurrent Liabilities 33,613,195,973 33,258,063,148
Total Liabilities 44,315,197,081 42,013,556,474
Forward

F-5
 March 31 December 31
2018 2017
Note (Unaudited) (Audited)
Equity Attributable to Equity Holders of the
Parent Company
Capital stock P10,222,973,000 P10,222,973,000
Additional paid-in capital 1,358,237,357 1,358,237,357
Retained earnings 2,884,183,509 2,571,883,195
Remeasurement loss on defined benefit liability -
net of tax 1,876,396 1,876,396
14,467,270,262 14,154,969,948
Non-controlling Interests 8,406,107,967 8,160,790,704
Total Equity P22,873,378,229 22,315,760,652
P67,188,575,310 P64,329,317,126

See Notes to the Condensed Consolidated Interim Financial Statements.

F-6
 DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF
COMPREHENSIVE INCOME
(UNAUDITED)

For the Three Months Ended March 31

Note 2018 2017
INCOME
Rent income P409,714,295 P104,540,511
Real estate sales 241,662,493 400,021,647
Hotel revenues 121,670,172 89,642,706
Leasehold rights’ sales - 24,082,143
Unrealized gains from changes in fair
values of investment property 10 851,857,693 -
Interest income 119,898,218 9,252,953
Income from forfeitures 2,417,806 2,021,436
Others 83,030,079 19,404,993
1,830,250,756 648,966,389
COSTS AND EXPENSES
Cost of real estate sales 8 131,405,678 165,669,975
Cost of hotel operations 8 90,914,748 62,924,829
Cost of leasehold rights - 4,133,652
Selling expenses 50,745,231 50,299,035
General and administrative expenses 295,579,166 161,898,583
Interest expense 187,727,811 15,809,797
756,372,634 460,735,871
INCOME BEFORE INCOME TAX 1,073,878,122 188,230,518
INCOME TAX EXPENSE 6 329,317,293 22,565,135
NET INCOME/TOTAL
COMPREHENSIVE INCOME P744,560,829 P165,665,383

Net income/ total comprehensive

income attributable to:
Equity holders of the Parent
Company P524,241,818 P149,412,354
Non-controlling interest 220,319,011 16,253,029
P744,560,829 P165,665,383

Earnings (Loss) Per Share 7

Basic P0.1625 (P0.0056)
Diluted P0.1623 (P0.0056)
See Notes to the Condensed Consolidated Interim Financial Statements.

F-7
 DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
(UNAUDITED)

Equity Attributable to Equity Holders of the Parent Company

Remeasurement
Capital Stock Loss on Defined Non-
Common Preferred Additional Retained Benefit Liability - Controlling
Note Shares Shares Paid-in Capital Earnings net of tax Total Interests Total Equity
As of January 1, 2018 P222,973,000 P10,000,000,000 P1,358,237,357 P2,571,883,195 P1,876,396 P14,154,969,948 P8,160,790,704 P22,315,760,652
Net income for the period - - - 499,243,566 - 499,243,566 220,319,011 719,562,577
Cash dividends declared 11 - - - (186,943,252) - (186,943,252) 24,998,252 (161,945,000)
Balance as of March 31, 2018 P222,973,000 P10,000,000,000 P1,358,237,357 P2,884,183,509 P1,876,396 P14,467,270,262 P8,406,107,967 P22,873,378,229

As of January 1, 2017 P222,973,000 P10,000,000,000 P1,358,237,357 P1,578,127,905 (P2,602,254) P13,156,736,008 P7,061,567,578 P20,218,303,586
Net income for the period - - - 165,665,383 - 165,665,383 16,253,029 181,918,412
Dividends declared 11 - - - (161,945,000) - (161,945,000) - (161,945,000)
Balance as of March 31, 2017 P222,973,000 P 10,000,000,000 P1,358,237,357 P1,581,848,288 (P2,602,254) P13,160,456,391 P7,077,820,607 P20,238,276,998

See Notes to the Condensed Consolidated Interim Financial Statements.

F-8
 DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(UNAUDITED)

For the Three Months Ended

March 31
Note 2018 2017
CASH FLOWS FROM OPERATING
ACTIVITIES
Income before income tax P1,073,878,122 P188,230,518
Adjustments for:
Unrealized gains from changes
in fair values of investment property (851,857,693) -
Interest expense 187,727,811 15,809,797
Interest income (119,898,218) (9,252,953)
Depreciation and amortization 34,864,564 12,872,790
Operating income before working capital
changes 324,714,586 207,660,152
Decrease (increase) in:
Receivables (299,909,101) (35,254,402)
Inventories 8 (109,737,354) (67,581,467)
Due from related parties 14 107,459 (305,243,360)
Prepaid expenses and other current
assets 523,302,275 292,228,443
Increase (decrease) in:
Accounts payable and other current
liabilities 866,577,475 95,977,767
Customers’ deposits 312,945,610 (70,118,876)
Due to related parties 14 1,637,757 215,931,912
Cash generated from operations 1,619,638,707 333,600,169
Interest received 3,655,076 9,252,953
Interest paid (480,045,295) (272,300,366)
Net cash provided by operating activities 1,143,248,488 70,552,756

CASH FLOWS FROM INVESTING

ACTIVITIES
Additions to:
Property and equipment (278,652,755) (25,236,030)
Intangible assets 9 (641,142) -
Investment property 10 (2,221,278,496) (2,274,053,735)
Increase in other noncurrent assets (24,746,616) (499,589,273)
Net cash used in investing activities (2,525,319,009) (2,798,879,038)
Forward

F-9
 For the Three Months Ended
March 31
Note 2018 2017
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from availment of notes, net of
debt issue costs P628,000,000 P750,000,000
Payments of:
Notes 12 - (1,096,000,000)
Dividends 11 (166,923,078) (161,945,000)
Increase in other noncurrent liabilities 122,234,000 47,310,139
Net cash provided by (used in) financing
activities 583,310,922 (460,634,861)

NET DECREASE IN CASH AND CASH

EQUIVALENTS (798,759,599) (3,188,961,143)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 2,100,423,876 5,466,874,377
CASH AND CASH EQUIVALENTS AT END
OF PERIOD P1,301,664,277 P2,277,913,234

See Notes to the Condensed Consolidated Interim Financial Statements.

F-10
 DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS

1. Reporting Entity

DoubleDragon Properties Corp., (“DD” or the “Parent Company”), was incorporated

and registered with the Philippine Securities and Exchange Commission (SEC) on
December 9, 2009 primarily to engage in the business of real estate development
including but not limited to residential and condominium projects, to acquire by
purchase or lease land and interest in land, to own, hold, impose, promote, develop,
subdivide and manage any land owned, held or occupied by the Parent Company, to
construct, manage or administer buildings such as condominiums, apartments,
hotels, restaurants, stores or other structures and to mortgage, sell, lease or
otherwise dispose of land, interests in land and buildings or other structures at any
time.

The Parent Company’s shares are listed in the Philippine Stock Exchange (“PSE”)
on April 7, 2014 under the stock symbol “DD”.

On June 23, 2015, the SEC approved the change in the Parent Company’s
registered office address to DD Meridian Park Bay Area, Corner Macapagal Avenue
and EDSA Extension Boulevard, Brgy. 76 Zone 10, San Rafael, Pasay City, Metro
Manila. The Parent Company also maintains its corporate office at 10th Floor,
DoubleDragon Plaza, DD Meridian Park Bay Area, Corner Macapagal Avenue and
EDSA Extension Boulevard, Pasay City, Metro Manila.

2. Basis of Preparation

The condensed consolidated interim financial statements have been prepared in

accordance with Philippine Accounting Standards (PAS) 34, Interim Financial
Reporting. Selected explanatory notes are included to explain events and
transactions that are significant to the understanding of the changes in financial
position and performance of the Group since the last annual consolidated financial
statements as at and for the year ended December 31, 2017. The condensed
consolidated interim financial statements do not include all the information required
for a complete set of financial statements in accordance with Philippine Financial
Reporting Standards (PFRS), and should be read in conjunction with the audited
consolidated financial statements of DoubleDragon Properties Corp. and
Subsidiaries (collectively referred to as the “Group”) as at and for the year ended
December 31, 2017. The audited consolidated financial statements are available
upon request from the Group’s registered office at DD Meridian Park Bay Area,
Corner Macapagal Avenue and EDSA Extension Boulevard, Brgy. 76 Zone 10, San
Rafael, Pasay City, Metro Manila.

The condensed consolidated interim financial statements were prepared solely for
the information and use by the management of DD and is not intended to be, and
should not be used by anyone other than for the specified purpose.

The condensed consolidated interim financial statements were approved and

authorized for issuance by the Board of Directors (BOD) on May 15, 2018.

F-11
 The condensed consolidated interim financial statements are presented in Philippine
peso and all values are rounded off to the nearest peso, except when otherwise
indicated.

3. Summary of Significant Accounting Policies

Except as described below, the accounting policies applied by the Group in these
condensed consolidated interim financial statements are the same as those applied
by the Group in its consolidated financial statements as of and for the year ended
December 31, 2017. The following changes in accounting policies are also expected
to be reflected in the Group’s consolidated financial statements as of and for the year
ended December 31, 2018.

Adoption of New or Revised Standards, Amendments to Standards and

Interpretations
The Group has adopted the following amendments to standards starting January 1,
2018 and accordingly changed its accounting policies. Except as otherwise
indicated, the adoption of these amendments to standards did not have any
significant impact on the Group’s condensed consolidated interim financial
statements.

ƒ PFRS 9 Financial Instruments (2014). PFRS 9 (2014) replaces PAS 39 Financial

Instruments: Recognition and Measurement and supersedes the previously
published versions of PFRS 9 that introduced new classifications and
measurement requirements (in 2009 and 2010) and a new hedge accounting
model (in 2013). PFRS 9 includes revised guidance on the classification and
measurement of financial assets, including a new expected credit loss model for
calculating impairment, guidance on own credit risk on financial liabilities
measured at fair value and supplements the new general hedge accounting
requirements published in 2013. PFRS 9 incorporates new hedge accounting
requirements that represent a major overhaul of hedge accounting and
introduces significant improvements by aligning the accounting more closely with
risk management.

The Group has adopted PFRS 9 and has not restated the comparative
information. The adoption of PFRS 9 did not have any significant effect on the
classification and measurement of financial assets and financial liabilities of the
Group. The Group is currently completing the expected credit loss model under
PFRS 9 on the impairment of financial assets, but it is not expected to have
significant impact on the condensed consolidated interim financial statements.

ƒ Classification and Measurement of Share-based Payment Transactions

(Amendments to PFRS 2). The amendments cover the following areas:

x Measurement of cash-settled awards. The amendments clarifies that a cash-

settled share-based payment is measured using the same approach as for
equity-settled share-based payments - i.e., the modified grant date method.

x Classification of awards settled net of tax withholdings. The amendments

introduce an exception stating that, for classification purposes, a share-
based payment transaction with employees is accounted for as equity-settled
if:

-2-

F-12
 o the terms of the arrangement permit or require a company to settle the
transaction net by withholding a specified portion of the equity
instruments to meet the statutory tax withholding requirement (the net
settlement feature); and

o the entire share-based payment transaction would otherwise be

classified as equity-settled if there were no net settlement feature.

The exception does not apply to equity instruments that the company
withholds in excess of the employee’s tax obligation associated with the
share-based payment.

x Modification of awards from cash-settled to equity settled. The amendments

clarify that when a share-based payment is modified from cash-settled to
equity-settled, at modification date, the liability for the original cash-settled
share-based payment is derecognized and the equity-settled share-based
payment is measured at its fair value, recognized to the extent that the goods
or services have been received up to that date. The difference between the
carrying amount of the liability derecognized, and the amount recognized in
equity, is recognized in profit or loss immediately.

x PFRS 15 Revenue from Contracts with Customers replaces PAS 11

Construction Contracts, PAS 18 Revenue, IFRIC 13 Customer Loyalty
Programmes, IFRIC 18 Transfer of Assets from Customers and SIC-31
Revenue - Barter Transactions Involving Advertising Services. The new standard
introduces a new revenue recognition model for contracts with customers which
specifies that revenue should be recognized when (or as) a company transfers
control of goods or services to a customer at the amount to which the company
expects to be entitled. Depending on whether certain criteria are met, revenue is
recognized over time, in a manner that best reflects the company’s performance,
or at a point in time, when control of the goods or services is transferred to the
customer. The standard does not apply to insurance contracts, financial
instruments or lease contracts, which fall in the scope of other PFRSs. It also
does not apply if two companies in the same line of business exchange non-
monetary assets to facilitate sales to other parties. Furthermore, if a contract with
a customer is partly in the scope of another PFRS, then the guidance on
separation and measurement contained in the other PFRS takes precedence.

The adoption of the standard did not have a material effect on the condensed
consolidated interim financial statements.

ƒ Transfers of Investment Property (Amendments to PAS 40) amends the

requirements on when an entity should transfer a property asset to, or from,
investment property. A transfer is made when and only when there is an actual
change in use - i.e., an asset meets or ceases to meet the definition of
investment property and there is evidence of the change in use. A change in
management intention alone does not support a transfer.

Standards Issued but Not Yet Adopted

A number of new standards, amendments to standards and interpretation are
effective for annual periods beginning after January 1, 2018. The Group has not
applied the following new standards, amendments to standards and interpretation in
preparing these consolidated financial statements. Unless otherwise stated, none of
these are expected to have a significant impact on the Group’s condensed
consolidated interim financial statements.

-3-

F-13
 Effective January 1, 2019

ƒ PFRS 16 Leases supersedes PAS 17 Leases and the related Philippine

Interpretations. The new standard introduces a single lease accounting model for
lessees under which all major leases are recognized on-balance sheet, removing
the lease classification test. Lease accounting for lessors essentially remains
unchanged except for a number of details including the application of the new
lease definition, new sale-and-leaseback guidance, new sub-lease guidance and
new disclosure requirements. Practical expedients and targeted reliefs were
introduced including an optional lessee exemption for short-term leases (leases
with a term of 12 months or less) and low-value items, as well as the permission
of portfolio-level accounting instead of applying the requirements to individual
leases. New estimates and judgmental thresholds that affect the identification,
classification and measurement of lease transactions, as well as requirements to
reassess certain key estimates and judgments at each reporting date were
introduced.

PFRS 16 is effective for annual periods beginning on or after January 1, 2019.

Earlier application is permitted for entities that apply PFRS 15 Revenue from
Contracts with Customers at or before the date of initial application of PFRS 16.

The management of the Group is currently assessing the potential impact of

PFRS 16 on their current lease arrangements.

Deferral of the Local Implementation of Amendments to PFRS 10 and PAS 28: Sale
or Contribution of Assets between an Investor and its Associate or Joint Venture

ƒ Sale or Contribution of Assets between an Investor and its Associate or Joint

Venture (Amendments to PFRS 10 and PAS 28). The amendments address an
inconsistency between the requirements in PFRS 10 and in PAS 28, in dealing
with the sale or contribution of assets between an investor and its associate or
joint venture.

The amendments require that a full gain or loss is recognized when a transaction
involves a business (whether it is housed in a subsidiary or not). A partial gain or
loss is recognized when a transaction involves assets that do not constitute a
business, even if these assets are housed in a subsidiary.

Originally, the amendments apply prospectively for annual periods beginning on

or after January 1, 2016 with early adoption permitted. However, on January 13,
2016, the FRSC decided to postpone the effective date of these amendments
until the IASB has completed its broader review of the research project on equity
accounting that may result in the simplification of accounting for such
transactions and of other aspects of accounting for associates and joint ventures.

4. Use of Judgments and Estimates

In preparing the condensed consolidated interim financial statements, management

has made judgements and estimates that affect the application of accounting policies
and the reported amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.

The significant judgments made by management in applying the Group’s accounting

policies and the key sources of estimation uncertainty were the same as those the
applied to the consolidated financial statements as at and for the year ended
December 31, 2017.

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F-14
5. Segment Information

Operating Segments
The reporting format of the Group’s operating segments is determined based on the
Group’s risks and rates of return which are affected predominantly by differences in
the products and services produced. The operating businesses are organized and
managed separately according to the nature of the products produced and services
provided, with each segment representing a strategic business unit that offers
different products and serves different markets.

The Group’s reportable segments are real estate development, leasing, and
hospitality. The real estate development segment is engaged in the development of
real estate assets to be held as trading inventory and for sale. This segment was
developed as part of the Group's tactical approach to early stage growth, as part of
that plan we will be transitioning out of this segment once the current inventory has
been fully sold. The leasing and hospitality segments which are focused in recurring
revenue will be the core pillars of the Group's growth plans moving forward. The
leasing segment is engaged in the acquisition and/or development of real estate
assets in the retail, office and industrial sector that are held for rentals. The
hospitality segment is engaged in the acquisition and/or development of hotels which
will be managed and operated the Group. The hospitality segment includes the
development of a homegrown hotel brand with a unique sale-and-manage business
model.

Others pertain to the segments engaged in marketing, property management

activities and hotel operations.

Management monitors the operating results of its business units separately for the
purpose of making decisions about resource allocation and performance
assessment. Segment performance is evaluated based on operating profit or loss
and is measured consistently with the operating profit or loss in the consolidated
financial statements.

The Group has three significant reportable segments for 2018 and 2017, namely the
real estate development, leasing, and hospitality.

Segment Assets and Liabilities

Segment assets include all operating assets used by a segment and consist primarily
of operating cash, receivables, real estate inventories, prepaid expenses and other
current assets, property and equipment and computer software licenses, net of
accumulated depreciation and amortization, investment property and other
noncurrent assets. Segment liabilities include all operating liabilities and consist
primarily of accounts payable and other current liabilities, customers’ deposits and
other noncurrent liabilities. Segment assets and liabilities do not include deferred
taxes.

Inter-segment Transactions
Segment revenues, expenses and performance include sales and purchases
between operating segments. Inter-segment transactions are set on an arm’s length
basis similar to transactions with nonrelated parties.

Major Customer
The Group does not have a single external customer from which sales revenue
generated amounted to 10% or more of the total revenues of the Group.

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F-15
Operating Segments
Analyses of financial information by business segment follow:

March 31, 2018

Real Estate
Development Leasing Hospitality Others Eliminations Consolidated
Revenue
External revenues P241,662,493 P1,257,620,191 P121,670,172 P209,297,900 P - P1,830,250,756
Inter-segment - 4,848,542 - 399,803,811 (404,652,353) -
Total Revenue P241,662,493 P1,262,468,733 P121,670,172 P609,101,711 (P404,652,353) P1,830,250,756
Segment Results P130,607,020 P584,964,917 P59,869,417 (P431,302) (P30,449,223) P744,560,829
Total Comprehensive
Income Attributable to
Equity holders of the Parent P524,241,818
Non-controlling interests 220,319,011
P744,560,829
Segment Assets P55,503,063,037 P51,265,254,452 P2,091,557,702 P43,540,042 (P41,714,839,923) P67,188,575,310
Segment Liabilities P42,720,871,154 P32,215,732,559 P1,878,285,858 P43,022,887 (P32,479,274,012) P44,378,638,446
Other Information
Capital Expenditures P251,076,870 P3,711,914,749 P3,022,702 P867,701 P - P3,966,882,022
Depreciation & amortization P16,565,006 P14,582,659 P3,294,807 P422,092 P - P34,864,564

F-16
March 31, 2017
Real Estate
Development Leasing Hospitality Others Eliminations Consolidated
External revenues P400,021,647 P104,540,511 P89,642,706 P54,761,525 P - P648,966,389
Segment Results P185,658,699 (P110,623,054) P4,896,684 (P613,257) P86,346,311 P165,665,383
Total Comprehensive Income
Attributable to
Equity holders of the Parent P149,412,354
Non-controlling interests 16,253,029
P165,665,383
Depreciation & amortization P4,892,220 P4,240,171 P3,732,879 P 7,520 P - P12,872,790

December 31, 2017

Real Estate
Development Leasing Hospitality Others Eliminations Consolidated
Segment Assets P53,105,409,593 P51,991,081,885 P2,116,618,390 P2,346,711,631 (P45,230,504,373) P64,329,317,126
Segment Liabilities P40,195,601,857 P30,593,283,788 P1,747,094,510 P2,878,338,907 (P33,400,762,588) P42,013,556,474
Other Information
Capital Expenditures P1,187,358,305 P9,495,292,718 P48,452,134 P173,740,000 P - P10,904,843,157

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F-17
 Capital expenditures on noncurrent assets represent additions to property and
equipment, computer software licenses, intangible assets and investment property.
Noncash expenses pertain to depreciation and amortization expense attributable to
the reportable segments.

The Group has only one geographical segment, which is the Philippines.

6. Income Taxes

Income tax expense (benefit) consists of:

For the three months ended March 31

2018 2017
Current P49,275,200 P21,923,249
Deferred 280,042,093 641,886
P329,317,293 P22,565,135

The reconciliation of the income tax expense computed at the statutory income tax
rate to the actual income tax expense as shown in profit or loss is as follows:

For the three months ended March 31

2018 2017
Income before income tax P1,073,878,122 P188,230,518
Income tax at the statutory income tax
rate P322,163,437 P56,469,155
Income tax effects of:
Nondeductible expenses 13,493,644 -
Nontaxable income (5,249,624) (31,128,134)
Interest income subjected to final tax (1,090,164) (2,775,886)
P329,317,293 P22,565,135

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F-18
 `

7. Basic and Diluted Earnings Per Share

Basic and diluted earnings per share for the three months ended March 31, 2018
and 2017 are computed as follows:

For the three months ended March

31
2018 2017
Net income attributable to equity holders of
the Parent Company P524,241,818 P149,412,354
Dividends on preferred shares for the period (161,945,000) (161,945,000)
Net income (loss) attributable to common
shareholders of the Parent Company (a) P362,296,818 (P12,532,646)
Weighted average number of common
shares outstanding (b) 2,229,730,000 2,229,730,000
Dilutive shares arising from stock options 3,201,250 -
Adjusted weighted average number of
common shares for diluted EPS (c) 2,232,931,250 2,229,730,000
Basic earnings (loss) per common share
attributable to equity holders of the Parent
Company (a/b) P0.1625 (P0.0056)
Diluted earnings (loss) per common share
attributable to equity holders of the Parent
Company (a/c) P0.1623 (P0.0056)

8. Inventories

This account consist of:

March 31, December 31,

2018 2017
Real estate inventories - at cost P3,923,608,316 P3,814,585,376
Hotel inventories - at cost 5,663,063 4,948,649
P3,929,271,379 P3,819,534,025

Real estate inventories represent the cost of construction and development of

completed and in-progress residential, commercial and office units for sale. Projects
of the Group include The SkySuites Tower, W.H. Taft Residences, The Uptown
Place, Injap Tower, FirstHomes Subdivision, DD HappyHomes-Mandurriao, DD
HappyHomes-Tanauan, DD HappyHomes-Zarraga and H101 - Fort.

The SkySuites Tower

On September 1, 2014, the Group acquired from Rizal Commercial Banking
Corporation (the “RCBC”) the unfinished commercial, office and residential project,
“The SkySuites Tower”, in Quezon City for a total consideration of P700 million
payable over four years. The Group was required to deliver to RCBC an irrevocable
standby letter of credit to guarantee the payment of the remaining balance payable to
RCBC. At the closing date of the transaction, RCBC delivered to the Group the
physical possession and control over “The SkySuites Tower”. Portion of the total
acquisition cost of “The SkySuites Tower” and cost to be incurred in its development
and completion was recognized as part of “Real estate inventories” and “Investment
property” accounts in the consolidated statements of financial position for the parts
pertaining to residential units for sale and commercial and office units held for
leasing, respectively.

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F-19
 `

W.H. Taft Residences

On November 5, 2012, the Group acquired and took over the development of
W.H. Taft Residences (the “W.H. Taft”), a condominium project along Taft Avenue in
the City of Manila, from Philtown Properties, Inc. (the “Philtown”). The Group also
acquired the land where the W.H. Taft is located from the Landowner. The
development of the W.H. Taft was formerly initiated under an unincorporated joint
venture agreement between Philtown and the Landowner. The project was
completed in September 2015.

The Uptown Place and Injap Tower

On December 27, 2013, the Group entered into an unincorporated joint venture
agreement with Injap Investments, Inc. (“III”) for the joint development of “The
Uptown Place” at General Luna St., Iloilo City and “Injap Tower” at Mandurriao
District, Iloilo City (the “Projects”). The agreement stipulates that III shall contribute
land and the Group shall finance and develop the Projects and be exclusively
responsible for the management and supervision of the construction of the Projects.
In consideration for III’s land contribution, the Group delivered some saleable units of
the Projects to III. The costs incurred in the development of the Projects are recorded
as part of “Real estate inventories” and “Investment property” accounts in the
consolidated statements of financial position. The projects were completed in 2014.

FirstHomes Subdivision
In October 2012, the Group completed its first horizontal development project located
at Navais, Mandurriao, Iloilo City. FirstHomes is a 1.30 hectare townhouse project
consisting of 112 units.

DD HappyHomes-Mandurriao
On May 31, 2014, as a result of the business combination, the Group acquired
DDHHRCI’s horizontal, residential real estate project in Mandurriao, Iloilo.

DD HappyHomes-Tanauan and DD HappyHomes-Zarraga

In 2016, the Group acquired additional landsites for horizontal, residential real estate
projects in Tanauan, Leyte and Zarraga, Iloilo.

H101 - Fort
In 2016, HOA entered into a Memorandum of Agreement and Deed of Absolute
Conveyance with a minority shareholder of HOA to acquire a parcel of land to be
used for the construction of H101 - Fort project. H101 - Fort started construction in
2017.

H101 - Davao
On August 22, 2017, HOA acquired a parcel of land in Davao City with an area of
5,384 square meter for the development of H101 - Davao.

Real estate inventories recognized as “Cost of real estate sales” amounted to

P131.41 million, and P165.7 million for the three months ended March 31, 2018 and
2017, respectively.

Capitalized borrowing costs amounted to P42.48 million and P69.90 million for the
three months ended March 31, 2018 and 2017 using 5.20% and 4.26% as
capitalization rates, respectively.

No inventory write-down was recognized on real estate inventories for the three
months ended March 31, 2018 and 2017.

- 10 -

F-20
 `

Hotel inventories mainly consists of consumable items used in the operations of

“Injap Tower Hotel”, “Jinjiang Inn Ortigas”, “Jinjiang Inn Makati” and “Hotel 101
Manila”. The cost of hotel inventories recognized under “Cost of hotel operations” in
the condensed consolidated statements of comprehensive income amounted to
P90.91 million and P62.92 million for the three months ended March 31, 2018 and
2017, respectively.

9. Goodwill and Intangible Assets

This account consists of:

March 31, December 31,

2018 2017
Hotel 101 brand P664,300,000 P664,300,000
Goodwill 350,377,742 350,377,742
Franchise rights 132,554,707 132,969,940
Advertising production cost 88,546,253 75,464,730
Computer software licenses - net 54,121,023 58,838,233
Concession right 31,801,838 31,801,838
P1,321,701,563 P1,313,752,483

Hotel 101 Brand

The Hotel 101 brand is an asset with indefinite useful life and is assessed for
impairment whenever there is an indication that the asset may be impaired. The
method used to estimate the fair value of Hotel 101 brand is the RfR based on cost
savings from owning the brand name. The cost savings are calculated based on
royalty rates of comparable brands and the forecast revenues of HOA.

Franchise Rights
This amount pertains to the rights of the Group to operate “JinJiang Inn” franchise
chain of hotels in the Philippines.

The Group entered into a Brand License or Franchise Agreement with Jinjiang Inn
Co, Ltd. (“Licensor”) of Shanghai, China for a period of 15 years from September 11,
2026. The Group is given the right to establish regular chains and develop franchise
chains of hotels. In consideration for this exclusive grant of license, the Group is
obliged to pay a lump sum franchise fee. Once the established hotels become
operational, fees such as royalty fees and ongoing management fees will be remitted
to the Licensor.

Amortization of the franchise rights amounted to P0.42 million and nil for the three
months ended March 31, 2018 and 2017, respectively.

Goodwill
Goodwill comprises the excess of the acquisition costs over the fair value of the
identifiable assets and liabilities in the acquisition of DDHHRCI and HOA. Goodwill
was computed based on fair values of net assets acquired.

In 2017, the Group finalized its purchase price allocation on the acquisition of HOA
which resulted in a goodwill of P266.1 million.

No impairment loss is recognized for the goodwill account for the three months
ended March 31, 2018 and 2017.

- 11 -

F-21
 `

The recoverable amount of goodwill has been determined based on a valuation

using cash flow projections covering a five-year period based on long range plans
approved by management.

Management believes that any reasonably possible change in the key assumptions
on which the recoverable amount is based would not cause its carrying amount to
exceed its recoverable amount.

The calculation of value in use are most sensitive to the following assumptions:

Gross Margins. Gross margins are based on average values achieved immediately
before the budget period. These are increased over the budget period for anticipated
efficiency improvements. Values assigned to key assumptions reflect past
experience, except for efficiency improvement.

Discount Rate. The Group uses the weighted-average cost of capital as the discount
rates, which reflect management’s estimate of the risk. This is the benchmark used
by management to assess operating performance and to evaluate future investment
proposals.

The recoverable amount of the cash-generating unit was determined to be higher

than its carrying amount as at March 31, 2018 and December 31, 2017. Hence,
management assessed that there is no impairment loss in the value of goodwill for
the three months ended March 31, 2018 and in 2017.

Advertising Production Cost

Advertising production cost pertains to the production cost incurred by the Group in
developing the CityMalls commercials which can be used and aired over a period of
time. This is being amortized over five years.

Concession Right
The Parent Company entered into a Joint Venture Agreement with the City
Government of Iloilo for the financing, design, construction, development, operation
and maintenance of the Iloilo-Guimaras Ferry Terminal (“Ferry Terminal”) and the
surrounding areas within the property.

Computer Software Licenses

The computer software licenses have been built, installed or supplied by the
manufacturer ready to operate or require some customization based on the Group’s
specific requirements.

10. Investment Property

This account consists of:

March 31, December 31,

2018 2017
Land P18,070,852,160 P17,752,035,742
Building 22,756,488,469 20,391,356,683
Construction in Progress 9,248,468,786 8,280,155,031
P50,075,809,415 P46,423,547,456

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F-22
 `

The following table provides the fair value hierarchy of the Group’s investment
property as at March 31, 2018 and December 31, 2017:

Level 2
December 31,
Date of Valuation March 31, 2018 2017
Land Various P18,070,852,160 P17,752,035,742
Commercial Various 22,756,488,469 19,158,134,783
Corporate/office Various 9,248,468,786 9,513,376,931
P50,075,809,415 P46,423,547,456

The Group’s investment property is stated at fair value, which has been determined
based on valuations performed by an accredited independent appraiser.

Valuation Techniques and Significant Unobservable Inputs

The fair values of the investment property were arrived at using the Market Data
Approach for land and Cost Approach for buildings.

Market data approach is an approach that considers available market evidences.

The aforesaid approach is based on sales and listings of comparable property
registered within the vicinity. The technique of this approach requires the
establishment of comparable property by reducing reasonable comparative sales
and listings to a common denominator. This is done by adjusting the differences
between the subject property and those actual sales and listings regarded as
comparable. The properties used as basis of comparison are situated within the
immediate vicinity of the subject property. The unobservable inputs to determine the
market value of the property are the following: location characteristics, size and
shape of the lot and time element.

Cost approach is a comparative approach to the value of the building and

improvements or another asset that considers as a substitute for the purchase of a
given property, the possibility of constructing another property that is a replica of, or
equivalent to, the original or one that could furnish equal utility with no undue cost
resulting from delay. It is based on the reproduction cost (new) of the subject
property or asset, less total (accrued) depreciation based on the physical wear and
tear, and obsolescence to which an estimate of entrepreneurial incentive or
developer’s profit/loss is commonly added.

The Group recognized unrealized gains from changes in fair values of investment
property amounting to P851,857,693 and nil for the three months ended March 31,
2018 and 2017, respectively.

Capitalized borrowing costs amounted to P259.37 million and P186.59 million for the
three months ended March 31, 2018 and 2017 using 5.20% and 4.26% as
capitalization rates, respectively. The Group also capitalized rent expenses which
were incurred for the rental of land properties where ongoing construction of CityMall
branches are situated.

11. Equity

On March 22, 2018, the BOD declared cash dividends of P1.61945 per share
equivalent to P161.95 million to its preferred stockholders of record as at April 10,
2018 and were paid on April 16, 2018.

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F-23
 `

On February 28, 2018, the BOD of DDHH declared cash dividends of P180.00797
per share equivalent to P36,001,594 to stockholders of record as at February 28,
2018 and will be paid on July 1, 2018. Noncontrolling interest share in dividends
declared amounted to P10,800,478.

On February 28, 2018, the BOD of DDMPDC declared cash dividends of

଑SHU share equivalent to P47,325,912.805 to stockholders of record as
at February 28, 2018 and will be paid on May 30, 2018. Noncontrolling interest share
in dividends declared amounted to P14,197,774.

On December 6, 2017, the BOD declared cash dividends of P1.61945 per share
equivalent to P161.95 million to preferred stockholders of record as at
January 2, 2018 and were paid on January 15, 2018.

12. Short-term and Long-term Debts

Notes Payable
Details of the account are as follows:

March 31, December 31,

2018 2017
Balance at beginning of the year P18,301,570,584 P18,747,085,477
Availments 628,000,000 3,545,258,750
Payments - (3,990,773,643)
18,929,570,584 18,301,570,584
Less short-term notes and current
portion of long-term notes 4,152,072,205 3,452,170,869
Noncurrent portion 14,777,498,379 14,849,399,715
Less unamortized debt issue costs 115,001,608 121,801,770
P14,662,496,771 P14,727,597,945

Long-term Notes Payable

Parent Company
a. On March 23, 2016, the Parent Company obtained a total of P1.50 billion
unsecured, bilateral long-term loans from a financing institution with scheduled
drawdown dates. The Parent Company has made drawdowns amounting to P1.5
billion during the year. The loan payments are to be made in five consecutive
annual installments to commence at the end of the 36th month after the initial
drawdown date. The Parent Company pays interest on the outstanding principal
amount of the loan on each interest payment date for the interest period then
ending at a fixed rate per annum determined on the interest rate setting date
equal to the higher of: (i) the applicable benchmark rate as determined by the
lender by reference to the PDST-R2 rate plus 1.75%; or (ii) floor rate based on
the prevailing BSP overnight rate plus 1.25%. The proceeds from these
borrowings were used by the Parent Company to partly finance its capital
expenditures for the development of additional CityMall branches and
construction of the Jollibee Tower and Phase 1 of the Meridian Park.

Outstanding balance of this loan amounted to P1.50 billion as at March 31,2018

and December 31, 2017.

b. On July 30, 2015, the Parent Company obtained a total of P1.50 billion
unsecured, bilateral, long-term loans from a financing institution with scheduled
drawdown dates. The Parent Company has made drawdowns amounting to

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F-24
 `

P0.50 billion and P1.00 billion in 2016 and 2015, respectively. The principal
repayments are to be made in five annual amortizations equivalent to 5.0% of the
total principal amount of the loan amount drawn, beginning on the 36th month
from initial drawdown date. The Parent Company pays interest on the
outstanding principal amount of the loan on each interest payment date for the
interest period then ending at a fixed rate per annum determined on the interest
rate setting date equal to the higher of: (i) the applicable benchmark rate as
determined by the lender by reference to the PDST-R2 rate plus 1.75 bps; or
(ii) floor rate based on the prevailing Bangko Sentral ng Pilipinas overnight rate
plus 125 bps. The proceeds from these borrowings were used by the Parent
Company to partly finance the development of The Meridian Park, a 4.75 hectare
ongoing, mixed-use development real estate property situated in Pasay City.

Outstanding balance of the loan as at March 31, 2018 and December 31, 2017
amounted to P1.5 billion.

c. On May 18, 2015, the Parent Company obtained a total of P5.00 billion
unsecured, bilateral long-term loans from a financing institution with scheduled
drawdown dates. The Parent Company has made drawdowns amounting to
P2.00 billion and P3.00 billion in 2016 and 2015, respectively. The loan
payments are to be made in five consecutive annual installments to commence
at the end of the 36th month after the initial drawdown date. The Group pays
interest on the outstanding principal amount of the loan on each interest payment
date for the interest period then ending at a fixed rate per annum determined on
the interest rate setting date equal to the higher of: (i) the applicable benchmark
rate as determined by the lender by reference to the PDST-R2 rate plus a spread
of 2.00% or (ii) 6.00%. The proceeds from these borrowings were used by the
Group to partly finance its capital expenditures for the development of additional
CityMall branches.

Outstanding balance of the loan as at March 31, 2018 and December 31, 2017
amounted to P5.00 billion.

d. On October 30, 2014, the Parent Company obtained a total of P7.40 billion
unsecured, bilateral long-term loans from various financing institutions. The loan
payments are to be made in seven consecutive annual installments to
commence at the end of the 12th month after the initial borrowing date. The
Parent Company pays interest on the outstanding principal amount of the loan on
each interest payment date for the interest period then ending at a fixed rate per
annum determined on the interest rate setting date equal to the higher of: (i) the
applicable benchmark rate as determined by the lender by reference to the
PDST-R2 rate plus a spread of 2.35% or (ii) 5.25%. The proceeds from these
borrowings were used by the Parent Company to partly finance its capital
expenditures, primarily for the development of The Meridian Park, the Dragon8,
The SkySuites Tower and roll-out of the first 12 CityMalls and for general
corporate purposes.

Outstanding balance of the loan as at March 31, 2018 and December 31, 2017
amounted to P7.18 billion.

HOA
e. On August 11, 2016, as a result of the acquisition of HOA, several long-term
notes payable of HOA for a total amount of P100.30 million were assumed by the
Parent Company. The principal amounts and related interests are due monthly.
Interest is based on negotiated rates or prevailing market rates. Principal
payments made in 2017 and 2016 amounted to P11.51 million and P2.90 million,
respectively.

- 15 -

F-25
 `

Current portion of these loans amounted to P10.07 million and P12.68 million as
at March 31, 2018 and December 31, 2017, respectively. Outstanding long-term
portion amounted to P70.40 million as at March 31, 2018 and December 31,
2017.

Short-term Loans Payable

Parent Company
a. The Group obtained short-term loans from various financial institutions which is
payable within one year. The proceeds from these borrowings were used for
working capital purposes more specifically in the development of the Group’s on-
going projects. The interest rates on these short-term and long-term borrowings
are repriced monthly based on negotiated rates or prevailing market rates.

Total loan availments amounted to P628 million in 2018 and P2.76 billion in 2017.
Payments made in 2018 amounted to nil and P4.0 billion in 2017, respectively.

Outstanding balance of the loans amounted to P3.58 billion and P2.94 billion as at
March 31, 2018 and December 31, 2017, respectively.

HOA
b. On August 11, 2016, as a result of the acquisition of HOA, short-term notes
payable of HOA amounting to P700.00 million were assumed by the Group. This
loan is due on March 23, 2017 and bears interest of 5.5% per annum. The loan
was fully settled in 2017.

PCLI
c. In 2016, PCLI obtained short-term loans from a local bank amounting to
P63.00 million which is payable within one year. The proceeds from these
borrowings were used for additional working capital requirements. The principal
amounts are payable lump sum at maturity and related interests are due monthly.
Interest is fixed at 3% per annum.

The long-term debt agreements contain, among others, covenants relating to

maintenance of certain financial ratios, working capital requirements, restrictions on
loans and guarantees, disposal of a substantial portion of assets, capital
expenditures, significant changes in the ownership, payments of dividends and
redemption of capital stock.

The Group is in compliance with the covenants of the debt agreements as of

March 31, 2018 and December 31, 2017.

The movements in debt issue costs are as follows:

March 31, December 31,

2018 2017
Balance at the beginning of year P121,801,770 P233,243,642
Adjustments - (84,842,786)
Amortization (6,800,162) (26,599,086)
Balance at end of year P115,001,608 P121,801,770

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F-26
 `

Bonds Payable
Details of the account are as follows:

March 31, December 31,

2018 2017
Balance at beginning of the year P15,000,000,000 P5,300,000,000
Availments - 9,700,000,000
15,000,000,000 15,000,000,000
Less unamortized debt issue costs 200,660,735 204,695,725
P14,799,339,265 P14,795,304,275

On November 28, 2016, the SEC approved the Parent Company’s application the
shelf registration of fixed rate bonds with an aggregate principal amount of
P15.00 billion, to be offered in one or several tranches.

The first tranche, issued on December 15, 2016, carried a due date of
December 15, 2026 and fixed interest rate of 5.9721% per annum. Interest is
payable quarterly in arrears on March 15, June 15, September 15, and December 15
of each year. Related costs from the issuance amounted to P82.34 million.

The second tranche, issued on July 21, 2017, carried a due date of July 21, 2024
and fixed interest rate of 6.0952% per annum. Interest is payable quarterly in arrears
on January 21, April 21, July 21 and October 21 of each year. Related costs from the
issuance amounted to P133.19 million.

Amortization of bond issue costs for the three months ended March 31, 2018 and
2017 amounted to P4.03 million and P0.31 million, respectively. Interest expense
from this bond for the months ended March 31, 2018 and 2017 amounted to P226.87
million and P94.96 million, respectively.

13. Financial Risk and Capital Management Objectives and Policies

Objectives and Policies

The Group has significant exposure to the following financial risks primarily from its
use of financial instruments:

ƒ Credit Risk
ƒ Liquidity Risk
ƒ Interest Rate Risk

This note presents information about the Group’s exposure to each of the above
risks, the Group’s objectives, policies and processes for measuring and managing
risks, and the Group’s management of capital.

The main purpose of the Group’s dealings in financial instruments is to fund its
respective operations and capital expenditures.

The BOD has overall responsibility for the establishment and oversight of the
Group’s risk management framework. The BOD has established the Executive
Committee, which is responsible for developing and monitoring the Group’s risk
management policies. The committee identifies all issues affecting the operations of
the Group and reports regularly to the BOD on its activities.

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F-27
 `

The Group’s risk management policies are established to identify and analyze the
risks faced by the Group, to set appropriate risk limits and controls, and to monitor
risks and adherence to limits. Risk management policies and systems are reviewed
regularly to reflect changes in market conditions and the Group’s activities. All risks
faced by the Group are incorporated in the annual operating budget. Mitigating
strategies and procedures are also devised to address the risks that inevitably occur
so as not to affect the Group’s operations and forecasted results. The Group,
through its training and management standards and procedures, aims to develop a
disciplined and constructive control environment in which all employees understand
their roles and obligations.

The Group’s principal financial assets include cash and cash equivalents,
receivables, due from related parties and refundable deposits. These financial assets
are used to fund the Group’s operations and capital expenditures.

Credit Risk
Credit risk represents the risk of loss the Group would incur if credit customers and
counterparties fail to perform their contractual obligations. The risk arises principally
from the Group’s cash and cash equivalents, receivables, due from related parties
and refundable deposits. The objective is to reduce the risk of loss through default by
counterparties.

In respect of installments contracts receivable, credit risk is managed primarily

through credit reviews and an analysis of receivables on a continuous basis.
Customer payments are facilitated by post-dated checks. Exposure to bad debts is
not significant as titles to real estate properties are not transferred to the buyers until
full payment has been made. There are no large concentrations of credit risk given
the Group's diverse customer base.

Credit risk arising from rent receivable is primarily managed through a tenant
selection process. Prospective tenants are evaluated on the basis of payment track
record and other credit information. In accordance with the provisions of the lease
contracts, the lessees are required to deposit with the Group security deposits and
advance rentals which helps reduce the Group’s credit risk exposure in case of
defaults by the tenants. For existing tenants, the Group has put in place a monitoring
and follow-up system. Receivables are aged and analyzed on a continuous basis to
minimize credit risk associated with these receivables.

The carrying amount of financial assets represents the maximum credit exposure.
The maximum exposure to credit risk at the reporting period follows:

December 31,
Note March 31, 2018 2017
Cash and cash equivalents* P1,295,191,752 P2,092,243,472
Receivables** 4,023,393,249 3,650,122,504
Due from related parties 14 103,414,592 103,522,051
Refundable deposits*** 130,147,595 122,039,368
P5,552,147,188 P5,967,927,395
*Excluding “Cash on hand” account.
** This includes both current and noncurrent portions of the account.
*** This is presented as part of “Prepaid expenses and other current assets - net” and “Other noncurrent
assets” accounts.

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F-28
 `

The following is the aging analysis per class of financial assets as at December 31:
March 31, 2018 Neither Past Due but not Impaired
Past Due 1 to 30 31 to 60 More than
Note nor Impaired Days Days 60 Days Impaired Total
Cash and cash equivalents P1,295,191,752 P - P - P - P - P1,295,191,752
Receivables* 3,008,553,910 92,101,229 119,752,724 801,886,812 1,098,574 4,023,393,249
Due from related parties 14 103,414,592 - - - - 103,414,592
Refundable deposits** 130,147,595 - - - - 130,147,595
P4,537,307,849 P92,101,229 P119,752,724 P801,886,812 P1,098,574 P5,552,147,188

* Including current and noncurrent portions.

** This is presented as part of “Prepaid expenses and other current assets - net” and “Other noncurrent assets” accounts.
December 31, 2017 Neither Past Due but not Impaired
Past Due 1 to 30 31 to 60 More than
Note nor Impaired Days Days 60 Days Impaired Total
Cash and cash equivalents P2,092,243,472 P - P - P - P - P2,092,243,472
Receivables* 2,650,872,115 89,543,135 118,300,155 790,308,525 1,098,574 3,650,122,504
Due from related parties 14 103,522,051 - - - - 103,522,051
Refundable deposits** 122,039,368 - - - - 122,039,368
P4,968,677,006 P89,543,135 P118,300,155 P790,308,525 P1,098,574 P5,967,927,395

* Including current and noncurrent portions.

** This is presented as part of “Prepaid expenses and other current assets - net” and “Other noncurrent assets” accounts.

The following is the credit quality of the Group’s financial assets:

March 31, 2018

Medium
Note High Grade Grade Low Grade Total
Cash and cash
equivalents* P1,295,191,752 P - P - P 1,295,191,752
Receivables** 3,100,655,139 119,752,724 802,985,386 4,023,393,249
Due from related parties 14 103,414,592 - - 103,414,592
Refundable deposits*** 130,147,595 - - 130,147,595
P4,629,409,078 P119,752,724 P802,985,386 P5,552,147,188

*Excluding “Cash on hand” account.

**This includes both current and noncurrent portions of the account.
***This is presented as part of “Prepaid expenses and other current assets - net” and “Other noncurrent assets”
accounts.

December 31, 2017

Medium
Note High Grade Grade Low Grade Total
Cash and cash
equivalents* P2,092,243,472 P - P - P2,092,243,472
Receivables** 2,740,415,250 118,300,155 791,407,099 3,650,122,504
Due from related parties 14 103,522,051 - - 103,522,051
Refundable deposits*** 122,039,368 - - 122,039,368
P5,058,220,141 P118,300,155 P791,407,099 P5,967,927,395

*Excluding “Cash on hand” account.

**This includes both current and noncurrent portions of the account.
***This is presented as part of “Prepaid expenses and other current assets - net” and “Other noncurrent assets”
accounts.

The Group assessed the credit quality of unrestricted cash as high grade since this is
deposited with reputable banks with low probability of insolvency.

Receivables assessed as high grade pertains to receivable from buyer that had no
default in payment; medium grade pertains to receivable from buyer who has history
of being 31 to 60 days past due; and low grade pertains to receivable from buyer
who has history of being over 60 days past due. Receivable balances are being
monitored on a regular basis to ensure timely execution of necessary intervention
efforts. The Group performs credit investigation and evaluation of each buyer to
establish paying capacity and creditworthiness. The Group will assess the
collectibility of its receivables and provide a corresponding allowance provision once
the account is considered impaired.

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F-29
 `

The credit risk for due from related parties and refundable deposits is considered
negligible since these accounts are still collectible based on the assessment of
debtor’s ability to pay and collection agreement.

Liquidity Risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations
as they fall due. The Group manages liquidity risks by forecasting projected cash
flows and maintaining balance between continuity of funding and flexibility in
operations. Treasury controls and procedures are in place to ensure that sufficient
cash is maintained to cover daily operational working capital requirements.
Management closely monitors the Group’s future and contingent obligations and set
up required cash reserves as necessary in accordance with internal requirements.

The following are the contractual maturities of financial liabilities, including estimated
interest payments and excluding the impact of netting agreements:
March 31, 2018
Carrying Contractual 1 Year 1 Year - More than
Note Amount Cash Flow or Less 5 Years 5 Years
Financial Liabilities
Accounts payable
and other current
liabilities* P4,824,148,524 P4,824,148,524 P4,824,148,524 P - P -
Due to related parties 14 946,358,168 946,358,168 946,358,168 - -
Dividends payable 177,116,771 177,116,771 177,116,771 - -
Notes payable** 12 18,814,568,976 22,690,032,316 5,042,887,855 15,286,647,413 2,360,497,048
Bonds payable 12 14,799,339,265 23,413,262,063 910,277,244 3,643,630,518 18,859,354,301
Other noncurrent
liabilities 781,690,995 781,690,995 - 389,962,747 391,728,248
* Excluding statutory obligations and unearned rent income account.
** This includes both current and noncurrent portions of the account.

December 31, 2017

Carrying Contractual 1 Year 1 Year - More than
Note Amount Cash Flow or Less 5 Years 5 Years
Financial Liabilities
Accounts payable
and other current
liabilities* P3,730,441,017 P3,730,441,017 P3,730,441,017 P - P -
Due to related parties 14 944,720,411 944,720,411 944,720,411 - -
Dividends payable 152,131,628 152,131,628 152,131,628 - -
Notes payable** 12 18,179,768,814 22,386,849,472 4,340,384,493 15,573,201,545 2,473,263,434
Bonds payable 12 14,795,304,275 23,640,964,080 910,277,244 3,643,630,518 19,087,056,318
Other noncurrent
liabilities 878,398,558 878,398,558 - 224,174,529 654,224,029
* Excluding statutory obligations and unearned rent income account.
** This includes both current and noncurrent portions of the account.

Interest Rate Risk

The Group interest risk management policy is to minimize interest rate cash flow risk
exposures to changes in interest rates. The Group has short-term and long-term
bank borrowings with fixed interest rates. Therefore, the Group is not subject to the
effect of changes in interest rates.

Fair Values
The following methods and assumptions are used to estimate the fair value of each
class of financial instruments:

Cash and Cash Equivalents/Due from Related Parties/Accounts Payable and Other
Current Liabilities/Due to Related Parties
The carrying amounts of cash and cash equivalents, due from related parties,
refundable deposits, accounts payable and other current liabilities, short-term notes
payable and due to related parties approximate their fair values due to the relatively
short-term nature of these financial instruments.

- 20 -

F-30
 `

Receivables
The fair values of installment contract receivable and receivables from leasehold
rights’ buyers from are based on the discounted value of future cash flows using the
applicable rates for similar types of instruments. The fair value of other receivables is
approximately equal to their carrying amounts due to the short-term nature of the
financial assets.

Refundable Deposits/Payable to RCBC/Security Deposits

Refundable deposits, payable to RCBC and security deposits are reported at their
present values, which approximate the cash amounts that would fully satisfy the
obligations as at reporting date.

Short-term Notes Payable/Long-term Notes Payable/Bonds Payable

The fair value of the interest-bearing fixed-rate short-term and long-term debts is
based on the discounted value of expected future cash flows using the applicable
market rates for similar types of loans as of reporting date.

Capital Management
The Group’s objectives when managing capital are to increase the value of
shareholders’ investment and maintain high growth by applying free cash flows to
selective investments. The Group sets strategies with the objective of establishing a
versatile and resourceful financial management and capital structure.

The BOD monitors the return on capital, which the Group defines as net operating
income divided by total shareholders’ equity. The BOD also monitors the level of
dividends to shareholders.

The BOD seeks to maintain a balance between the higher returns that might be
possible with higher levels of borrowings and the advantages and security afforded
by a sound capital position. The Group defines capital as equity, which includes
capital stock, additional paid-in capital and retained earnings. There were no
changes in the Group’s approach to capital management as at March 31, 2018 and
December 31, 2017. The Group is not subject to externally-imposed capital
requirements.

- 21 -

F-31
 `

14. Related Party Transactions

The Group, in the normal course of business, has transactions with its related parties
as follows:
Outstanding Balances
Due from Due to
Amount of Related Related
Category Year Transaction Parties Parties Terms and Conditions
Parent Company’s
Key Management -
Personnel
Management fees 2018 P669,643 P - P - Demandable; non-interest bearing;
unsecured; payable in cash
2017 2,678,571 - - Demandable; non-interest bearing;
unsecured; payable in cash
Stockholders
Rent expense 2018 849,302 - - Demandable; non-interest bearing;
unsecured; payable in cash
2017 3,672,896 - - Demandable; non-interest bearing;
unsecured; payable in cash
Acquisition of HOA 2018 - - 429,944,449 Payable by way of DD shares
2017 - - 429,944,449 Payable by way of DD shares
Other Related
Parties
Land acquired 2018 - - 383,281,305 Demandable; non-interest bearing;
unsecured; payable in cash
2017 - - 383,281,305 Demandable; non-interest bearing;
unsecured; payable in cash

2018 - - 122,400,000 Payable by way of condo units

2017 - - 122,400,000 Payable by way of condo units

Cash advances 2018 1,530,298 103,414,592 10,732,414 Demandable; non-interest bearing;

received unsecured; collectible in cash;
no impairment
2017 1,713,562 103,522,051 9,094,657 Demandable; non-interest bearing;
unsecured; collectible in cash;
no impairment
Rent income 2018 47,485,344 - - Demandable; non-interest bearing;
unsecured; collectible in cash;
no impairment
2017 189,941,376 - - Demandable; non-interest bearing;
unsecured; collectible in cash;
no impairment
2018 P103,414,592 P946,358,168

2017 P103,522,051 P944,720,411

The short-term benefits of other key management personnel amounted to

P5.78 million and P5.34 million for the three months ended March 31, 2018 and
2017, respectively. Directors’ fees amounted to nil and P0.81 million for the three
months ended March 31, 2018 and in 2017, respectively.

Except when indicated above, all outstanding due to/from related parties are to be
settled in cash.

- 22 -

F-32
DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the quarters ended March 31, 2018 and March 31, 2017

Horizontal Analysis Vertical Analysis

Mar. 31, 2018 Mar. 31, 2017 Increase (Decrease) 2018 2017
REVENUES
Real estate sales ₱ 241,662,493 ₱ 400,021,647 ₱ (158,359,154) -39.6% 13.2% 61.6%
Leasehold rights' sales - 24,082,143 (24,082,143) -100.0% 0.0% 3.7%
Unrealized gain from change in fair values of investment property 851,857,693 - 851,857,693 100.0% 46.5% 0.0%
Rent income 409,714,295 104,540,511 305,173,784 291.9% 22.4% 16.1%
Hotel revenues 121,670,172 89,642,706 32,027,466 135.7% 6.6% 13.8%
Interest income 119,898,218 9,252,953 110,645,265 1195.8% 6.6% 1.4%
Income from forfeitures 2,417,806 2,021,436 396,370 119.6% 0.1% 0.3%
Others 83,030,079 19,404,993 63,625,086 327.9% 4.5% 3.0%
1,830,250,756 648,966,389 1,181,284,367 182.0% 100.0% 100.0%
COST AND EXPENSES
Cost of real estate sales 131,405,678 165,669,975 (34,264,297) -20.7% 7.2% 25.5%
Cost of leasehold rights - 4,133,652 (4,133,652) -100.0% 0.0% 0.6%
Cost of hotel operations 90,914,748 62,924,829 27,989,919 144.5% 5.0% 9.7%
Selling and marketing expenses 50,745,231 50,299,035 446,196 0.9% 2.8% 7.8%
General and administrative expenses 295,579,166 161,898,583 133,680,583 82.6% 16.1% 24.9%
Interest expense 187,727,811 15,809,797 171,918,014 1087.4% 10.3% 2.4%
756,372,634 460,735,871 295,636,763 64.2% 41.3% 71.0%
INCOME BEFORE INCOME TAX 1,073,878,122 188,230,518 885,647,604 470.5% 58.7% 29.0%
INCOME TAX EXPENSE 329,317,293 22,565,135 306,752,158 1359.4% 18.0% 3.5%
NET INCOME/TOTAL COMPREHENSIVE INCOME ₱ 744,560,829 ₱ 165,665,383 ₱ 578,895,446 349.4% 40.7% 25.5%

Attributable to:
Equity holders of the Parent Company ₱ 524,241,818 ₱ 149,412,354 ₱ 374,829,464 250.9% 28.6% 23.0%
Non-controlling interest 220,319,011 16,253,029 204,065,982 1255.6% 12.0% 2.5%
₱ 744,560,829 ₱ 165,665,383 ₱ 578,895,446 349.4% 40.7% 25.5%

F-33
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

March 31, 2018 versus March 31, 2017 Results of Operations

DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the quarters ended March 31, 2018 and March 31, 2017

Horizontal Analysis Vertical Analysis

Mar. 31, 2018 Mar. 31, 2017 Increase (Decrease) 2018 2017
REVENUES
Real estate sales ₱ 241,662,493 ₱ 400,021,647 ₱ (158,359,154) -39.6% 13.2% 61.6%
Leasehold rights' sales - 24,082,143 (24,082,143) -100.0% 0.0% 3.7%
Unrealized gain from change in fair values of investment property 851,857,693 - 851,857,693 100.0% 46.5% 0.0%
Rent income 409,714,295 104,540,511 305,173,784 291.9% 22.4% 16.1%
Hotel revenues 121,670,172 89,642,706 32,027,466 135.7% 6.6% 13.8%
Interest income 119,898,218 9,252,953 110,645,265 1195.8% 6.6% 1.4%
Income from forfeitures 2,417,806 2,021,436 396,370 119.6% 0.1% 0.3%
Others 83,030,079 19,404,993 63,625,086 327.9% 4.5% 3.0%
1,830,250,756 648,966,389 1,181,284,367 182.0% 100.0% 100.0%
COST AND EXPENSES
Cost of real estate sales 131,405,678 165,669,975 (34,264,297) -20.7% 7.2% 25.5%
Cost of leasehold rights - 4,133,652 (4,133,652) -100.0% 0.0% 0.6%
Cost of hotel operations 90,914,748 62,924,829 27,989,919 144.5% 5.0% 9.7%
Selling and marketing expenses 50,745,231 50,299,035 446,196 0.9% 2.8% 7.8%
General and administrative expenses 295,579,166 161,898,583 133,680,583 82.6% 16.1% 24.9%
Interest expense 187,727,811 15,809,797 171,918,014 1087.4% 10.3% 2.4%
756,372,634 460,735,871 295,636,763 64.2% 41.3% 71.0%
INCOME BEFORE INCOME TAX 1,073,878,122 188,230,518 885,647,604 470.5% 58.7% 29.0%
INCOME TAX EXPENSE 329,317,293 22,565,135 306,752,158 1359.4% 18.0% 3.5%
NET INCOME/TOTAL COMPREHENSIVE INCOME ₱ 744,560,829 ₱ 165,665,383 ₱ 578,895,446 349.4% 40.7% 25.5%

Attributable to:
Equity holders of the Parent Company ₱ 524,241,818 ₱ 149,412,354 ₱ 374,829,464 250.9% 28.6% 23.0%
Non-controlling interest 220,319,011 16,253,029 204,065,982 1255.6% 12.0% 2.5%
₱ 744,560,829 ₱ 165,665,383 ₱ 578,895,446 349.4% 40.7% 25.5%

Revenues

Total Revenues of DoubleDragon Properties Corp. (“The Company”) rose 182.0% for the three months
months ended March 31, 2018 to P1,830.3 million vs. P649.0 million during the same period last year.

Rental revenues rose by 291.9% to P409.7 million for the three months ended March 31, 2018 vs. P104.5 million
from the same period last year contributed by additional mall openings as the Company continues to transition
into the recurring revenue business model. As DoubleDragon Plaza, the first phase of DD Meridian, starts to
substantially contribute together with more CityMalls set to open this year, the Company expects rental revenues
to continue to gain momentum as we shift into the 90% recurring revenue business model by 2020.

The Company booked P121.7million in Hotel revenues for the three (3) months ended March 31, 2018, a 135.7%
increased from P89.6 million during the same period last year, from its subsidiary, Hotel of Asia, Inc. (“HOA”),
which serves as the Company’s hospitality arm. HOA is a hospitality firm primarily engaged in the ownership,
operation and development of hotel projects, including the Hotel 101 at the Mall of Asia Complex. HOA also
holds the master franchisee of JinJiang Inn which currently has two operational hotels located in Makati and
Ortigas respectively. The stake in HOA will now allow DoubleDragon to benefit from the booming tourism
prospects for the Philippines in the years to come as well as fully optimize the use and value of its string of prime
properties in various strategic areas of the country.

DoubleDragon now has 4 strong legs in various property spectrums namely commercial retail leasing, office
leasing, industrial leasing, and hospitality, which will provide the company with a diversified source of recurring
revenues backed by a string of appreciating hard assets.

F-34
Cost and Expenses

Cost of real estate sales amounting to P131.4 million decreased by P34.3 million (-20.7%) for the three months
ended March 31, 2018. Selling expenses of P50.7 million slightly increased by P0.45 million (0.9%) from P50.3
million from the same period last year. General and administrative expenses of P295.6 million increased by P133.7
million (82.6%) due to the increase in personnel cost, business taxes, depreciation and leases. Interest expense
amounting to P187.7 million was recognized for the three months ended March 31, 2018 – an increase from P15.8
million in the same period last year, due to bond interest expense from the bonds issued in July of last year.

Net Income

The Company has accelerated its growth trajectory for the first quarter of 2018 as income before tax rose by
470.5% to P1,073.9 million from P188.2 million posted in the same period last year.

The Company’s consolidated net income of P744.6 million grew by P578.9 million, up by 349.4% for the three
months ended March 31, 2018 from P165.7 million posted for the same period in the previous year as its core
projects complete and start to contribute substantially. to significant increase in Rental and Hotel Revenue with
improved gross profit margins. Moreover, income from rental for Q1 2018 has increased 3.9x from Q1 2017
marking the beginning of the realization of the projects that the Company has been building.

F-35
 March 31, 2018 versus December 31, 2017 Statements of Financial Position

DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES

(Formerly Injap Land Corporation)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Unaudited Audited Horizontal Analysis Vertical Analysis

March 31, 2018 December 31, 2017 Increase (Decrease) 2018 2017
ASSETS
Current Assets
Cash and cash equivalents 1,301,664,277 2,100,423,876 ₱ (798,759,599) -38.0% 1.9% 3.3%
Receivables - net 3,719,309,870 3,419,400,769 299,909,101 8.8% 5.5% 5.3%
Inventories 3,929,271,379 3,819,534,025 109,737,354 2.9% 5.8% 5.9%
Due from related parties 103,414,592 103,522,051 (107,459) -0.1% 0.2% 0.2%
Prepaid expenses and other current assets - net 4,299,238,942 4,822,541,217 (523,302,275) -10.9% 6.4% 7.5%
Total Current Assets 13,352,899,060 14,265,421,938 (912,522,878) -6.4% 19.9% 22.2%

Noncurrent Assets
Receivables - net of current portion 304,083,379 230,721,735 73,361,644 31.8% 0.5% 0.4%
Property and equipment - net 1,010,355,837 1,009,930,629 425,208 0.0% 1.5% 1.6%
Goodwill and intangible assets 1,321,701,563 1,313,752,483 7,949,080 0.6% 2.0% 2.0%
Investment property 50,075,809,415 46,423,547,456 3,652,261,959 7.9% 74.5% 72.2%
Deferred tax assets 276,379,562 263,343,007 13,036,555 5.0% 0.4% 0.4%
Other noncurrent assets 847,346,494 822,599,878 24,746,616 3.0% 1.3% 1.3%
Total Noncurrent Assets 53,835,676,250 50,063,895,188 3,771,781,062 7.5% 80.1% 77.8%
₱ 67,188,575,310 ₱ 64,329,317,126 ₱ 2,859,258,184 4.4% 100.0% 100.0%

LIABILITIES AND EQUITY

Current Liabilities
Accounts payable and other liabilities 4,924,181,819 4,057,604,344 ₱ 866,577,475 21.4% 7.3% 6.3%
Short-term notes payable 4,152,072,205 3,452,170,869 699,901,336 20.3% 6.2% 5.4%
Due to related parties 946,358,168 944,720,411 1,637,757 0.2% 1.4% 1.5%
Customers' deposits 438,642,558 125,696,948 312,945,610 249.0% 0.7% 0.2%
Dividends payable 177,116,771 152,131,628 24,985,143 16.4% 0.3% 0.2%
Income tax payable 63,629,587 23,169,126 40,460,461 174.6% 0.1% 0.0%
Total Current Liabilities 10,702,001,108 8,755,493,326 1,946,507,782 22.2% 15.9% 13.6%

Noncurrent Liabilities
Long-term notes payable - net of debt issue costs 14,662,496,771 14,727,597,945 (65,101,174) -0.4% 21.8% 22.9%
Bonds payable - net of bond issue costs 14,799,339,265 14,795,304,275 4,034,990 0.0% 22.0% 23.0%
Deferred tax liabilities 3,142,166,270 2,849,087,621 293,078,649 10.3% 4.7% 4.4%
Retirement benefits liability 8,561,109 7,674,749 886,360 11.5% 0.0% 0.0%
Other noncurrent liabilities 1,000,632,558 878,398,558 122,234,000 13.9% 1.5% 1.4%
Total Noncurrent Liabilities 33,613,195,973 33,258,063,148 355,132,825 1.1% 50.0% 51.7%
Total Liabilities 44,315,197,081 42,013,556,474 2,301,640,607 5.5% 66.0% 65.3%

Equity
Equity Attributable to Equity Holders of the Parent Company
Capital stock 222,973,000 222,973,000 - 0.0% 0.3% 0.3%
Preferred Shares 10,000,000,000 10,000,000,000 - 14.9% 15.5%
Additional paid-in capital 1,358,237,357 1,358,237,357 - 0.0% 2.0% 2.1%
Retained earnings 2,884,183,509 2,571,883,195 312,300,314 12.1% 4.3% 4.0%
Remeasurement loss on defined benefit liability - net of tax 1,876,396 1,876,396 - 0.0% 0.0% 0.0%
14,467,270,262 14,154,969,948 312,300,314 2.2% 21.5% 22.0%
Non-controlling Interest 8,406,107,967 8,160,790,704 245,317,263 3.0% 12.5% 12.7%
Total Equity 22,873,378,229 22,315,760,652 557,617,577 2.5% 34.0% 34.7%
Total Liabilities and Equity ₱ 67,188,575,310 ₱ 64,329,317,126 ₱ 2,859,258,184 4.4% 100.0% 100.0%

The Company’s Total Assets increased by P2.9 billion from the end of last year primarily due to the increase in
the Company’s Investment Properties which now stand at P50.1 billion as the ongoing construction in the various
projects in Metro Manila and across the Philippines continues to progress. The Company’s debt-to-equity remains
healthy at 1.47x.

For the first three months of 2018, the Company’s properties held for lease, classified as investment properties,
increased by P3.7 billion or an increase of 7.9% for the first three months of 2018 to end at P50.1 billion as of
March 31, 2018. DoubleDragon is focusing on the buildup of recurring revenue firmly grounded on a portfolio of
appreciating real estate assets acquired at un-stretched prices to provide downturn protection during any economic
cycle.

F-36
Current Assets

Cash amounting to P1.3 billion as of March 31, 2018 decreased by P798.8 million (-38.0%) from P2.1 billion as
of December 31, 2017.

Receivables amounting to P3.7 billion as of March 31, 2018 increased by P300.0 million (8.8%) from P3.4 billion
as of December 31, 2017 due to incremental sales from the Company’s projects.

Real estate inventories amounting to P3.9 billion as of March 31, 2018 increased by P109.7 million from P3.8
billion on December 31, 2017.

Prepaid expenses and other current assets amounting to P4.3 billion as of March 31, 2018 decreased by P523.3
million (-10.9%) from P4.8 billion on December 31, 2017. This account includes input taxes on expenditures
related to construction and property development and creditable withholding taxes.

Noncurrent Assets

Noncurrent installment contracts receivable amounting to P304.1 million as of March 31, 2018 increased from
P230.7 million as of December 31, 2017. Noncurrent installment contracts represent the portion of receivables
from the sale of units from vertical and horizontal projects collectible in two to three years’ time.

Property and equipment amounting to P1,010.4 million as of March 31, 2018 increased by P0.4 million from
P1,009.9 million as of December 31, 2017.

Intangible assets amounting to P1.322 billion as of March 31, 2018 increased by P7.9 million (0.6%) from P1.314
billion as of December 31, 2017.

Investment property amounting to P50.1 billion as of March 31, 2018 increased by P3.7 billion (7.9%) from P46.4
billion as of December 31, 2017 as the Company continues to secure prime commercial property across provincial
cities in the Philippines for its CityMall expansion. Full swing construction of the Company’s two Metro Manila
office Projects, DD Meridian Park and Jollibee Plaza as well as the ongoing development of CentralHub industrial
leasing sites, are also contributing to the increase in the Company’s Investment Properties.

Current Liabilities

Accounts payable and other liabilities amounting to P4.9 billion as of March 31, 2018 increased by P866.6 million
(21.4%) from P4.1 billion as of December 31, 2017. The bulk of such increase is attributable to Trade Payables
arising from services provided by the contractors and subcontractors for actual progress billings related to existing
and new developmental projects.

Short-term notes payable amounting to P4.2 billion as of March 31, 2018 increased by P700.0 million (20.3%)
from P3.5 billion as of December 31, 2017 due to availment of short-term loans.

Customers' deposits amounting to P438.6 million as of March 31, 2018 increased by P312.9 million (249.0%)
from P125.7 million as of December 31, 2017 due to the increase in deposits from DD Meridian Park’s new
tenants as well as deposits from the unit buyers of Hotel 101-Fort.

Noncurrent Liabilities

Long-term notes payable remains at P14.7 billion as of March 31, 2018. Bonds payable also remains at P14.8
billion as of March 31, 2018. Deferred tax liabilities increased by P293.1 million (10.3%) to P3.1 billion from
P2.8 billion as of December 31, 2017.

There are no other significant movements in the Noncurrent Liabilities portion of the Balance Sheet of the
Company

Equity

F-37
Equity amounting to P22.9 billion as of March 31, 2018 is higher by P557.6 million from P22.3 billion as of
December 31, 2017, due to the consolidated net income recorded for the first three months of 2018.

Key Performance Indicators of the Company

Audited Unaudited
2017 March 31, 2018
Current Ratio 1.63 1.25
Asset to Equity 2.88 2.94
Debt to Equity Ratios
On Gross Basis 1.48x 1.47x
On Net Basis 1.38x 1.41x
Return on Equity 12.02% 3.66%
Net Income to Revenue 24.83% 28.64%
Revenue Growth 78.14% 182.0%
EBITDA PhP 4,762,120,984 PhP 1,296,470,497
Solvency Ratio 0.06x 0.02x
Acid Test Ratio 0.64 0.48
Interest Coverage Ratio 2.92 2.63
(In compliance with SRC Rule 68, as amended on October 2011)

The following are the formula by which the Company calculates the foregoing performance indicators are
as follows:

1. Current Ratio Current Assets

Current Liabilities

2. Asset to Equity Ratio Total Assets

Total Stockholders' Equity

3. Debt to Equity Ratio (Gross Total Interest Bearing Short-Term and Long-Term Debt
Basis) Total Equity

4. Debt to Equity Ratio (Net Total Interest Bearing Short-Term and Long-Term Debt less Cash and
Basis) Cash Equivalent
Total Equity

5. Return on Equity Net Income Attributable to Owners of the Parent

Average Equity Attributable to the Owners of the Parent

6. Net Income to Revenue Net Income Attributable to Owners of the Parent

(Net Profit Margin) Total Revenue

F-38
7. Revenue Growth Total Revenue (Current Period) - Total Revenue (Prior Period)
Total Revenue (Prior Period)

8. EBITDA Income from Operations + Depreciation and Amortization + Interest

Expense

9. Solvency Ratio Net Income + Depreciation and Amortization

Total Liabilities

10. Acid Test Ratio Cash + Accounts Receivable + Marketable Securities

Current Liabilities

11. Interest Coverage Ratio Earnings before interest and taxes

Interest Paid

F-39
F-40
 R.G. Manabat & Co.
The KPMG Center, 9/F
6787 Ayala Avenue, Makati City
Philippines 1226
Telephone +63 (2) 885 7000
Fax +63 (2) 894 1985
Internet www.kpmg.com.ph
Email ph-inquiry@kpmg.com.ph

REPORT OF INDEPENDENT AUDITORS

ON SUPPLEMENTARY INFORMATION
The Board of Directors and Stockholders
DoubleDragon Properties Corp.
DD Meridian Park Bay Area
Corner Macapagal Avenue and EDSA Extension Boulevard
Brgy 76 Zone 10, San Rafael, Pasay City, Metro Manila

We have reviewed in accordance with Philippine Standards on Review Engagements 2410, Review of Interim Financial
Information Performed by the Independent Auditor of the Entity, the condensed consolidated interim financial statements
of DoubleDragon Properties Corp. and Subsidiaries, which comprise the condensed consolidated interim statement of
financial position as at March 31, 2018, and the condensed consolidated interim statements of comprehensive income,
condensed consolidated interim statements of changes in equity and condensed consolidated interim statements of cash
flows for the three months ended March 31, 2018 and 2017, and selected explanatory notes, included in this Form 17-Q,
and have issued our report thereon dated May 18, 2018.

Our review was made for the purpose of expressing a conclusion on the condensed consolidated interim financial
statements of the Group taken as a whole. The supplementary information included in the following accompanying
additional components are the responsibility of the Group’s management. Such additional components include:

ƒ Map of the Conglomerate

ƒ Schedule of Philippine Financial Reporting Standards and Interpretations
ƒ Supplementary Schedules of Annex 68-E
ƒ Reconciliation of Retained Earnings Available for Dividend Declaration

These supplementary information are presented for purposes of complying with the Securities Regulation Code Rule 68,
As Amended, and are not a required part of the condensed consolidated interim financial statements. Such information
have been subjected to the review procedures applied in the review of the consolidated interim financial statements and,
in our review, nothing has come to our attention that causes us to believe that such information do not present fairly, in all
material respect, in relation to the condensed consolidated interim financial statements taken as a whole.

R.G. MANABAT & CO.

DARWIN P. VIROCEL
Partner
CPA License No. 0094495
SEC Accreditation No. 1386-AR, Group A, valid until June 14, 2020
Tax Identification No. 912-535-864
BIR Accreditation No. 08-001987-31-2017
Issued October 18, 2016; valid until October 17, 2019
PTR No. 6615157MD
Issued January 3, 2018 at Makati City

May 18, 2018

Makati City, Metro Manila

PRC-BOA Registration No. 0003, valid until March 15, 2020

SEC Accreditation No. 0004-FR-5, Group A, valid until November 15, 2020
IC Accreditation No. F-2017/010-R, valid until August 26, 2020
R.G. Manabat & Co., a Philippine partnership and a member firm of the KPMG network of independent
F-41
BSP - Selected External Auditors, Category A, valid for 3-year audit period
member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. (2017 to 2019)
DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
SCHEDULE A - FINANCIAL ASSETS
FOR THE PERIOD ENDED MARCH 31, 2018

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F-42
DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
SCHEDULE B - AMOUNTS RECEIVABLE FROM DIRECTORS, OFFICERS, EMPLOYEES,
RELATED PARTIES AND PRINCIPAL STOCKHOLDERS
FOR THE PERIOD ENDED MARCH 31, 2018

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F-43
DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
SCHEDULE C - AMOUNTS RECEIVABLE FROM RELATED PARTIES
WHICH ARE ELIMINATED DURING THE CONSOLIDATION OF FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MARCH 31, 2018

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F-44
DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
SCHEDULE D - INTANGIBLE ASSETS - OTHER ASSETS
FOR THE PERIOD ENDED MARCH 31, 2018

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+ #)" 
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F-45
DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
SCHEDULE E - LONG-TERM DEBT
FOR THE PERIOD ENDED MARCH 31, 2018

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F-46
DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
SCHEDULE F - INDEBTEDNESS TO RELATED PARTIES
FOR THE PERIOD ENDED MARCH 31, 2018

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F-47
DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
SCHEDULE G - GUARANTEES OF SECURITES OF OTHER ISSUERS
FOR THE PERIOD ENDED MARCH 31, 2018



 


 
 
 






 



 
 

 

 
  





   








    

F-48
DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
SCHEDULE H - CAPITAL STOCK
FOR THE PERIOD ENDED MARCH 31, 2018

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F-49
DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
FINANCIAL RATIOS - KEY PERFORMANCE INDICATORS
AS OF MARCH 31, 2018




 

Current Assets















































1. Current Ratio
Current Liabilities

Total Assets















































2. Asset to Equity Ratio
Total Stockholders' Equity

Total Interest Bearing Short-Term and Long-Term Debt















































3. Debt to Equity Ratio (Gross Basis)
Total Equity

Total Interest Bearing Short-Term and Long-Term Debt less Cash and Cash Equivalent














































4. Debt to Equity Ratio (Net Basis)
Total Equity

Net Income Attributable to Owners of the Parent 3.66% 12.02%

5. Return on Equity
Average Equity Attributable to the Owners of the Parent

Net Income Attributable to Owners of the Parent 28.64% 24.83%

6. Net Income to Revenue
Total Revenue

Total Revenue (Current Period) - Total Revenue (Prior Period) 182.00% 78.14%
7. Revenue Growth
Total Revenue (Prior Period)

Net Income Attributable to Owners of the Parent (Current Period)  
8. Income Growth

Net Income Attributable to Owners of the Parent (Prior Period)

Income from Operations + Depreciation and Amortization + Interest Expense 



 



9. EBITDA

Cash + Accounts Receivable + Marketable Securities  

10. Acid Test Ratio
Current Liabilities

Net Income + Depreciation and Amortization  

11. Solvency Ratio
Total Liabilities

Earnings Before Interest and Taxes  

12. Interest Coverage Ratio
Interest Paid

F-50
F-51
 RECONCILIATION
RECONCILIATION OF RETAINED EARNINGSOF RETAINED EARNINGS
AVAILABLE FOR DIVIDEND DECLARATION
AVAILABLE FOR DIVIDEND DECLARATION
March 31, 2018
AS AT DECEMBER 31, 2015
DoubleDragon Properties Corp.
DoubleDragon Properties Corp. DD Meridian Park Bay Area
DD Meridian Park BayCorner
Area Macapagal Avenue and EDSA Extension Boulevard
Brgy 76 Zone 10. San Rafael, Pasay City, Metro Manila
Corner Macapagal Avenue and EDSA Extension Boulevard
Brgy 76 Zone 10. San Rafael, Pasay City, Metro Manila

Unappropriated Retained Earnings, beginning ₱1,070,254,945

Adjustments:
(see adjustments in previous year' reconciliation) (1,019,364,841)
Unappropriated Retained Earnings, as adjusted,
beginning 50,890,104
Add: Net income ₱114,707,806
Less: Non-actual/unrealized income net of tax
Equity in net income of associate/joint venture -
Unrealized foreign exchange gain (loss) net
(except those attributable to Cash and Cash
Equivalents) -
Unrealized actuarial gain (loss) -
Fair value adjustments (M2M gains) -
Fair value adjustments of Investment Property
resulting to gain -
Adjustments due to deviation from PFRS/GAAP -
gain -
Other unrealiazed gains or adjustments to the
retained earnings as a result of certain
transactions accounted for under PFRS -
Add: Non-actual losses
Depreciation on revaluation increment (after tax) -
Adjustments due to deviation from PFRS/GAAP -
gain -
Loss on fair value adjustments of investment
Property (after tax) -
Net income actual/realized 114,707,806
Add (Less):
Dividend declaration for the period (161,945,000)
Stock issuance costs -
Appropriations of Retained Earnings during the
period -
Reversal of appropriations -
Effect of prior period adjustments -
Treasury Shares -
Unappropriated Retained Earnings, as adjusted,
ending 3,652,910

F-52
 DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES

PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Adopted Not Not

Effective as of March 31, 2018 Adopted Applicable
Framework for the Preparation and Presentation of Financial
✔
Statements
Conceptual Framework Phase A: Objectives and qualitative
characteristics
PFRSs Practice Statement Management Commentary
Philippine Financial Reporting Standards
PFRS 1 First-time Adoption of Philippine Financial Reporting
✔
(Revised) Standards
Amendments to PFRS 1 and PAS 27: Cost of an ✔
Investment in a Subsidiary, Jointly Controlled Entity or
Associate
Amendments to PFRS 1: Additional Exemptions for First-
✔
time Adopters
Amendment to PFRS 1: Limited Exemption from
✔
Comparative PFRS 7 Disclosures for First-time Adopters
Amendments to PFRS 1: Severe Hyperinflation and
✔
Removal of Fixed Date for First-time Adopters
Amendments to PFRS 1: Government Loans
✔
Annual Improvements to PFRSs 2009 – 2011 Cycle: First-
✔
time Adoption of Philippine Financial Reporting
Standards – Repeated Application of PFRS 1
Annual Improvements to PFRSs 2009 – 2011 Cycle: ✔
Borrowing Cost Exemption
Annual Improvements to PFRSs 2011 – 2013 Cycle: PFRS
✔
version that a first-time adopter can apply
Annual Improvements to PFRSs 2014 – 2016 Cycle:
✔
Deletion of short-term exemptions for first-time adopters
PFRS 2 Share-based Payment
✔
Amendments to PFRS 2: Vesting Conditions and
✔
Cancellations
Amendments to PFRS 2: Group Cash-settled Share-
✔
based Payment Transactions
Annual Improvements to PFRSs 2010 – 2012 Cycle:
✔
Meaning of ‘vesting condition’
Amendments to PFRS 2: Classification and Measurement
✔
of Share-based Payment Transactions
PFRS 3 Business Combinations
✔
(Revised)
Annual Improvements to PFRSs 2010 – 2012 Cycle:
✔
Classification and measurement of contingent
consideration
Annual Improvements to PFRSs 2011 – 2013 Cycle: Scope ✔
exclusion for the formation of joint arrangements
PFRS 4 Insurance Contracts
✔
Amendments to PAS 39 and PFRS 4: Financial Guarantee ✔
Contracts
Amendments to PFRS 4: Applying PFRS 9, Financial ✔
Instruments with PFRS 4, Insurance Contracts

F-53
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Adopted Not Not
Effective as of March 31, 2018 Adopted Applicable
PFRS 5 Non-current Assets Held for Sale and Discontinued
✔
Operations
Annual Improvements to PFRSs 2012 – 2014 Cycle:
✔
Changes in method for disposal
PFRS 6 Exploration for and Evaluation of Mineral Resources ✔
PFRS 7 Financial Instruments: Disclosures
✔
Amendments to PFRS 7: Transition
✔
Amendments to PAS 39 and PFRS 7: Reclassification of
✔
Financial Assets
Amendments to PAS 39 and PFRS 7: Reclassification of
✔
Financial Assets - Effective Date and Transition
Amendments to PFRS 7: Improving Disclosures about
✔
Financial Instruments
Amendments to PFRS 7: Disclosures - Transfers of
✔
Financial Assets
Amendments to PFRS 7: Disclosures – Offsetting Financial
✔
Assets and Financial Liabilities
Amendments to PFRS 7: Mandatory Effective Date of ✔
PFRS 9 and Transition Disclosures
Annual Improvements to PFRSs 2012 – 2014 Cycle:
✔
‘Continuing involvement’ for servicing contracts
Annual Improvements to PFRSs 2012 – 2014 Cycle:
✔
Offsetting disclosures in condensed interim financial
statements
PFRS 8 Operating Segments
✔
Annual Improvements to PFRSs 2010 – 2012 Cycle:
✔
Disclosures on the aggregation of operating segments
PFRS 9 Financial Instruments (2014)
✔
Amendments to PFRS 9: Prepayment Features with
✔
Negative Compensation
PFRS 10 Consolidated Financial Statements
✔
Amendments to PFRS 10, PFRS 11, and PFRS 12:
✔
Consolidated Financial Statements, Joint Arrangements
and Disclosure of Interests in Other Entities: Transition
Guidance
Amendments to PFRS 10, PFRS 12, and PAS 27 (2011):
✔
Investment Entities
Amendments to PFRS 10 and PAS 28: Sale or ✔
Contribution of Assets between an Investor and its
Associate or Joint Venture
Amendments to PFRS 10, PFRS 12 and PAS 28: Investment
✔
Entities: Applying the Consolidation Exception
PFRS 11 Joint Arrangements
✔
Amendments to PFRS 10, PFRS 11, and PFRS 12:
✔
Consolidated Financial Statements, Joint Arrangements
and Disclosure of Interests in Other Entities: Transition
Guidance

F-54
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Adopted Not Not
Effective as of March 31, 2018 Adopted Applicable
Amendments to PFRS 11: Accounting for Acquisitions of
✔
Interests in Joint Operations

PFRS 12 Disclosure of Interests in Other Entities

✔
Amendments to PFRS 10, PFRS 11, and PFRS 12:
✔
Consolidated Financial Statements, Joint Arrangements
and Disclosure of Interests in Other Entities: Transition
Guidance
Amendments to PFRS 10, PFRS 12, and PAS 27 (2011):
✔
Investment Entities
Amendments to PFRS 10, PFRS 12 and PAS 28: Investment
✔
Entities: Applying the Consolidation Exception
Annual Improvements to PFRSs 2014 – 2016 Cycle:
✔
Clarification of the scope of the standard
PFRS 13 Fair Value Measurement
✔
Annual Improvements to PFRSs 2010 – 2012 Cycle:
✔
Measurement of short-term receivables and payables
Annual Improvements to PFRSs 2011 – 2013 Cycle: Scope
✔
of portfolio exception
PFRS 14 Regulatory Deferral Accounts ✔
PFRS 15 Revenue from Contracts with Customers
✔
PFRS 16 Leases
✔
Philippine Accounting Standards
PAS 1 Presentation of Financial Statements
✔
(Revised)
Amendment to PAS 1: Capital Disclosures
✔
Amendments to PAS 32 and PAS 1: Puttable Financial
✔
Instruments and Obligations Arising on Liquidation
Amendments to PAS 1: Presentation of Items of Other ✔
Comprehensive Income
Annual Improvements to PFRSs 2009 – 2011 Cycle:
✔
Presentation of Financial Statements – Comparative
Information beyond Minimum Requirements
Annual Improvements to PFRSs 2009 – 2011 Cycle:
✔
Presentation of the Opening Statement of Financial
Position and Related Notes
Amendments to PAS 1: Disclosure Initiative ✔
PAS 2 Inventories
✔
PAS 7 Statement of Cash Flows
✔
Amendments to PAS 7: Disclosure Initiative
✔
PAS 8 Accounting Policies, Changes in Accounting Estimates
✔
and Errors
PAS 10 Events after the Reporting Period ✔
PAS 11 Construction Contracts
✔

F-55
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Adopted Not Not
Effective as of March 31, 2018 Adopted Applicable
PAS 12 Income Taxes
✔
Amendment to PAS 12: Deferred Tax: Recovery of
✔
Underlying Assets
Amendments to PAS 12: Recognition of Deferred Tax
✔
Assets for Unrealized Losses
PAS 16 Property, Plant and Equipment
✔
Annual Improvements to PFRSs 2009 – 2011 Cycle:
✔
Property, Plant and Equipment – Classification of
Servicing Equipment

Annual Improvements to PFRSs 2010 – 2012 Cycle:

✔
Restatement of accumulated depreciation
(amortization) on revaluation (Amendments to PAS 16
and PAS 38)

Amendments to PAS 16 and PAS 38: Clarification of ✔

Acceptable Methods of Depreciation and Amortization

Amendments to PAS 16 and PAS 41: Agriculture: Bearer

✔
Plants

PAS 17 Leases
✔
PAS 18 Revenue
✔
PAS 19 Employee Benefits ✔
(Amended)
Amendments to PAS 19: Defined Benefit Plans:
✔
Employee Contributions
Annual Improvements to PFRSs 2012 – 2014 Cycle:
✔
Discount rate in a regional market sharing the same
currency – e.g. the Eurozone
PAS 20 Accounting for Government Grants and Disclosure of
✔
Government Assistance
PAS 21 The Effects of Changes in Foreign Exchange Rates
✔
Amendment: Net Investment in a Foreign Operation
✔
PAS 23 Borrowing Costs ✔
(Revised)
PAS 24 Related Party Disclosures ✔
(Revised)
Annual Improvements to PFRSs 2010 – 2012 Cycle:
✔
Definition of ‘related party’
PAS 26 Accounting and Reporting by Retirement Benefit Plans ✔
PAS 27 Separate Financial Statements
✔
(Amended)
Amendments to PFRS 10, PFRS 12, and PAS 27 (2011):
✔
Investment Entities
Amendments to PAS 27: Equity Method in Separate
✔
Financial Statements

PAS 28 Investments in Associates and Joint Ventures

✔

F-56
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Adopted Not Not
Effective as of March 31, 2018 Adopted Applicable
(Amended) Amendments to PFRS 10 and PAS 28: Sale or
✔
Contribution of Assets between an Investor and its
Associate or Joint Venture
Amendments to PFRS 10, PFRS 12 and PAS 28: Investment ✔
Entities: Applying the Consolidation Exception
Annual Improvements to PFRSs 2014 – 2016 Cycle:
✔
Measuring an associate or joint venture at fair value
Amendments to PAS 28: Long-term Interests in
✔
Associates and Joint Ventures
PAS 29 Financial Reporting in Hyperinflationary Economies
✔
PAS 32 Financial Instruments: Disclosure and Presentation
✔
Amendments to PAS 32 and PAS 1: Puttable Financial ✔
Instruments and Obligations Arising on Liquidation
Amendment to PAS 32: Classification of Rights Issues
✔
Amendments to PAS 32: Offsetting Financial Assets and ✔
Financial Liabilities
Annual Improvements to PFRSs 2009 – 2011 Cycle:
✔
Financial Instruments Presentation – Income Tax
Consequences of Distributions
PAS 33 Earnings per Share
✔
PAS 34 Interim Financial Reporting
✔
Annual Improvements to PFRSs 2009 – 2011 Cycle:
✔
Interim Financial Reporting – Segment Assets and
Liabilities
Annual Improvements to PFRSs 2012 – 2014 Cycle:
✔
Disclosure of information “elsewhere in the interim
financial report’
PAS 36 Impairment of Assets ✔
Amendments to PAS 36: Recoverable Amount
✔
Disclosures for Non-Financial Assets
PAS 37 Provisions, Contingent Liabilities and Contingent Assets ✔
PAS 38 Intangible Assets ✔
Annual Improvements to PFRSs 2010 – 2012 Cycle:
✔
Restatement of accumulated depreciation
(amortization) on revaluation (Amendments to PAS 16
and PAS 38)
Amendments to PAS 16 and PAS 38: Clarification of
✔
Acceptable Methods of Depreciation and Amortization
PAS 39 Financial Instruments: Recognition and Measurement
✔
Amendments to PAS 39: Transition and Initial Recognition
✔
of Financial Assets and Financial Liabilities
Amendments to PAS 39: Cash Flow Hedge Accounting
✔
of Forecast Intragroup Transactions
Amendments to PAS 39: The Fair Value Option
✔
Amendments to PAS 39 and PFRS 4: Financial Guarantee
✔

F-57
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Adopted Not Not
Effective as of March 31, 2018 Adopted Applicable
Contracts
Amendments to PAS 39 and PFRS 7: Reclassification of
✔
Financial Assets
Amendments to PAS 39 and PFRS 7: Reclassification of
✔
Financial Assets – Effective Date and Transition
Amendments to Philippine Interpretation IFRIC–9 and
✔
PAS 39: Embedded Derivatives
Amendment to PAS 39: Eligible Hedged Items
✔
Amendment to PAS 39: Novation of Derivatives and
✔
Continuation of Hedge Accounting
PAS 40 Investment Property ✔
Annual Improvements to PFRSs 2011 – 2013 Cycle: Inter-
✔
relationship of PFRS 3 and PAS 40 (Amendment to PAS
40)
Amendments to PAS 40: Transfers of Investment Property ✔
PAS 41 Agriculture
✔
Amendments to PAS 16 and PAS 41: Agriculture: Bearer
✔
Plants
Philippine Interpretations
IFRIC 1 Changes in Existing Decommissioning, Restoration and
✔
Similar Liabilities
IFRIC 2 Members' Share in Co-operative Entities and Similar
✔
Instruments
IFRIC 4 Determining Whether an Arrangement Contains a Lease ✔
IFRIC 5 Rights to Interests arising from Decommissioning,
✔
Restoration and Environmental Rehabilitation Funds
IFRIC 6 Liabilities arising from Participating in a Specific Market - ✔
Waste Electrical and Electronic Equipment
IFRIC 7 Applying the Restatement Approach under PAS 29
✔
Financial Reporting in Hyperinflationary Economies
IFRIC 9 Reassessment of Embedded Derivatives
✔
Amendments to Philippine Interpretation IFRIC–9 and ✔
PAS 39: Embedded Derivatives
IFRIC 10 Interim Financial Reporting and Impairment
✔
IFRIC 12 Service Concession Arrangements
✔
IFRIC 13 Customer Loyalty Programmes
✔
IFRIC 14 PAS 19 - The Limit on a Defined Benefit Asset, Minimum
✔
Funding Requirements and their Interaction
Amendments to Philippine Interpretations IFRIC- 14,
✔
Prepayments of a Minimum Funding Requirement
IFRIC 16 Hedges of a Net Investment in a Foreign Operation
✔
IFRIC 17 Distributions of Non-cash Assets to Owners
✔
IFRIC 18 Transfers of Assets from Customers
✔

F-58
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Adopted Not Not
Effective as of March 31, 2018 Adopted Applicable
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
✔
IFRIC 20 Stripping Costs in the Production Phase of a Surface
✔
Mine
IFRIC 21 Levies
✔
IFRIC 22 Foreign Currency Transactions and Advance
✔
Consideration
IFRIC 23 Uncertainty over Income Tax Treatments
✔
SIC-7 Introduction of the Euro
✔
SIC-10 Government Assistance - No Specific Relation to
✔
Operating Activities
SIC-15 Operating Leases - Incentives ✔
SIC-25 Income Taxes - Changes in the Tax Status of an Entity or ✔
its Shareholders
SIC-27 Evaluating the Substance of Transactions Involving the
✔
Legal Form of a Lease
SIC-29 Service Concession Arrangements: Disclosures.
✔
SIC-31 Revenue - Barter Transactions Involving Advertising
✔
Services
SIC-32 Intangible Assets - Web Site Costs
✔
Philippine Interpretations Committee Questions and Answers
PIC Q&A PAS 18, Appendix, paragraph 9 – Revenue recognition
✔
2006-01 for sales of property units under pre-completion
contracts
PIC Q&A PAS 27.10(d) – Clarification of criteria for exemption from
✔
2006-02 presenting consolidated financial statements
PIC Q&A PAS 1.103(a) – Basis of preparation of financial
✔
2007-01- statements if an entity has not applied PFRSs in full
Revised
PIC Q&A PAS 20.24.37 and PAS 39.43 - Accounting for
✔
2007-02 government loans with low interest rates [see PIC Q&A
No. 2008-02]
PIC Q&A PAS 40.27 – Valuation of bank real and other properties
✔
2007-03 acquired (ROPA)
PIC Q&A PAS 101.7 – Application of criteria for a qualifying NPAE
✔
2007-04
PIC Q&A PAS 19.78 – Rate used in discounting post-employment
✔
2008-01- benefit obligations
Revised
PIC Q&A PAS 20.43 – Accounting for government loans with low
✔
2008-02 interest rates under the amendments to PAS 20
PIC Q&A Framework.23 and PAS 1.23 – Financial statements
✔
2009-01 prepared on a basis other than going concern
PIC Q&A PAS 39.AG71-72 – Rate used in determining the fair
✔
2009-02 value of government securities in the Philippines
PIC Q&A PAS 39.AG71-72 – Rate used in determining the fair
✔
2010-01 value of government securities in the Philippines

F-59
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Adopted Not Not
Effective as of March 31, 2018 Adopted Applicable
PIC Q&A PAS 1R.16 – Basis of preparation of financial statements
✔
2010-02
PIC Q&A PAS 1 Presentation of Financial Statements –
✔
2010-03 Current/non-current classification of a callable term
loan
PIC Q&A PAS 1.10(f) – Requirements for a Third Statement of
✔
2011-01 Financial Position
PIC Q&A PFRS 3.2 – Common Control Business Combinations
✔
2011-02
PIC Q&A Accounting for Inter-company Loans
✔
2011-03
PIC Q&A PAS 32.37-38 – Costs of Public Offering of Shares
✔
2011-04
PIC Q&A PFRS 1.D1-D8 – Fair Value or Revaluation as Deemed
✔
2011-05 Cost
PIC Q&A PFRS 3, Business Combinations (2008), and PAS 40, ✔
2011-06 Investment Property – Acquisition of Investment
properties – asset acquisition or business combination?
PIC Q&A PFRS 3.2 – Application of the Pooling of Interests Method
✔
2012-01 for Business Combinations of Entities Under Common
Control in Consolidated Financial Statements
PIC Q&A Cost of a New Building Constructed on the Site of a
✔
2012-02 Previous Building
PIC Q&A Applicability of SMEIG Final Q&As on the Application of ✔
2013-01 IFRS for SMEs to Philippine SMEs
PIC Q&A Conforming Changes to PIC Q&As - Cycle 2013
✔
2013-02
PIC Q&A PAS 19 – Accounting for Employee Benefits under a
✔
2013-03 Defined Contribution Plan subject to Requirements of
(Revised) Republic Act (RA) 7641, The Philippine Retirement Law
PIC Q&A Conforming Changes to PIC Q&As - Cycle 2015 ✔
2015-01
PIC Q&A Conforming Changes to PIC Q&As - Cycle 2016
✔
2016-01
PIC Q&A PAS 32 and PAS 38 - Accounting Treatment of Club ✔
2016-02 Shares Held by an Entity
PIC Q&A Application of PFRS 15 “Revenue from Contracts with
✔
2016-04 Customers” on Sale of Residential Properties under Pre-
Completion Contracts
PIC Q&A Conforming Changes to PIC Q&As - Cycle 2017 ✔
2017-01
PIC Q&A PAS 2 and PAS 16 - Capitalization of operating lease
✔
2017-02 cost as part of construction costs of a building
PIC Q&A PAS 28 - Elimination of profits and losses resulting from
✔
2017-03 transactions between associates and/or joint ventures
PIC Q&A PAS 24 - Related party relationships between parents,
✔
2017-04 subsidiary, associate and non-controlling shareholder
PIC Q&A PFRS 7 – Frequently asked questions on the disclosure
✔
2017-05 requirements of financial instruments under PFRS 7,
Financial Instruments: Disclosures
PIC Q&A PAS 2, 16 and 40 – Accounting for Collector’s Items
✔

F-60
 PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS Adopted Not Not
Effective as of March 31, 2018 Adopted Applicable
2017-06
PIC Q&A PFRS 10 – Accounting for reciprocal holdings in
✔
2017-07 associates and joint ventures
PIC Q&A PFRS 10 – Requirement to prepare consolidated
✔
2017-08 financial statements where an entity disposes of its single
investment in a subsidiary, associate or joint venture
PIC Q&A PAS 17 and Philippine Interpretation SIC-15 - Accounting
✔
2017-09 for payments between and among lessors and lessees
PIC Q&A PAS 40 - Separation of property and classification as
✔
2017-10 investment property
PIC Q&A PFRS 10 and PAS 32 - Transaction costs incurred to ✔
2017-11 acquire outstanding non-controlling interest or to sell
non-controlling interest without a loss of control
PIC Q&A Subsequent Treatment of Equity Component Arising
✔
2017-12 from Intercompany Loans
PIC Q&A Voluntary changes in accounting policy ✔
2018-01
PIC Q&A Non-controlling interests and goodwill impairment test
✔
2018-02
PIC Q&A Fair value of PPE and depreciated replacement cost
✔
2018-03
PIC Q&A Inability to measure fair value reliably for biological
✔
2018-04 assets within the scope of PAS 41
PIC Q&A Maintenance requirement of an asset held under lease
✔
2018-05
PIC Q&A Cost of investment in subsidiaries in SFS when pooling is
✔
2018-06 applied
PIC Q&A Cost of an associate, joint venture, or subsidiary in
✔
2018-07 separate financial statements
PIC Q&A Accounting for the acquisition of non-wholly owned ✔
2018-08 subsidiary that is not a business
PIC Q&A Classification of deposits and progress payments as
✔
2018-09 monetary or non-monetary items
PIC Q&A Scope of disclosure of inventory write-down
✔
2018-10

Legend:

Adopted – means a particular standard or interpretation is relevant to the operations of the entity (even if it has no effect or no
material effect on the financial statements), for which there may be a related particular accounting policy made in the financial
statements and/or there are current transactions the amounts or balances of which are disclosed on the face or in the notes of the
financial statements.

Not Adopted – means a particular standard or interpretation is effective but the entity did not adopt it due to either of these two
reasons: 1) The entity has deviated or departed from the requirements of such standard or interpretation; or 2) The standard provides
for an option to early adopt it but the entity decided otherwise.

Not Applicable – means the standard or interpretation is not relevant at all to the operations of the entity.

F-61
F-62
F-63
F-64
F-65
F-66
F-67
DOUBLEDRAGON PROPERTIES CORP.
AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017, 2016 and 2015

F-68


R.G. Manabat & Co.

The KPMG Center, 9/F
6787 Ayala Avenue, Makati City
Philippines 1226
Telephone +63 (2) 885 7000
Fax +63 (2) 894 1985
Internet www.kpmg.com.ph
Email ph-inquiry@kpmg.com.ph

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders

DoubleDragon Properties Corp.
DD Meridian Park Bay Area
Corner Macapagal Avenue and EDSA Extension Boulevard
Brgy 76 Zone 10, San Rafael, Pasay City, Metro Manila

Opinion

We have audited the consolidated financial statements of DoubleDragon Properties

Corp. and its subsidiaries (“the Group”), which comprise the consolidated statements of
financial position as at December 31, 2017 and 2016, and the consolidated statements
of comprehensive income, consolidated statements of changes in equity and
consolidated statements of cash flows for each of the three years in the period ended
December 31, 2017, and notes, comprising significant accounting policies and other
explanatory information.

In our opinion, the accompanying consolidated financial statements present fairly,

in all material respects, the consolidated financial position of the Group as at
December 31, 2017 and 2016, and its consolidated financial performance and its
consolidated cash flows for each of the three years in the period ended
December 31, 2017, in accordance with Philippine Financial Reporting Standards
(PFRS).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSA).

Our responsibilities under those standards are further described in the Auditors’
Responsibilities for the Audit of the Consolidated Financial Statements section of our
report. We are independent of the Group in accordance with the Code of Ethics for
Professional Accountants in the Philippines (Code of Ethics) together with the ethical
requirements that are relevant to our audits of the consolidated financial statements in
the Philippines, and we have fulfilled our other ethical responsibilities in accordance with
these requirements and the Code of Ethics. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.

PRC-BOA Registration No. 0003, valid until March 15, 2020

SEC Accreditation No. 0004-FR-5, Group A, valid until November 15, 2020
IC Accreditation No. F-2017/010-R, valid until August 26, 2020

F-69
R.G. Manabat & Co., a Philippine partnership and a member firm of the KPMG network of independent BSP - Selected External Auditors, Category A, valid for 3-year audit period
member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. (2017 to 2019)
Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the consolidated financial statements of the current period.
These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.

Valuation of Investment Property (P46.42 billion)

Refer to Note 12 to the consolidated financial statements.

The risk
The valuation of investment property requires significant judgments and
estimates by management and the independent appraiser. Any input
inaccuracies or unreasonable bases used in these judgments and estimates
could result in a material misstatement of the net income and investment
property.

Our response
We performed the following audit procedures around the valuation of investment
property:

ƒ We evaluated the Group’s controls over data used in the valuation of the
investment property portfolio and management’s review of the valuations;

ƒ We evaluated the competence, capabilities and objectivity of the independent

appraiser;

ƒ We discussed with the external valuation expert to obtain understanding on

the assumptions used;

ƒ We conducted comparison of assumptions and/or detailed analytical

procedures by reference to external market data to evaluate the
appropriateness of the valuation used by the independent appraiser and
investigated further the valuation of those properties which were not in line
with our expectations; and

ƒ We performed site visits for a sample of properties, focusing primarily on

development properties, which enabled us to assess the stage of completion
of, and gain specific insights into, these developments.

Determination of Percentage of Completion (P819.54 million)

Refer to Note 3 to the consolidated financial statements.

The risk
Real estate sales were recognized based on a percentage of completion which is
determined by the project managers. The percentage of completion involves high
estimation uncertainty in which an error in assumptions and judgment used
would result to an error in the accuracy of real estate sales and related cost of
sales.

F-70
 Our response
We performed the following audit procedures around the determination of
percentage of completion:

ƒ We discussed with project managers for major properties under development

and assessed project costs, progress of development and verified the
forecasted costs to complete as well as identified contingencies, exposures
and remaining risks. We corroborated the information provided by the project
managers through review, site visits and cost analysis;

ƒ We evaluated the competence, capabilities and objectivity of the project

managers;

ƒ We compared the percentage of completion of major projects based on input

method to check the reasonableness of the stage of completion as
determined by the project managers; and

ƒ We performed site visits for a sample of properties (focusing primarily on

development properties) which enabled us to assess the existence of these
developments.

Other Information

Management is responsible for the other information. The other information comprises
the information included in the SEC Form 20-IS (Definitive Information Statement),
SEC Form 17-A and Annual Report for the year ended December 31, 2017, but does not
include the consolidated financial statements and our auditors’ report thereon. The
SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A and Annual Report
for the year ended December 31, 2017 are expected to be made available to us after the
date of this auditors’ report.

Our opinion on the consolidated financial statements does not cover the other
information and we will not express any form of assurance conclusion thereon.

In connection with our audits of the consolidated financial statements, our responsibility
is to read the other information identified above when it becomes available and, in doing
so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audits or otherwise
appears to be materially misstated.

Responsibilities of Management and Those Charged with Governance for the

Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated
financial statements in accordance with PFRS, and for such internal control as
management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or
error.

In preparing the consolidated financial statements, management is responsible for

assessing the Group’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.

F-71
Those charged with governance are responsible for overseeing the Group’s financial
reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated
financial statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with PSA will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with PSA, we exercise professional judgment and

maintain professional skepticism throughout the audit. We also:

ƒ Identify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.

ƒ Obtain an understanding of internal control relevant to the audit in order to design

audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Group’s internal control.

ƒ Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by management.

ƒ Conclude on the appropriateness of management’s use of the going concern basis

of accounting and, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubt on
the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditors’ report to the
related disclosures in the consolidated financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditors’ report. However, future events or
conditions may cause the Group to cease to continue as a going concern.

ƒ Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial
statements represent the underlying transactions and events in a manner that
achieves fair presentation.

ƒ Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the
consolidated financial statements. We are responsible for the direction, supervision
and performance of the group audit. We remain solely responsible for our audit
opinion.

We communicate with those charged with governance regarding, among other matters,
the planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.

F-72
F-73
F-74
 DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31
2016
(As restated -
Note 2017 Note 28)
ASSETS
Current Assets
Cash and cash equivalents 6 P2,100,423,876 P5,466,874,377
Receivables - net 7 3,419,400,769 1,712,247,793
Inventories 8 3,819,534,025 3,186,344,243
Due from related parties 21 103,522,051 101,808,489
Prepaid expenses and other current assets - net 9 4,822,541,217 3,251,281,534
Total Current Assets 14,265,421,938 13,718,556,436
Noncurrent Assets
Receivables - net of current portion 7 230,721,735 643,323,007
Property and equipment - net 10 1,009,930,629 863,417,757
Goodwill and intangible assets 11, 28 1,313,752,483 1,255,001,324
Investment property 12 46,423,547,456 32,535,137,136
Deferred tax assets 24 263,343,007 15,519,784
Other noncurrent assets 13, 28 822,599,878 1,022,535,822
Total Noncurrent Assets 50,063,895,188 36,334,934,830
P64,329,317,126 P50,053,491,266

LIABILITIES AND EQUITY

Current Liabilities
Accounts payable and other current liabilities 14 P4,057,604,344 P2,639,958,858
Short-term loans payable and current maturities of
long-term notes payable, net of debt issue costs 15 3,452,170,869 3,486,004,312
Due to related parties 21 944,720,411 1,081,038,940
Customers’ deposits 16 125,696,948 219,924,165
Dividends payable 152,131,628 161,945,000
Income tax payable 23,169,126 1,128,130
Total Current Liabilities 8,755,493,326 7,589,999,405
Noncurrent Liabilities
Long-term notes payable - net of current
maturities and debt issue costs 15 14,727,597,945 15,027,837,523
Bonds payable - net of bond issue costs 15 14,795,304,275 5,217,658,399
Deferred tax liabilities 24, 28 2,849,087,621 1,149,415,869
Retirement benefits liability 23 7,674,749 6,121,432
Other noncurrent liabilities 17 878,398,558 844,155,052
Total Noncurrent Liabilities 33,258,063,148 22,245,188,275
Total Liabilities 42,013,556,474 29,835,187,680
Forward

F-75
 December 31
2016
(As restated -
Note 2017 Note 28)
Equity Attributable to Equity Holders of the
Parent Company
Capital stock 26 P10,222,973,000 P10,222,973,000
Additional paid-in capital 26 1,358,237,357 1,358,237,357
Retained earnings 26 2,571,883,195 1,578,127,905
Remeasurement loss on defined benefit liability -
net of tax 1,876,396 (2,602,254)
14,154,969,948 13,156,736,008
Non-controlling Interests 28 8,160,790,704 7,061,567,578
Total Equity 22,315,760,652 20,218,303,586
P64,329,317,126 P50,053,491,266

See Notes to the Consolidated Financial Statements.

F-76
 DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31

Note 2017 2016 2015
INCOME
Rent income 22 P909,151,356 P268,667,585 P116,545,653
Real estate sales 7, 21 819,540,458 931,925,450 641,470,191
Leasehold rights’ sales 12 21,606,591 292,660,122 139,713,804
Hotel revenues 28 397,493,744 78,894,545 -
Unrealized gains from changes
in fair values of investment
property 12 4,174,511,063 1,830,049,768 811,063,913
Interest income 6, 7, 13 127,967,791 119,292,042 120,857,833
Income from forfeitures 12,091,903 12,672,533 69,295,227
Others 149,549,862 177,553,903 29,988,318
6,611,912,768 3,711,715,948 1,928,934,939
COSTS AND EXPENSES
Cost of real estate sales 8, 18 362,236,122 495,763,585 370,604,075
Cost of hotel operations 8 275,541,313 61,006,174 -
Cost of leasehold rights 12 4,133,652 21,913,753 8,364,736
Selling expenses 19 197,361,259 172,663,800 113,030,897
General and administrative
expenses 20 1,093,894,942 725,452,401 428,602,219
Interest expense 15, 17 643,825,886 330,238,308 114,353,234
2,576,993,174 1,807,038,021 1,034,955,161
INCOME BEFORE INCOME TAX 4,034,919,594 1,904,677,927 893,979,778

INCOME TAX EXPENSE 24

Current 58,630,651 (34,001,309) 93,875,651
Deferred 1,449,929,108 468,370,715 177,321,390
1,508,559,759 434,369,406 271,197,041
NET INCOME 2,526,359,835 1,470,308,521 622,782,737

OTHER COMPREHENSIVE
INCOME
Item that will never be
reclassified to profit or loss
Remeasurement gain (loss) on
defined benefit liability 23 6,398,071 - (3,717,505)
Deferred tax effect on
remeasurement gain (loss) on
defined benefit liability (1,919,421) - 1,115,251
4,478,650 - (2,602,254)
TOTAL COMPREHENSIVE
INCOME P2,530,838,485 P1,470,308,521 P620,180,483

Net income attributable to:

Equity holders of the Parent
Company P1,641,535,290 P1,079,113,320 P559,405,589
Non-controlling interest 884,824,545 391,195,201 63,377,148
P2,526,359,835 P1,470,308,521 P622,782,737
Forward

F-77
 Years Ended December 31
Note 2017 2016 2015
Total comprehensive income
attributable to:
Equity holders of the Parent
Company P1,646,013,940 P1,079,113,320 P556,803,335
Non-controlling interest 884,824,545 391,195,201 63,377,148
P2,530,838,485 P1,470,308,521 P620,180,483
Basic Earnings Per Share 25 P0.4457 P0.2622 P0.2509
Diluted Earnings Per Share 25 P0.4452 P0.2622 P02509

See Notes to the Consolidated Financial Statements.

F-78
 DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015

Equity Attributable to Equity Holders of the Parent Company

Remeasurement
Capital Stock Loss on Defined Non-
Common Preferred Additional Retained Benefit Liability - controlling
Note Shares Shares Paid-in Capital Earnings net of tax Total Interests Total Equity
As of January 1, 2015 P222,973,000 P - P1,358,237,357 P726,406,053 P - P2,307,616,410 P5,522,559,022 P7,830,175,432
Total Comprehensive Income
Net income for the year - - - 559,405,589 - 559,405,589 63,377,148 622,782,737
Other comprehensive income-net of tax - - - - (2,602,254) (2,602,254) - (2,602,254)
Total Comprehensive Income - - - 559,405,589 (2,602,254) 556,803,335 63,377,148 620,180,483

Movements During the Year

Cash dividends declared 26 - - - (111,486,500) - (111,486,500) - (111,486,500)
Share capital - - - - - - 300,207,740 300,207,740
Effect of business combination - - - - - - 5,400,000 5,400,000
Total Movement During the Year - - - (111,486,500) - (111,486,500) 305,607,740 194,121,240

Balance as of December 31, 2015 222,973,000 - 1,358,237,357 1,174,325,142 (2,602,254) 2,752,933,245 5,891,543,910 8,644,477,155

Total Comprehensive Income

Net income for the year - - - 1,079,113,320 - 1,079,113,320 391,195,201 1,470,308,521
Other comprehensive income-net of tax - - - - - - - -
Total Comprehensive Income - - - 1,079,113,320 - 1,079,113,320 391,195,201 1,470,308,521

Movements During The Year

Stock issuances during the year 26 - 10,000,000,000 - - - 10,000,000,000 - 10,000,000,000
Stock issuance cost during the year - - - (184,803,557) - (184,803,557) - (184,803,557)
Dividends declared 26 - - - (494,505,000) - (494,505,000) - (494,505,000)
Share capital - - - - - - 445,717,560 445,717,560
Effect of business combination
(As restated - Note 28) - - - - - - 337,108,907 337,108,907
Dilution of NCI - - - 3,998,000 - 3,998,000 (3,998,000) -
Total Movement During the Year - 10,000,000,000 - (675,310,557) - 9,324,689,443 778,828,467 10,103,517,910
Balance as of December 31, 2016 222,973,000 10,000,000,000 1,358,237,357 1,578,127,905 (2,602,254) 13,156,736,008 7,061,567,578 20,218,303,586

Forward

F-79
 Equity Attributable to Equity Holders of the Parent Company
Remeasurement
Capital Stock Loss on Defined Non-
Common Preferred Additional Retained Benefit Liability - controlling
Note Shares Shares Paid-in Capital Earnings net of tax Total Interests Total Equity
As of January 1, 2017 P222,973,000 P 10,000,000,000 P1,358,237,357 P1,578,127,905 (P2,602,254) P13,156,736,008 P7,061,567,578 P20,218,303,586
Total Comprehensive Income
Net income for the year - - - 1,641,535,290 - 1,641,535,290 884,824,545 2,526,359,835
Other comprehensive income-net of tax - - - - 4,478,650 4,478,650 - 4,478,650
Total Comprehensive Income - - - 1,641,535,290 4,478,650 1,646,013,940 884,824,545 2,530,838,485

Movements During the Year

Dividends declared 26 - - - (647,780,000) - (647,780,000) - (647,780,000)
Share capital - - - - - - 214,398,581 214,398,581
Total Movement During the Year - - - (647,780,000) - (647,780,000) 214,398,581 (433,381,419)

Balance as of December 31, 2017 P222,973,000 P 10,000,000,000 P1,358,237,357 P2,571,883,195 P1,876,396 P14,154,969,948 P8,160,790,704 P22,315,760,652

See Notes to the Consolidated Financial Statements.

F-80
 DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31

Note 2017 2016 2015
CASH FLOWS FROM
OPERATING ACTIVITIES
Income before income tax P4,034,919,594 P1,904,677,927 P893,979,778
Adjustments for:
Unrealized gains from changes
in fair values of investment
property 12 (4,174,511,063) (1,830,049,768) (811,063,913)
Interest expense 15,17 643,825,886 330,238,308 114,353,234
Interest income 6, 7, 13 (127,967,791) (119,292,042) (120,857,833)
Depreciation and
amortization 10, 11, 20 83,375,504 32,952,498 8,965,701
Retirement costs 23 7,951,388 1,137,566 1,266,361
Impairment loss on input
value-added tax 9, 20 2,579,609 83,475,465 18,104,261
Impairment loss on receivables 7, 20 - - 1,098,574
Operating income before working
capital changes 470,173,127 403,139,954 105,846,163
Decrease (increase) in:
Receivables (1,198,408,984) (722,063,032) (435,303,193)
Inventories (456,434,365) (303,498,684) (396,995,636)
Due from related parties (1,713,562) (43,241,109) (57,537,310)
Prepaid expenses and other
current assets (1,573,839,292) (1,746,548,611) (723,655,185)
Increase (decrease) in:
Accounts payable and other
current liabilities 1,142,313,947 670,435,484 763,014,564
Due to related parties (136,318,529) (37,808,882) 272,981,081
Customers’ deposits (94,227,217) (123,924,759) (237,866,416)
Cash used for operations (1,848,454,875) (1,903,509,639) (709,515,932)
Interest received 35,958,723 34,937,469 120,857,833
Interest paid (1,643,359,765) (966,526,899) (89,277,502)
Income tax paid (36,589,655) (74,312,326) (50,322,077)
Net cash used in operating activities (3,492,445,572) (2,909,411,395) (728,257,678)
CASH FLOWS FROM
INVESTING ACTIVITIES
Additions to:
Property and equipment 10 (278,652,753) (65,936,618) (57,654,454)
Intangible assets 11 (94,342,719) (84,580,032) (26,589,473)
Investment property 12 (8,668,760,532) (10,193,754,015) (8,446,718,294)
Increase in non-controlling interest 214,398,581 445,717,560 305,607,740
Decrease (increase) in other
noncurrent assets 621,100,881 268,928,521 (839,563,784)
Acquisition of a subsidiary, net of
cash acquired 28 - (145,311,366) -
Acquisition of an associate 13 (417,795,000) - -
Net cash used in investing
activities (8,624,051,542) (9,774,935,950) (9,064,918,265)
Forward

F-81
 Years Ended December 31
Note 2017 2016 2015
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from:
Issuance of bonds, net of debt
issue costs P9,566,805,702 P5,217,658,399 P -
Availment of notes, net of debt
issue costs 3,545,258,750 6,504,257,166 7,167,707,048
Issuance of capital stock 26 - 9,815,196,443 -
Payment of:
Notes 15 (3,990,773,643) (4,176,899,556) (174,000,000)
Dividends 26 (657,593,372) (332,560,000) (111,486,500)
Increase in other noncurrent
liabilities 286,349,176 163,109,437 54,223,994
Net cash provided by financing
activities 8,750,046,613 17,190,761,889 6,936,444,542
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS (3,366,450,501) 4,506,414,544 (2,856,731,401)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 6 5,466,874,377 960,459,833 3,817,191,234
CASH AND CASH EQUIVALENTS
AT END OF YEAR 6 P2,100,423,876 P5,466,874,377 P960,459,833

See Notes to the Consolidated Financial Statements.

F-82
 DOUBLEDRAGON PROPERTIES CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Reporting Entity

DoubleDragon Properties Corp., (“DD” or the “Parent Company”), was incorporated

and registered with the Philippine Securities and Exchange Commission (SEC) on
December 9, 2009 primarily to engage in the business of real estate development
including but not limited to residential and condominium projects, to acquire by
purchase or lease land and interest in land, to own, hold, impose, promote, develop,
subdivide and manage any land owned, held or occupied by the Parent Company, to
construct, manage or administer buildings such as condominiums, apartments,
hotels, restaurants, stores or other structures and to mortgage, sell, lease or
otherwise dispose of land, interests in land and buildings or other structures at any
time.

The Parent Company’s shares are listed in the Philippine Stock Exchange (“PSE”)
on April 7, 2014 under the stock symbol “DD”.

On June 23, 2015, the SEC approved the change in the Parent Company’s
registered office address to DD Meridian Park Bay Area, Corner Macapagal Avenue
and EDSA Extension Boulevard, Brgy. 76 Zone 10, San Rafael, Pasay City, Metro
Manila. The Parent Company also maintains its corporate office at 10th Floor,
DoubleDragon Plaza, DD Meridian Park Bay Area, Corner Macapagal Avenue and
EDSA Extension Boulevard, Pasay City, Metro Manila.

2. Basis of Preparation

Statement of Compliance
The accompanying consolidated financial statements have been prepared in
compliance with Philippine Financial Reporting Standards (PFRS). PFRS are based
on International Financial Reporting Standards (IFRS) issued by the International
Accounting Standards Board (IASB). PFRS consist of PFRS, Philippine Accounting
Standards (PAS), and Philippine Interpretations.

The consolidated financial statements were approved and authorized for issuance by
the Board of Directors (BOD) on March 2, 2018.

Basis of Measurement
The consolidated financial statements of the Group have been prepared using the
historical cost basis of accounting except for investment property which is measured
at fair value and retirement benefit liability which is measured at present value of
defined benefit obligation.

Functional and Presentation Currency

The consolidated financial statements are presented in Philippine peso, which is the
Parent Company’s functional currency. All financial information presented in
Philippine peso has been rounded off to the nearest peso, unless otherwise stated.

F-83
Basis of Consolidation
The consolidated financial statements include the accounts of the Parent Company
and the following subsidiaries (collectively referred to as the “Group”):

Percentage of
Ownership
Subsidiaries 2017 2016
DoubleDragon Sales Corp. (DDSC)(a) 100 100
DoubleDragon Property Management Corp. (DDPMC)(a) 100 100
Iloilo-Guimaras Ferry Terminal Corp. (IGFTC) (b) 100 100
CentralHub Industrial Centers Inc. (CICI) (c) 100 -
DD-Meridian Park Development Corp. (DD-MPDC) (d) 70 70
DD HappyHomes Residential Centers Inc. (DDHH) (e) 70 70
Hotel of Asia, Inc. (HOA) (f) 70 70
CityMall Commercial Centers Inc. (CMCCI) (g) 66 66
Piccadilly Circus Landing Inc. (PCLI) (h) 50 50
(a) Consolidated effective January 1, 2012.
(b) Consolidated effective June 10, 2016.
(c) Consolidated effective August 31, 2017.
(d) Consolidated effective October 27, 2014.
(e) Consolidated effective May 23, 2014.
(f) Consolidated effective August 11, 2016.
(g) Consolidated effective December 27, 2013.
(h) Consolidated effective August 1, 2013.

DDSC
DDSC was incorporated and registered with the SEC on November 12, 2012
primarily to engage in the business of selling or marketing real estate products,
including but not limited to land, buildings, condominium units, town houses,
apartments, house and lot packages and all other forms of real estate products.
DDSC started its commercial operations in September 2017.

DDPMC
DDPMC was incorporated and registered with the SEC on January 17, 2012
primarily to engage in maintaining, preserving, preparing and cleaning buildings,
condominiums, townhouses, hotels, amusement or recreational places, counters,
office premises, factories, shops, equipment and facilities. DDPMC started its
commercial operations in 2015.

IGFTC
IGFTC was incorporated and registered with the SEC on June 10, 2016, primarily to
finance, design, construct, develop, operate and maintain Iloilo City-Guimaras Ferry
Terminal and the surrounding areas and to provide a safe, efficient and modern ferry
terminal for commuters going to and arriving from Guimaras Island. IGFTC started its
commercial operations in April 2017.

DD-MPDC
DD-MPDC was incorporated and registered with the SEC on October 27, 2014
primarily to engage in the business of real estate development including but not
limited to residential and condominium projects, to acquire by purchase or lease land
and interest in land, to own, hold, impose, promote, develop, subdivide and manage
any land owned, held or occupied by the entity, to construct, manage or administer
buildings such as condominiums, apartments, hotels, restaurants, stores or other
structures and to mortgage, sell, lease or otherwise dispose of land, interests in land
and buildings or other structures at any time. DD-MPDC started its commercial
operations in October 2017.

-2-
F-84
DDHH
DDHH was incorporated and registered with the SEC on September 15, 2011
primarily to engage, operate and hold or manage real estate business, to acquire by
purchase, lease, donation or otherwise, own, use, improve, develop, subdivide, sell,
mortgage, exchange, lease, and hold for investment or otherwise, real estate of all
kinds, whether improved, managed or otherwise, deal in or dispose of buildings,
houses, apartments, townhouses, condominiums, and other structure of whatever
kind, together with the appurtenances or improvements found thereon. DDHH started
its commercial operations in 2014.

HOA
HOA was incorporated and registered with the SEC on June 8, 2011 primarily to
engage in the business of real estate development including but not limited to
residential and condominium projects, to acquire by purchase or lease land and
interest in land, to own, hold, impose, promote, develop, subdivide and manage any
land owned, held or occupied by HOA, to construct, manage or administer buildings
such as condominiums, apartments, hotels, restaurants, stores or other structures
and to mortgage, sell, lease or otherwise dispose of land, interests in land and
buildings or other structures at any time. HOA started its commercial operations in
2012.

HOA has the following subsidiaries which are also engaged in the hotel industry and
are included in the consolidated financial statements:

Percentage
of Ownership
Subsidiaries 2017
Hotel 101 Management Corporation (h) 100
CSI Hotels Incorporated (h) 50
(h) Consolidated effective August 11, 2016.

CMCCI
CMCCI was incorporated and registered with the SEC on December 27, 2013
primarily to engage in the business of commercial shopping centers or malls, and for
the attainment of this purpose, to construct, build, develop, operate and maintain
commercial center or malls and to perform all acts or trades necessary for its
operation and maintenance, including but not limited to the preservation of
commercial spaces for rent, amusement centers, movie theater, performing arts
center, children’s play area and hobby or gaming centers, parking lots and other
service facilities, within the compound or premises of the shopping centers. CMCCI
started its commercial operations in 2015.

-3-
F-85
CMCCI has the following subsidiaries which are also engaged in the real estate
investment industry and are included in the consolidated financial statements:

Percentage of
Ownership
Subsidiaries 2017 2016
CM-Northtown Davao Inc. (i) 79 79
Prime DDG Commercial Centers Inc. (j) 70 70
CM-Goldenfields Bacolod Inc. (k) 70 70
CM-Tarlac MacArthur Inc. (l) 70 70
CM-Danao Cebu Inc. (m) 70 70
CM-Mandalagan Bacolod Inc. (m) 70 70
CM-Dipolog Zamboanga Inc. (n) 70 70
(i) Incorporated and consolidated effective December 5, 2016.
(j) Incorporated and consolidated effective April 28, 2014.
(k) Incorporated and consolidated effective March 2, 2015.
(l) Incorporated and consolidated effective April 24, 2015.
(m) Incorporated and consolidated effective July 21, 2015.
(n) Incorporated and consolidated effective October 8, 2015.

PCLI
PCLI was incorporated and registered with the SEC on October 10, 2012 primarily to
engage in owning, using, improving, developing, subdividing, selling, exchanging,
leasing and holding for investment or otherwise, real estate of all kinds, including
buildings, houses, apartments and other structures. PCLI started its commercial
operations in 2013.

CICI
CICI was incorporated and registered with the SEC on August 31, 2017 primarily to
engage in and carry on a business of receiving, accepting, unloading, storing, and/or
deposit of goods, chattels, fungibles, parcels, boxes, documents, mail, products,
money, vehicles, animals, articles, cargoes, and effects of all kinds and provide
facilities, amenities coveniences, features, services and/or accommodations in
relation to said business. CICI has not started its commercial operations as at
December 31, 2017

-4-
F-86
The following table summarizes the financial information relating to the DD-MPDC
and CMCCI, DD’s subsidiaries that has material non-controlling interest (NCI), before
any intra-group eliminations:

DD-MPDC

December 31
2017 2016
NCI percentage 30.00% 30.00%
Current assets P1,565,769,628 P1,402,984,423
Noncurrent assets 18,799,720,364 12,204,652,614
Current liabilities (2,808,485,103) (587,995,289)
Noncurrent liabilities (1,026,010,705) (396,668,681)
Net assets 16,530,994,184 12,622,973,067
Carrying amount of NCI 4,959,298,255 3,786,891,920
Net income/total comprehensive income 2,305,825,115 329,818,347
Net income/total comprehensive income
allocated to NCI 691,747,534 98,945,504
Cash flows from operating activities (375,100,714) 454,249,437
Cash flows from investing activities (2,103,240,178) (1,821,551,627)
Cash flows from financing activities 1,850,016,970 1,959,326,009
Net increase (decrease) in cash and cash
equivalents (P628,323,922) P592,023,819

CMCCI

December 31
2017 2016
NCI percentage 34.00% 34.00%
Current assets P4,659,712,131 P4,597,224,113
Noncurrent assets 21,237,800,238 19,248,416,464
Current liabilities (2,193,910,961) (8,751,277,453)
Noncurrent liabilities (21,431,215,218) (11,110,596,594)
Net assets 2,272,386,190 3,983,766,530
Carrying amount of NCI 772,611,305 1,354,480,620
Net income (loss)/total comprehensive
income (loss) (180,128,109) 602,410,138
Net income (loss)/total comprehensive
income (loss) allocated to NCI (61,243,557) 204,819,447
Cash flows from operating activities (3,288,294,056) (2,006,467,909)
Cash flows from investing activities (4,682,329,154) (6,797,031,388)
Cash flows from financing activities 5,120,893,386 10,085,496,903
Net increase (decrease) in cash and cash
equivalents (P2,849,729,824) P1,281,997,606

-5-
F-87
A subsidiary is an entity controlled by the Group. The Group controls an entity if, and
only if, the Group is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power over the
entity. The Group reassesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three elements
of control.

When the Group has less than majority of the voting or similar rights of an investee,
the Group considers all relevant facts and circumstances in assessing whether it has
power over an investee, including the contractual arrangement with the other vote
holders of the investee, rights arising from other contractual arrangements and the
Group’s voting rights and potential voting rights.

The financial statements of the subsidiaries are included in the consolidated financial
statements from the date when the Group obtains control, and continue to be
consolidated until the date when such control ceases.

The financial statements of the subsidiaries are prepared for the same reporting
period as the Parent Company, using uniform accounting policies for like
transactions and other events in similar circumstances. Intergroup balances and
transactions, including intergroup unrealized profits and losses, are eliminated in
preparing the consolidated financial statements.

Non-controlling interests represent the portion of profit or loss and net assets not
attributable to the equity holders of the Parent Company and are presented in the
consolidated statements of comprehensive income and within equity in the
consolidated statements of financial position, separately from the equity attributable
to equity holders of the Parent Company.

Non-controlling interests include the interests not held by the Parent Company in
DD-MPDC, DDHH, CMCCI and its subsidiaries, PCLI and HOA and its subsidiaries
in 2017 and 2016.

A change in the ownership interest of a subsidiary, without a loss of control, is

accounted for as an equity transaction. If the Group loses control over a subsidiary,
the Group: (i) derecognizes the assets (including goodwill) and liabilities of the
subsidiary, the carrying amount of any non-controlling interests and the cumulative
transaction differences recorded in equity; (ii) recognizes the fair value of the
consideration received, the fair value of any investment retained and any surplus or
deficit in profit or loss; and (iii) reclassify the Parent Company’s share of components
previously recognized in other comprehensive income to profit or loss or retained
earnings, as appropriate, as would be required if the Group had directly disposed of
the related assets or liabilities.

-6-
F-88
3. Summary of Significant Accounting Policies

The accounting policies set out below have been applied consistently to all the years
presented in these consolidated financial statements, except for the changes in
accounting policies as explained below.

Adoption of New or Revised Standards, Amendments to Standards and

Interpretations
The Group has adopted the following amendments to standards starting January 1,
2017 and accordingly, changed its accounting policies. The adoption of these
amendments to standards did not have any significant impact on the Group’s
consolidated financial statements.

ƒ Disclosure initiative (Amendments to PAS 7 Statement of Cash Flows). The

amendments address financial statements users’ requests for improved
disclosures about an entity’s net debt relevant to understanding an entity’s cash
flows. The amendments require entities to provide disclosures that enable users
of financial statements to evaluate changes in liabilities arising from financing
activities, including both changes arising from cash flows and non-cash changes
- e.g. by providing a reconciliation between the opening and closing balances in
the statement of financial position for liabilities arising from financing activities.

ƒ Recognition of Deferred Tax Assets for Unrealized Losses (Amendments to

PAS 12 Income Taxes). The amendments clarify that:

x the existence of a deductible temporary difference depends solely on a

comparison of the carrying amount of an asset and its tax base at the end of
the reporting period, and is not affected by possible future changes in the
carrying amount or expected manner of recovery of the asset;

x the calculation of future taxable profit in evaluating whether sufficient taxable

profit will be available in future periods excludes tax deductions resulting
from the reversal of the deductible temporary differences;

x the estimate of probable future taxable profit may include the recovery of
some of an entity's assets for more than their carrying amount if there is
sufficient evidence that it is probable that the entity will achieve this; and

x an entity assesses a deductible temporary difference related to unrealized

losses in combination with all of its other deductible temporary differences,
unless a tax law restricts the utilization of losses to deduction against income
of a specific type.

-7-
F-89
Standards Issued but Not Yet Adopted
A number of new standards, amendments to standards and interpretation are
effective for annual periods beginning after January 1, 2017. The Group has not
applied the following new standards, amendments to standards and interpretation in
preparing these consolidated financial statements. Unless otherwise stated, none of
these are expected to have a significant impact on the Group’s consolidated financial
statements.

Effective January 1, 2018

ƒ PFRS 9 Financial Instruments (2014). PFRS 9 (2014) replaces PAS 39 Financial

Instruments: Recognition and Measurement and supersedes the previously
published versions of PFRS 9 that introduced new classifications and
measurement requirements (in 2009 and 2010) and a new hedge accounting
model (in 2013). PFRS 9 includes revised guidance on the classification and
measurement of financial assets, including a new expected credit loss model for
calculating impairment, guidance on own credit risk on financial liabilities
measured at fair value and supplements the new general hedge accounting
requirements published in 2013. PFRS 9 incorporates new hedge accounting
requirements that represent a major overhaul of hedge accounting and
introduces significant improvements by aligning the accounting more closely with
risk management.

The new standard is to be applied retrospectively for annual periods beginning

on or after January 1, 2018, with early adoption permitted.

The management of the Group is still in the process of assessing the impact of
PFRS 9 on the classification and measurement of the Group’s financial assets
and impairment losses credit based on expected credit loss model.

ƒ Classification and Measurement of Share-based Payment Transactions

(Amendments to PFRS 2). The amendments cover the following areas:

x Measurement of cash-settled awards. The amendments clarifies that a cash-

settled share-based payment is measured using the same approach as for
equity-settled share-based payments - i.e., the modified grant date method.

x Classification of awards settled net of tax withholdings. The amendments

introduce an exception stating that, for classification purposes, a share-
based payment transaction with employees is accounted for as equity-settled
if:

- the terms of the arrangement permit or require a company to settle the

transaction net by withholding a specified portion of the equity
instruments to meet the statutory tax withholding requirement (the net
settlement feature); and

- the entire share-based payment transaction would otherwise be

classified as equity-settled if there were no net settlement feature.

The exception does not apply to equity instruments that the company
withholds in excess of the employee’s tax obligation associated with the
share-based payment.

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 x Modification of awards from cash-settled to equity settled. The amendments
clarify that when a share-based payment is modified from cash-settled to
equity-settled, at modification date, the liability for the original cash-settled
share-based payment is derecognized and the equity-settled share-based
payment is measured at its fair value, recognized to the extent that the goods
or services have been received up to that date. The difference between the
carrying amount of the liability derecognized, and the amount recognized in
equity, is recognized in profit or loss immediately.

As a practical simplification, the amendments can be applied prospectively.

Retrospective or early application is permitted.

ƒ PFRS 15 Revenue from Contracts with Customers replaces PAS 11

Construction Contracts, PAS 18 Revenue, IFRIC 13 Customer Loyalty
Programmes, IFRIC 18 Transfer of Assets from Customers and SIC-31
Revenue - Barter Transactions Involving Advertising Services. The new standard
introduces a new revenue recognition model for contracts with customers which
specifies that revenue should be recognized when (or as) a company transfers
control of goods or services to a customer at the amount to which the company
expects to be entitled. Depending on whether certain criteria are met, revenue is
recognized over time, in a manner that best reflects the company’s performance,
or at a point in time, when control of the goods or services is transferred to the
customer. The standard does not apply to insurance contracts, financial
instruments or lease contracts, which fall in the scope of other PFRSs. It also
does not apply if two companies in the same line of business exchange non-
monetary assets to facilitate sales to other parties. Furthermore, if a contract with
a customer is partly in the scope of another PFRS, then the guidance on
separation and measurement contained in the other PFRS takes precedence.

The new standard is effective for annual periods beginning on or after January 1,
2018, with early adoption permitted.

The management of the Group is still in the process of assessing the impact of
PFRS 15 on the Group’s revenue recognition of real estate sales and hotel
revenues.

ƒ Transfers of Investment Property (Amendments to PAS 40) amends the

requirements on when an entity should transfer a property asset to, or from,
investment property. A transfer is made when and only when there is an actual
change in use - i.e., an asset meets or ceases to meet the definition of
investment property and there is evidence of the change in use. A change in
management intention alone does not support a transfer.

The amendments are effective for annual periods beginning on or after

January 1, 2018, with early adoption permitted. An entity may apply the
amendments to transfers that occur after the date of initial application and also
reassess the classification of property assets held at that date or apply the
amendments retrospectively, but only if it does not involve the use of hindsight.

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Effective January 1, 2019

ƒ PFRS 16 Leases supersedes PAS 17 Leases and the related Philippine

Interpretations. The new standard introduces a single lease accounting model for
lessees under which all major leases are recognized on-balance sheet, removing
the lease classification test. Lease accounting for lessors essentially remains
unchanged except for a number of details including the application of the new
lease definition, new sale-and-leaseback guidance, new sub-lease guidance and
new disclosure requirements. Practical expedients and targeted reliefs were
introduced including an optional lessee exemption for short-term leases (leases
with a term of 12 months or less) and low-value items, as well as the permission
of portfolio-level accounting instead of applying the requirements to individual
leases. New estimates and judgmental thresholds that affect the identification,
classification and measurement of lease transactions, as well as requirements to
reassess certain key estimates and judgments at each reporting date were
introduced.

PFRS 16 is effective for annual periods beginning on or after January 1, 2019.

Earlier application is permitted for entities that apply PFRS 15 Revenue from
Contracts with Customers at or before the date of initial application of PFRS 16.

The management of the Group is currently assessing the potential impact of

PFRS 16 on their current lease arrangements.

Deferral of the Local Implementation of Amendments to PFRS 10 and PAS 28: Sale
or Contribution of Assets between an Investor and its Associate or Joint Venture

ƒ Sale or Contribution of Assets between an Investor and its Associate or Joint

Venture (Amendments to PFRS 10 and PAS 28). The amendments address an
inconsistency between the requirements in PFRS 10 and in PAS 28, in dealing
with the sale or contribution of assets between an investor and its associate or
joint venture.

The amendments require that a full gain or loss is recognized when a transaction
involves a business (whether it is housed in a subsidiary or not). A partial gain or
loss is recognized when a transaction involves assets that do not constitute a
business, even if these assets are housed in a subsidiary.

Originally, the amendments apply prospectively for annual periods beginning on

or after January 1, 2016 with early adoption permitted. However, on January 13,
2016, the FRSC decided to postpone the effective date of these amendments
until the IASB has completed its broader review of the research project on equity
accounting that may result in the simplification of accounting for such
transactions and of other aspects of accounting for associates and joint ventures.

Financial Instruments
Date of Recognition
The Group recognizes a financial asset or financial liability in the consolidated
statements of financial position when it becomes a party to the contractual provisions
of the instrument. In the case of a regular way purchase or sale of financial assets,
recognition is done using settlement date accounting.

Initial Recognition of Financial Instruments

Financial instruments are recognized initially at fair value. The initial measurement of
financial instruments, except for those designated as at fair value through profit or
loss (FVPL), includes transaction costs.

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Financial Assets
The Group classifies its financial assets, at initial recognition, in the following
categories: financial assets at FVPL, loans and receivables, available-for-sale (AFS)
financial assets and held-to-maturity (HTM) investments. The classification depends
on the purpose for which the investments are acquired and whether they are quoted
in an active market. The Group determines the classification of its financial assets at
initial recognition and, where allowed and appropriate, re-evaluates such designation
at every reporting date.

The Group has no HTM investments, AFS financial assets and financial assets at
FVPL as at December 31, 2017 and 2016.

Loans and Receivables

Loans and receivables are non-derivative financial assets with fixed or determinable
payments and maturities that are not quoted in an active market. They are not
entered into with the intention of immediate or short-term resale and are not
designated as AFS financial assets or financial assets at FVPL.

Subsequent to initial measurement, loans and receivables are carried at amortized

cost using the effective interest rate method, less any impairment in value. Any
interest earned on loans and receivables is recognized as part of “Interest income”
account in the consolidated statements of comprehensive income on an accrual
basis. Amortized cost is calculated by taking into account any discount or premium
on acquisition and fees that are an integral part of the effective interest rate. The
periodic amortization is also included as part of “Interest income” account in the
consolidated statements of comprehensive income. Gains or losses are recognized
in profit or loss when loans and receivables are derecognized or impaired.

Cash includes cash on hand and in banks which are stated at face value. Cash
equivalents are short-term, highly liquid investments that are readily convertible to
known amounts of cash and are subject to an insignificant risk of changes in value.

The Group’s cash and cash equivalents, receivables, due from related parties and
refundable deposits under “Prepaid expenses and other current assets - net” and
“Other noncurrent assets” accounts are included in this category (Notes 6, 7, 9
and 13).

Financial Liabilities
The Group classifies its financial liabilities, at initial recognition, in the following
categories: financial liabilities at FVPL and other financial liabilities. The Group
determines the classification of its financial liabilities at initial recognition and, where
allowed and appropriate, re-evaluates such designation at every reporting date. All
financial liabilities are recognized initially at fair value and, in the case of loans and
borrowings, net of directly attributable transaction costs.

The Group has no financial liabilities at FVPL as at December 31, 2017 and 2016.

Other Financial Liabilities

This category pertains to financial liabilities that are not designated or classified as at
FVPL. After initial measurement, other financial liabilities are carried at amortized
cost using the effective interest rate method. Amortized cost is calculated by taking
into account any premium or discount and any directly attributable transaction costs
that are considered an integral part of the effective interest rate of the liability. The
effective interest rate amortization is included in “Interest expense” account in the
consolidated statements of comprehensive income. Gains and losses are recognized
in profit or loss when the liabilities are derecognized as well as through the
amortization process.

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The Group’s accounts payable and other current liabilities, due to related parties,
notes payable, bonds payable and other noncurrent liabilities (excluding payables to
government agencies and unearned rent income) accounts are included in this
category (Notes 14, 15 and 17).

Derecognition of Financial Assets and Financial Liabilities

Financial Assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of
similar financial assets) is primarily derecognized when:

ƒ the rights to receive cash flows from the asset have expired; or

ƒ the Group has transferred its rights to receive cash flows from the asset or has
assumed an obligation to pay them in full without material delay to a third party
under a “pass-through” arrangement; and either: (a) has transferred substantially
all the risks and rewards of the asset; or (b) has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of
the asset.

When the Group has transferred its rights to receive cash flows from an asset or has
entered into a pass-through arrangement, it evaluates if and to what extent it has
retained the risks and rewards of ownership. When it has neither transferred nor
retained substantially all the risks and rewards of the asset nor transferred control of
the asset, the Group continues to recognize the transferred asset to the extent of the
Group’s continuing involvement. In that case, the Group also recognizes the
associated liability. The transferred asset and the associated liability are measured
on the basis that reflects the rights and obligations that the Group has retained.

Financial Liabilities
A financial liability is derecognized when the obligation under the liability is
discharged or cancelled, or expires. When an existing financial liability is replaced by
another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is
treated as a derecognition of the original liability and the recognition of a new liability.
The difference in the respective carrying amounts is recognized in profit or loss.

Impairment of Financial Assets

The Group assesses, at the reporting date, whether there is objective evidence that
a financial asset or group of financial assets is impaired.

A financial asset or a group of financial assets is deemed to be impaired if, and only
if, there is objective evidence of impairment as a result of one or more events that
have occurred after the initial recognition of the asset (an incurred loss event) and
that loss event has an impact on the estimated future cash flows of the financial
asset or the group of financial assets that can be reliably estimated.

For financial assets carried at amortized cost such as loans and receivables, the
Group first assesses whether impairment exists individually for financial assets that
are individually significant, or collectively for financial assets that are not individually
significant. If no objective evidence of impairment has been identified for a particular
financial asset that was individually assessed, the Group includes the asset as part
of a group of financial assets with similar credit risk characteristics and collectively
assesses the group for impairment. Assets that are individually assessed for
impairment and for which an impairment loss is, or continues to be recognized, are
not included in the collective impairment assessment.

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F-94
Evidence of impairment for specific impairment purposes may include indications
that the borrower or a group of borrowers is experiencing financial difficulty, default
or delinquency in principal or interest payments, or may enter into bankruptcy or
other form of financial reorganization intended to alleviate the financial condition of
the borrower. For collective impairment purposes, evidence of impairment may
include observable data on existing economic conditions or industry-wide
developments indicating that there is a measurable decrease in the estimated future
cash flows of the related assets.

If there is objective evidence of impairment, the amount of loss is measured as the

difference between the asset’s carrying amount and the present value of estimated
future cash flows (excluding future credit losses) discounted at the financial asset’s
original effective interest rate (i.e., the effective interest rate computed at initial
recognition). Time value is generally not considered when the effect of discounting
the cash flows is not material. If a loan or receivable has a variable rate, the discount
rate for measuring any impairment loss is the current effective interest rate, adjusted
for the original credit risk premium. For collective impairment purposes, impairment
loss is computed based on their respective default and historical loss experience.

The carrying amount of the asset is reduced either directly or through the use of an
allowance account. The impairment loss for the period is recognized in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment was
recognized, the previously recognized impairment loss is reversed. Any subsequent
reversal of an impairment loss is recognized in profit or loss, to the extent that the
carrying amount of the asset does not exceed its amortized cost at the reversal date.

Classification of Financial Instruments between Debt and Equity

From the perspective of the issuer, a financial instrument is classified as debt
instrument if it provides for a contractual obligation to:

ƒ deliver cash or another financial asset to another entity;

ƒ exchange financial assets or financial liabilities with another entity under

conditions that are potentially unfavorable to the Group; or

ƒ satisfy the obligation other than by the exchange of a fixed amount of cash or
another financial asset for a fixed number of own equity shares.

If the Group does not have an unconditional right to avoid delivering cash or another
financial asset to settle its contractual obligation, the obligation meets the definition
of a financial liability.

Debt Issue Costs

Debt issue costs are considered as an adjustment to the effective yield of the related
debt and are deferred and amortized using the effective interest rate method. When
a loan is paid, the related unamortized debt issue costs at the date of repayment are
recognized in profit or loss.

Offsetting Financial Instruments

Financial assets and financial liabilities are offset and the net amount is reported in
the consolidated statements of financial position if, and only if, there is a currently
enforceable legal right to offset the recognized amounts and there is an intention to
settle on a net basis, or to realize the assets and settle the liabilities simultaneously.
This is not generally the case with master netting agreements, and the related assets
and liabilities are presented gross in the consolidated statements of financial
position.

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F-95
Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement
date. The fair value measurement is based on the presumption that the transaction
to sell the asset or transfer the liability takes place either in the principal market for
the asset or liability, or in the absence of a principal market, in the most
advantageous market for the asset or liability. The principal or most advantageous
market must be accessible to the Group.

The fair value of an asset or liability is measured using the assumptions that market
participants would use when pricing the asset or liability, assuming that market
participants act in their best economic interest.

The Group uses valuation techniques that are appropriate in the circumstances and
for which sufficient data are available to measure fair value, maximizing the use of
relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the
consolidated financial statements are categorized within the fair value hierarchy,
described as follows, based on the lowest level input that is significant to the fair
value measurement as a whole:

ƒ Level 1: quoted prices (unadjusted) in active markets for identical assets or

liabilities;

ƒ Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly; and

ƒ Level 3: inputs for the asset or liability that are not based on observable market
data.

For assets and liabilities that are recognized in the consolidated financial statements
on a recurring basis, the Group determines whether transfers have occurred
between levels in the hierarchy by re-assessing the categorization at the end of each
reporting period.

For the purpose of fair value disclosures, the Group has determined classes of
assets and liabilities on the basis of the nature, characteristics and risks of the asset
or liability and the level of the fair value hierarchy.

Inventories
Real Estate Inventories
Real estate inventories are properties that are acquired and developed or
constructed for sale in the ordinary course of business, rather than to be held for
rental or capital appreciation. They consist of acquisition cost of land and other
related development costs, capitalized borrowings and other capitalized costs.

These are carried at the lower of cost or net realizable value (NRV). NRV is the
estimated selling price in the ordinary course of business, less estimated costs of
completion and estimated costs to make the sale.

The cost of real estate inventories recognized in profit or loss is determined with
reference to the specific costs incurred on the property and allocated to saleable
area based on relative size.

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F-96
Hotel Inventories
Hotel inventories are valued at the lower of cost and NRV. The cost of hotel
inventories is determined using the weighted average method and includes all
expenditures incurred in acquiring the inventories and in bringing them to their
existing location and condition.

NRV is the estimated selling price in the ordinary course of business less the
estimated costs of marketing and distribution necessary to make the sale.

The Group maintains an allowance to reduce hotel inventories to NRV at a level

considered adequate to provide for potential obsolete inventories. The level of this
allowance is evaluated by management based on the movements and current
condition of hotel inventory items. Such allowance has been considered in the
determination of the NRV of the hotel inventories.

The amount of any write-down of hotel inventories to NRV and all losses of hotel
inventories are recognized as expense in the period the write-down or loss occurred.
The amount of any reversal of any write-down of hotel inventories arising from an
increase in NRV is recognized as a reduction in the amount of hotel inventories
recognized as expense in the period in which the reversal occurred.

Prepaid Expenses and Other Current Assets

Prepaid expenses represent expenses not yet incurred but already paid in cash.
These are initially recorded as assets and measured at the amount of cash paid.
Subsequently, these are recognized in profit or loss as they are consumed in
operations or expire with the passage of time. These typically comprise prepayments
for commissions, taxes and licenses and rental.

Prepaid expenses are classified in the consolidated statements of financial position

as current assets when the cost of goods or goods related to the prepaid expenses
are expected to be incurred within one year. Otherwise, prepaid expenses are
classified as noncurrent assets.

Other current assets represent resources that are expected to be used up within one
year after the reporting date. These typically comprise advances to contractors and
suppliers, input value-added tax (VAT), etc.

Property and Equipment

Property and equipment, except land, are stated at cost less accumulated
depreciation and amortization and any accumulated impairment in value. Such cost
includes the cost of replacing part of the property and equipment at the time the cost
is incurred, if the recognition criteria are met, and excludes the costs of day-to-day
servicing. Land is stated at cost less any impairment in value.

The initial cost of property and equipment comprises its construction cost or
purchase price, including import duties, taxes and any directly attributable costs in
bringing the asset to its working condition and location for its intended use.
Expenditures incurred after the asset has been put into operation, such as repairs,
maintenance and overhaul costs, are normally recognized as expense in the period
the costs are incurred. Major repairs are capitalized as part of property and
equipment only when it is probable that future economic benefits associated with the
items will flow to the Group and the cost of the items can be measured reliably.

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F-97
Depreciation and amortization, which commence when the assets are available for
their intended use, are computed using the straight-line method over the following
estimated useful lives of the assets:

Useful Life in Years

Building 50
Leasehold improvements 3 to 5 or lease term,
whichever is shorter
Equipment and showroom 3 to 10
Furniture and fixtures 3 to 5
Room fixtures and components 5 to 10

The remaining useful lives, residual values, and depreciation and amortization
methods are reviewed and adjusted periodically, if appropriate, to ensure that such
periods and methods of depreciation and amortization are consistent with the
expected pattern of economic benefits from the items of property and equipment.

The carrying amounts of property and equipment are reviewed for impairment when
events or changes in circumstances indicate that the carrying amounts may not be
recoverable.

Fully depreciated assets are retained in the accounts until they are no longer in use.

An item of property and equipment is derecognized when either it has been disposed
of or when it is permanently withdrawn from use and no future economic benefits are
expected from its use or disposal. Any gain or loss arising from the retirement and
disposal of an item of property and equipment (calculated as the difference between
the net disposal proceeds and the carrying amount of the asset) is included in profit
or loss in the period of retirement and disposal.

Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. The
cost of intangible assets acquired in a business combination is its fair value as at the
date of acquisition. Following initial recognition, intangible assets are carried at cost
less any accumulated amortization and accumulated impairment losses, if any.

Intangible assets with finite lives are amortized using the straight-line method over
their useful economic lives and assessed for impairment whenever there is an
indication that the intangible asset may be impaired. The amortization period and the
amortization method for intangible assets with finite useful lives are reviewed at least
at the end of each reporting period. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits embodied in the asset
is accounted for by changing the amortization period or method, as appropriate, and
are treated as changes in accounting estimates. The amortization expense on
intangible assets with finite lives is recognized in the consolidated statements of
comprehensive income in the expense category consistent with the function of the
intangible assets.

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F-98
The following intangibles are recognized and determined by the Group to have finite
lives:

Concession Right
Concession right on service concession arrangements is recognized when the Group
effectively receives a license or right to charge users for the public service it
provides. Concession rights pertains the consideration received for the ferry terminal
constructed in accordance with the terms and conditions of the concession
arrangements accounted for under Philippine Interpretation IFRIC 12 Service
Concession Arrangements. These are not recognized as property and equipment of
the Group but as an intangible asset.

The service concession right is amortized on a straight-line basis over the years
stated in the concession arrangement which is 25 years from the start of commercial
operations and is being assessed for impairment whenever there is an indication that
the intangible asset may be impaired.

Hotel101 Brand
The Hotel101 brand is an asset with indefinite useful life and is assessed for
impairment whenever there is an indication that the asset may be impaired. The
method used to estimate the fair value of Hotel101 brand is the Relief-from-Royalty
Method (RfR) based on cost savings from owning the brand name. The cost savings
are calculated based on royalty rates of comparable brands and the forecast
revenues of Hotel of Asia, Inc.

Computer Software Licenses

Acquired computer software licenses are capitalized on the basis of the costs
incurred to acquire and install the specific software. Costs associated with
maintaining computer software are expensed as incurred. Capitalized costs are
amortized on a straight-line basis over an estimated useful life of five years as the
lives of this intangible asset is considered limited.

Franchise Rights
Franchise rights is measured at cost less accumulated amortization and impairment
losses, if any.

Franchise rights is amortized over the useful life of 15 years and assessed for
impairment whenever there is an indication that intangible assets may be impaired.
The amortization period and the amortization method used for an intangible asset
with a finite useful life of the expected pattern of consumption of future economic
benefits embodied in the asset are accounted for by changing the amortization
period or method, as appropriate, and are treated as changes in accounting
estimate. The amortization expense on intangible assets with finite lives is
recognized in profit or loss consistent with the function of the intangible asset.

Investment Property
Investment property consists of properties held to earn rentals and/or for capital
appreciation. Initially, investment property is measured at cost including certain
transaction costs. Subsequent to initial recognition, investment property, is stated at
fair value, which reflects market conditions at the reporting date. The fair value of
investment property is determined by independent real estate valuation experts
based on recent real estate transactions with similar characteristics and location to
those of the Group’s investment property. Gains or losses arising from changes in
the fair values of investment property are included in profit or loss in the period in
which they arise.

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F-99
Investment property of the Group is mainly composed of land, building and
construction-in-progress.

Investment property is derecognized either when it is disposed of or when it is

permanently withdrawn from use and no future economic benefit is expected from its
disposal. Any gain or loss on the retirement and disposal of investment property is
recognized in profit or loss in the period of retirement or disposal.

Transfers are made to investment property when, and only when, there is a change
in use, evidenced by ending of owner-occupation or commencement of an operating
lease to another party. Transfers are made from investment property when, and only
when, there is a change in use, evidenced by commencement of the owner-
occupation or commencement of development with a view to sell.

For a transfer from investment property to owner-occupied property or real estate

inventories, the deemed cost of property for subsequent accounting is its fair value at
the date of change in use. If owner-occupied property becomes an investment
property, the Group accounts for such property in accordance with the policy stated
under property and equipment up to the date of change in use.

Investment in an Associate
An associate is an entity in which the Group has significant influence. Significant
influence is the power to participate in the financial and operating policies of the
investee, but not control over those policies. The Group’s investment in an associate
are accounted for using the equity method.

Under the equity method, the investment in an associate is initially recognized at

cost. The carrying amount of the investment is adjusted to recognize the changes in
the Group’s share of net assets of the associate since the acquisition date. Goodwill
relating to the associate is included in the carrying amount of the investment and is
neither amortized nor individually tested for impairment.

The Group’s share in the profit or loss of the associate is recognized as “Others”
account in profit or loss. Adjustments to the carrying amount may also be necessary
for changes in the Group’s proportionate interest in the associate arising from
changes in the associate’s other comprehensive income. The Group’s share of those
changes is recognized in the consolidated statements of comprehensive income.
Unrealized gains and losses resulting from transactions between the Group and the
associate are eliminated to the extent of the interest in the associate.

After application of the equity method, the Group determines whether it is necessary
to recognize an impairment loss with respect to the Group’s net investment in the
associate. At each reporting date, the Group determines whether there is objective
evidence that the investment in the associate is impaired. If there is such evidence,
the Group recalculates the amount of impairment as the difference between the
recoverable amount of the associate and its carrying value. Such impairment loss is
recognized as part of “Others” account in the profit or loss.

Upon loss of significant influence over the associate, the Group measures and
recognizes any retained investment at fair value. Any difference between the
carrying amount of the associate upon loss of significant influence and the fair value
of the retained investment and proceeds from disposal is recognized in profit or loss.

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Business Combination
Business combinations are accounted for using the acquisition method as at the
acquisition date. The cost of an acquisition is measured as the aggregate of the
consideration transferred, measured at acquisition date fair value, and the amount of
any non-controlling interests in the acquiree. For each business combination, the
Group elects whether to measure the non-controlling interests in the acquiree at fair
value or at proportionate share of the acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred and included as part of “General
and administrative expenses” account in the consolidated statements of
comprehensive income.

When the Group acquires a business, it assesses the financial assets and financial
liabilities assumed for appropriate classification and designation in accordance with
the contractual terms, economic circumstances and pertinent conditions as at the
acquisition date.

If the business combination is achieved in stages, the acquisition date fair value of
the acquirer’s previously held equity interest in the acquiree is remeasured at the
acquisition date fair value and any resulting gain or loss is recognized in profit or
loss.

The Group measures goodwill at the acquisition date as: a) the fair value of the
consideration transferred; plus b) the recognized amount of any non-controlling
interests in the acquiree; plus c) if the business combination is achieved in stages,
the fair value of the existing equity interest in the acquiree; less d) the net recognized
amount (generally fair value) of the identifiable assets acquired and liabilities
assumed. When the excess is negative, a bargain purchase gain is recognized
immediately in profit or loss. Subsequently, goodwill is measured at cost less any
accumulated impairment in value. Goodwill is reviewed for impairment, annually or
more frequently, if events or changes in circumstances indicate that the carrying
amount may be impaired.

The consideration transferred does not include amounts related to the settlement of
pre-existing relationships. Such amounts are generally recognized in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or
equity securities that the Group incurs in connection with a business combination,
are expensed as incurred. Any contingent consideration payable is measured at fair
value at the acquisition date. If the contingent consideration is classified as equity, it
is not remeasured and settlement is accounted for within equity. Otherwise,
subsequent changes to the fair value of the contingent consideration are recognized
in profit or loss.

Goodwill in a Business Combination

Goodwill acquired in a business combination is, from the acquisition date, allocated
to each of the cash-generating units, or groups of cash-generating units that are
expected to benefit from the synergies of the combination, irrespective of whether
other assets or liabilities are assigned to those units or groups of units. Each unit or
group of units to which the goodwill is allocated:

ƒ represents the lowest level within the Group at which the goodwill is monitored
for internal management purposes; and

ƒ is not larger than an operating segment determined in accordance with PFRS 8.

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F-101
Impairment is determined by assessing the recoverable amount of the
cash-generating unit or group of cash-generating units, to which the goodwill relates.
Where the recoverable amount of the cash-generating unit or group of
cash-generating units is less than the carrying amount, an impairment loss is
recognized. Where goodwill forms part of a cash-generating unit or group of
cash-generating units and part of the operation within that unit is disposed of, the
goodwill associated with the operation disposed of is included in the carrying amount
of the operation when determining the gain or loss on disposal of the operation.
Goodwill disposed of in this circumstance is measured based on the relative values
of the operation disposed of and the portion of the cash-generating unit retained. An
impairment loss with respect to goodwill is not reversed.

Non-controlling Interests
The acquisitions of NCI are accounted for as transactions with owners in their
capacity as owners and therefore no goodwill is recognized as a result of such
transactions. Any difference between the purchase price and the net assets of the
acquired entity is recognized in equity. The adjustments to non-controlling interests
are based on a proportionate amount of the identifiable net assets of the subsidiary.

Impairment of Non-financial Assets

The carrying amounts of non-financial assets are reviewed for impairment when
events or changes in circumstances indicate that the carrying amount may not be
recoverable. If any such indication exists, and if the carrying amount exceeds the
estimated recoverable amount, the assets or cash-generating units are written down
to their recoverable amounts. The recoverable amount of the asset is the greater of
fair value less costs of disposal and value in use. The fair value less costs of
disposal is the price that would be received to sell an asset in an orderly transaction
between market participants at the measurement date. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset. For an asset that does not generate largely
independent cash inflows, the recoverable amount is determined for the cash-
generating unit to which the asset belongs. Impairment losses are recognized in
profit or loss in those expense categories consistent with the function of the impaired
asset.

An assessment is made at each reporting date as to whether there is any indication

that previously recognized impairment losses may no longer exist or may have
decreased. If such indication exists, the recoverable amount is estimated. A
previously recognized impairment loss is reversed only if there has been a change in
the estimates used to determine the asset’s recoverable amount since the last
impairment loss was recognized. If that is the case, the carrying amount of the asset
is increased to its recoverable amount. That increased amount cannot exceed the
carrying amount that would have been determined, net of depreciation and
amortization, had no impairment loss been recognized for the asset in prior years.
Such reversal is recognized in profit or loss. After such a reversal, the depreciation
and amortization charge is adjusted in future periods to allocate the asset’s revised
carrying amount, less any residual value, on a systematic basis over its remaining
useful life.

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F-102
Provisions
Provisions are recognized when: (a) the Group has a present obligation (legal or
constructive) as a result of past events; (b) it is probable (i.e., more likely than not)
that an outflow of resources embodying economic benefits will be required to settle
the obligation; and (c) a reliable estimate of the amount of the obligation can be
made. If the effect of the time value of money is material, provisions are determined
by discounting the expected future cash flows at a pre-tax rate that reflects current
market assessment of the time value of money and the risks specific to the liability.
Where discounting is used, the increase in the provision due to the passage of time
is recognized as interest expense. Where some or all of the expenditure required to
settle a provision is expected to be reimbursed by another party, the reimbursement
is recognized as a separate asset only when it is virtually certain that reimbursement
will be received. The amount recognized for the reimbursement shall not exceed the
amount of the provision. Provisions are reviewed at each reporting date and adjusted
to reflect the current best estimate.

Capital Stock
Capital stock is measured at par value for all shares issued. When the Group issues
more than one class of stock, a separate account is maintained for each class of
stock and the number of shares issued.

Common Shares. Common shares are classified as equity. Incremental costs directly
attributable to the issue of common shares are recognized as deduction from equity,
net of any tax effects.

Preferred Shares. Preferred shares are classified as equity if it is non-redeemable, or

redeemable only at the Group’s option, and any dividends are discretionary.
Dividends thereon are recognized as distributions within equity upon approval by the
Company’s BOD.

Additional Paid-in Capital

Additional paid-in capital represents the amount received in excess of the par value
of the capital stock issued.

Stock issuance costs are transaction costs that are directly attributable to the
issuance of new shares accounted for as a deduction from equity, net of any related
income tax benefit. Such costs are deducted from additional paid-in capital arising
from the share issuance. If the additional paid-in capital is insufficient to absorb such
expenses, the excess shall be charged to stock issuance costs to be reported as a
contra equity account as a deduction from the following in the order of priority:
(1) additional paid-in capital from previous stock issuance; and (2) retained earnings.

Retained Earnings
Retained earnings represent the accumulated net income or losses, net of any
dividend distributions and other capital adjustments. When the retained earnings
account has a debit balance, it is called “deficit.” A deficit is not an asset but a
deduction from equity.

- 21 -
F-103
Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits
associated with the transaction will flow to the Group and the amount of revenue can
be reliably measured. The following specific recognition criteria must also be met
before revenue is recognized:

Real Estate Sales

Revenue is measured at the fair value of the consideration received or receivable,
net of discounts. Revenue is recognized to the extent that it is probable that
economic benefits will flow to the Group and the revenue can be reliably measured.
The following specific recognition criteria must also be met before revenue is
recognized:

For financial reporting purposes, revenue is recognized using the percentage of

completion method as permitted by FRSC when all the following conditions are met:

ƒ Equitable interest is transferred to the buyer;

ƒ The Group is obliged to perform significant acts;
ƒ The amount of revenue can be measured reliably; and
ƒ It is probable that the economic benefits will flow to the Group.

Under this method, revenue is recognized as the related obligation is fulfilled,

measured principally on the basis of the estimated completion of a physical
proportion of the contract work.

Nonrefundable reservation fees paid by prospective buyers which are to be applied

against the receivable upon recognition of revenue and the excess collections from
buyers over the related revenue recognized based on the percentage of completion
method are included in the “Customers’ deposits” account in the consolidated
statements of financial position.

For income tax reporting purposes, income is recognized in full upon collection of at
least 25% of the total contract price in the year of sale. Otherwise, revenue from sale
is deferred and recognized as income based on collection of installments.

Estimated loss on unsold units is recognized immediately when it is probable that the
total project cost will exceed total contract price.

Leasehold Rights’ Sale

Revenue from sale of leasehold rights over mall stalls in the Dragon8 Shopping
Center (the “Dragon8”) is recognized on the accrual basis when the collectibility of
sales price is reasonably assured.

Rent Income
Rent income from investment property is recognized on a straight-line basis over the
lease term and terms of the lease, respectively or based on a certain percentage of
the gross revenue of the tenants, as provided under the terms of the lease contract.

Hotel Revenues
Hotel revenues are based on the actual occupancy.

Interest Income
Interest income is recognized as it accrues using the effective interest method.
Interest income from banks which is presented net of final tax is recognized when
earned.

- 22 -
F-104
Other Income
Common Usage Service Area (CUSA) charges and income from various charges to
tenants are recognized when earned. Other income from hotel operations, which
include guest laundry, minibar, shuttle service and other charges, are recognized
upon delivery of order or upon rendering of service.

Cost and Expense Recognition

Costs and expenses are recognized when they are incurred and are reported in the
consolidated financial statements in the periods to which they relate.

Cost of Real Estate Sales

The cost of real estate sales recognized in the consolidated statements of
comprehensive income upon sale is determined with reference to the specific costs
incurred on the property, allocated to saleable area based on relative size and takes
into account the percentage of completion used for revenue recognition purposes. It
includes the following:

Land and Land Development Costs

Land and land development costs represent the cost for acquiring the land and
preparing it for condominium site and residential lots.

Construction Costs and Other Project Costs

Construction costs and other project costs pertain to accumulated costs for
materials, labor and overhead incurred as at reporting date.

Cost of Leasehold Rights

The cost consists of the prorated building’s construction costs over which the
corresponding leasehold rights are being sold. A systematic allocation of the
construction/project cost is made based on the floor area attributable to the
corresponding mall stalls.

Cost of Hotel Operations

Cost of hotel operations is charged to operations when incurred.

Expenses are also recognized when a decrease in future economic benefit related to
a decrease in an asset or an increase in a liability that can be measured reliably has
arisen. Expenses are recognized on the basis of a direct association between costs
incurred and the earning of specific items of income; on the basis of systematic and
rational allocation procedures when economic benefits are expected to arise over
several accounting periods and the association can only be broadly or indirectly
determined; or immediately when an expenditure produces no future economic
benefits or when, and to the extent that future economic benefits do not qualify, or
cease to qualify, for recognition as an asset.

Leases
The determination of whether an arrangement is, or contains, a lease is based on the
substance of the arrangement and requires an assessment of whether the fulfillment
of the arrangement is dependent on the use of a specific asset or assets and the
arrangement conveys a right to use the asset. A reassessment is made after the
inception of the lease only if one of the following applies:

(a) there is a change in contractual terms, other than a renewal or extension of the
arrangement;

(b) a renewal option is exercised or an extension is granted, unless the term of the
renewal or extension was initially included in the lease term;

- 23 -
F-105
(c) there is a change in the determination of whether fulfillment is dependent on a
specific asset; or

(d) there is a substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from

the date when the change in circumstances gives rise to the reassessment for
scenarios (a), (c) or (d), and at the date of renewal or extension period for scenario
(b) above.

Operating Lease
Group as Lessee. Leases which do not transfer to the Group substantially all the
risks and rewards of ownership of the asset are classified as operating leases.
Operating lease payments are recognized as an expense in profit or loss on a
straight-line basis over the lease term. Contingent rents are recognized as expense
in the period in which they are incurred. Associated costs such as maintenance and
insurance are expensed as incurred.

Group as Lessor. Leases where the Group does not transfer substantially all the
risks and rewards of ownership of the assets are classified as operating leases. Rent
income from operating leases is recognized as income on a straight-line basis over
the lease term. Initial direct costs incurred in negotiating an operating lease are
added to the carrying amount of the leased asset and recognized as an expense
over the lease term on the same basis as rent income. Contingent rents are
recognized as income in the period in which they are earned.

Borrowing Costs
Borrowing costs are capitalized if they are directly attributable to the acquisition or
construction of a qualifying asset otherwise it’s expensed out. Capitalization of
borrowing costs commences when the activities to prepare the asset are in progress
and expenditures and borrowing costs are being incurred. Borrowing costs are
capitalized until the assets are substantially ready for their intended use.

The amount of specific borrowing costs capitalized is net of the investment income
on any temporary investment of the funds pending expenditure on the asset. On the
other hand, general borrowing costs capitalized is exclusive of any investment
income earned.

Employee Benefits
Short-term Employee Benefits
Short-term employee benefits are expensed as the related service is provided. A
liability is recognized for the amount expected to be paid if the Group has a present
legal or constructive obligation to pay this amount as a result of past service provided
by the employee and the obligation can be estimated reliably.

Retirement Costs
The Parent Company has no established retirement plan for its permanent
employees and only conforms to the minimum regulatory benefit under the
Retirement Pay Law (Republic Act No. 7641) which is of the defined benefit type.
The cost of providing benefits under the defined benefit retirement plan is actuarially
determined using the projected unit credit method. Projected unit credit method
reflects services rendered by employees to the date of valuation and incorporates
assumptions concerning employees’ projected salaries. Actuarial gains and losses
are recognized in full in the period in which they occur in other comprehensive
income. Such actuarial gains and losses are also immediately recognized in equity
and are not reclassified to profit or loss in subsequent period.

- 24 -
F-106
The defined benefit retirement liability is the aggregate of the present value of the
amount of future benefit that employees have earned in return for their service in the
current and prior periods.

Defined benefit costs comprise the following:

ƒ Service costs
ƒ Net interest on the defined benefit retirement liability
ƒ Remeasurements of defined benefit retirement liability

Service costs which include current service costs, past service costs and gains or
losses on non-routine settlements are recognized as expense in profit or loss. Past
service costs are recognized when plan amendment or curtailment occurs.

Net interest on the defined benefit retirement liability is the change during the period
as a result of contributions and benefit payments, which is determined by applying
the discount rate based on the government bonds to the defined benefit retirement
liability. Net interest on the defined benefit retirement liability is recognized as
expense or income in profit or loss.

Remeasurements of defined benefit retirement liability comprising actuarial gains

and losses are recognized immediately in other comprehensive income in the period
in which they arise.

Taxes
Current Tax
Current tax is the expected tax payable or receivable on the taxable income or loss
for the year, using tax rates enacted or substantively enacted by the end of the
reporting date, and any adjustment to tax payable in respect of previous years.

Deferred Tax
Deferred tax is recognized in respect of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes.

Deferred tax liabilities are recognized for all taxable temporary differences. Deferred
tax assets are recognized for all deductible temporary differences and the
carryforward tax benefits of the net operating loss carry-over (NOLCO) to the extent
that it is probable that sufficient future taxable profit will be available against which
the deductible temporary differences and the carryforward tax benefits of NOLCO
can be utilized. Deferred tax, however, is not recognized when it arises from the
initial recognition of an asset or a liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit
nor taxable profit or loss.

Future taxable profits will be available against which they can be used. If the amount
of taxable temporary differences is insufficient to recognize deferred tax asset in full,
the future taxable profits, adjusted for reversals of existing temporary differences, are
considered based on the business plan of the Group.

The carrying amount of deferred tax assets is reviewed at each reporting date and
reduced to the extent that it is no longer probable that sufficient future taxable profit
will be available to allow all or part of the deferred tax asset to be utilized.
Unrecognized deferred tax assets are reassessed at each reporting date and are
recognized to the extent that it has become probable that sufficient future taxable
profit will allow the deferred tax asset to be recovered.

- 25 -
F-107
The measurement of deferred tax reflects the tax consequences that would follow
the manner in which the Group expects, at the end of the reporting period, to recover
or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply in the year when the asset is realized or the liability is settled, based on tax
rates (and tax laws) that have been enacted or substantively enacted by the end of
the reporting date.

Current tax and deferred tax are recognized in profit or loss except to the extent that
it relates to a business combination, or items recognized directly in equity or in other
comprehensive income.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right
exists to set off current tax assets against current tax liabilities and the deferred
taxes relate to the same taxable entity and the same taxation authority.

VAT
Revenues, expenses and assets are recognized net of the amount of VAT. The net
amount of tax recoverable from, or payable to, the taxation authority is included as
part of “Prepaid expenses and other current assets - net” or “Accounts payable and
other current liabilities” account in the consolidated statements of financial position.

Related Parties
Parties are considered to be related if one party has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other party in
making financial and operating decisions. Parties are also considered to be related if
they are subject to common control. Related parties may be individuals or corporate
entities.

Basic and Diluted Earnings Per Common Share (EPS)

Basic EPS is computed by dividing the net income for the period attributable to
equity holders of the Parent Company by the weighted average number of issued
and outstanding common shares during the period, with retroactive adjustment for
any stock dividends declared. Diluted EPS is computed by dividing net income for
the year attributable to common equity holders of the Parent Company by the
weighted average number of common shares issued and outstanding during the year
plus the weighted average number of common shares that would be issued on
conversion of all the dilutive potential common shares into common shares.

Operating Segments
The Group’s operating segments are organized and managed separately according
to the nature of the products and services provided, with each segment representing
a strategic business unit that offers different products and serves different markets.
Financial information on operating segments is presented in Note 5 to the
consolidated financial statements. The Chief Executive Officer (the chief operating
decision maker) reviews management reports on a regular basis.

The measurement policies the Group used for segment reporting under PFRS 8 are
the same as those used in the consolidated financial statements. There have been
no changes in the measurement methods used to determine reported segment profit
or loss from prior periods. All inter-segment transfers are carried out at arm’s length
prices.

Segment revenues, expenses and performance include sales and purchases

between business segments. Such sales and purchases are eliminated in
consolidation.

- 26 -
F-108
 Contingencies
Contingent liabilities are not recognized in the consolidated financial statements.
These are disclosed in the notes to the consolidated financial statements unless the
possibility of an outflow of resources embodying economic benefits is remote.
Contingent assets are not recognized in the consolidated financial statements but
are disclosed in the notes to the consolidated financial statements when an inflow of
economic benefits is probable.

Events After the Reporting Date

Post year-end events that provide evidence of conditions that existed at the end of
the reporting date (adjusting events) are recognized in the consolidated financial
statements. Post year-end events that are not adjusting events are disclosed in the
notes to the consolidated financial statements when material.

4. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the consolidated financial statements in accordance with PFRSs

require management to exercise judgments, make estimates and use assumptions
that affect the application of accounting policies and the amounts of assets, liabilities,
income and expenses reported in the consolidated financial statements at the
reporting date. However, uncertainty about these judgments, estimates and
assumptions could result in an outcome that could require a material adjustment to
the carrying amount of the affected asset or liability in the future.

Judgments and estimates are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. Revisions are recognized in the
period in which the judgments and estimates are revised and in any future period
affected.

Judgments
In the process of applying the Group’s accounting policies, management has made
the following judgments, apart from those involving estimations, which have the most
significant effect on the amounts recognized in the consolidated financial statements:

Impairment of Non-financial Assets

PFRS require that an impairment review be performed on property and equipment
and intangible assets with finite lives when events or changes in circumstances
indicate that the carrying amount may not be recoverable. Determining the
recoverable amounts of these assets requires the estimation of cash flows expected
to be generated from the continued use and ultimate disposition of such assets.
While it is believed that the assumptions used in the estimation of fair values
reflected in the consolidated financial statements are appropriate and reasonable,
significant changes in these assumptions may materially affect the assessment of
recoverable amounts and any resulting impairment loss could have a material
adverse impact on the financial performance.

The combined carrying amounts of property and equipment and intangible assets
with finite lives amounted to P1,309.01 million and P1,103.74 million as at
December 31, 2017 and 2016, respectively (Notes 10 and 11).

- 27 -
F-109
Distinction between Real Estate Inventories and Investment Property
The Group determines whether a property will be classified as real estate inventories
or investment property. In making this judgment, the Group considers whether the
property is held for sale in the ordinary course of business [real estate inventories] or
which is held primarily to earn rental and capital appreciation and is not substantially
for use by, or in the operations of the Group [investment property].

Distinction between Investment Property and Property and Equipment

The Group determines whether a property qualifies as an investment property. In
making its judgment, the Group considers whether the property generates cash flows
largely independent of the other assets held by an entity. Property and equipment or
owner-occupied properties generate cash flows that are attributable not only to the
property but also to the other assets used in the production or supply process.

Property Acquisitions and Business Combinations

The Group acquires subsidiaries that own real estate properties. At the time of
acquisition, the Group considers whether the acquisition represents the acquisition of
a business. The Group accounts for an acquisition as a business combination where
an integrated set of activities is acquired in addition to the property. More specifically,
consideration is made with regard to the extent to which significant processes are
acquired. The significance of any process is judged with reference to the guidance in
PAS 40, Investment Property on ancillary services. When the acquisition of
subsidiaries does not represent a business, it is accounted for as an acquisition of a
group of assets and liabilities. The cost of the acquisition is allocated to the assets
and liabilities acquired based upon their relative fair values, and no goodwill or
deferred tax is recognized.

Determination of Control
The Parent Company determines control when it is exposed, or has rights, to
variable returns from its involvement with an entity and has the ability to affect those
returns through its power over the entity. The Parent Company controls an entity if
and only if the Parent Company has all of the following:

a. power over the entity;

b. exposure, or rights, to variable returns from its involvement with the entity; and

c. the ability to use its power over the entity to affect the amount of the Parent
Company's returns.

Collectibility of the Sales Price

The Group assesses whether it is probable that the economic benefits will flow to the
Group when the sales prices are collectible. Collectibility of the contract price is
demonstrated by the buyer’s commitment to pay, which is supported by the buyer’s
initial and continuous investments that motivates the buyer to honor the obligation.
Collectibility is also assessed by considering factors such as collections, credit
standing of the buyer and location of the property.

Determination of whether the Group is acting as a Principal or an Agent

The Group assesses its hotel revenue arrangements against the following criteria to
determine whether it is acting as a principal or an agent:

ƒ Whether the Group has primary responsibility for providing the services;
ƒ Whether the Group has inventory risk;
ƒ Whether the Group has discretion in establishing prices; and
ƒ Whether the Group bears the credit risk.

- 28 -
F-110
If the Group has determined it is acting as an agent, the Group neither takes title to
nor is exposed to inventory risk related to the services; and has no significant
responsibility in respect of the services rendered; when the Group collects the
revenue from the final customer, all credit is borne by the principal; and the Group
cannot vary the selling prices set by the principal. If the Group has determined it is
acting as an agent, only the net amount retained is recognized as revenue.

The Group concludes that it is acting as the principal in its hotel revenue
arrangements.

Provisions and Contingencies

The Group, in the ordinary course of business, sets up appropriate provisions for its
present legal or constructive obligations, if any, in accordance with its policies on
provisions and contingencies. In recognizing and measuring provisions,
management takes risk and uncertainties into account.

No provision for probable losses arising from legal contingencies was recognized in
the Group’s consolidated financial statements in 2017, 2016 and 2015.

Estimates and Assumptions

The key estimates and assumptions used in the consolidated financial statements
are based upon management’s evaluation of relevant facts and circumstances as at
the date of the consolidated financial statements. Actual results could differ from
such estimates.

Revenue and Cost Recognition

The Group’s revenue and cost recognition policies require management to make use
of estimates and assumptions that may affect the reported amounts of revenues and
costs. The Group’s revenue from real estate sales is recognized based on the
percentage of completion. It is measured principally on the basis of the estimated
completion of a physical proportion of contract work by reference to the actual costs
incurred to date over the estimated total costs of the project. Changes in estimate
may affect the reported amounts of revenue in real estate sales and receivables.
There were no changes in the assumptions or basis for estimation during the year.

Revenue and cost recognized related to real estate contracts amounted to

P819.54 million and P362.24 million, respectively, in 2017, P931.93 million and
P495.76 million, respectively, in 2016, and P641.47 million and P370.60 million,
respectively, in 2015 (Note 18).

Allowance for Impairment Losses on Receivables, Due from Related Parties and
Refundable Deposits
Provisions are made for specific and groups of accounts, where objective evidence
of impairment exists. The Group evaluates these accounts on the basis of factors
that affect the collectibility of the accounts. These factors include, but are not limited
to, the length of the Group’s relationship with the customers and counterparties, the
current credit status based on third party credit reports and known market forces,
average age of accounts, collection experience and historical loss experience. The
amount and timing of the recorded expenses for any period would differ if the Group
made different judgments or utilized different methodologies. An increase in the
allowance for impairment losses would increase the recorded general and
administrative expenses and decrease current and noncurrent assets.

The Group recognized impairment loss on its receivables amounting to P1.10 million
in 2015. No impairment loss is recognized for due from related parties and
refundable deposits in 2017, 2016 and 2015.

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F-111
The combined carrying amounts of the Group’s receivables, due from related parties
and refundable deposits amounted to P3,875.68 million and P2,551.30 million as at
December 31, 2017 and 2016, respectively (Notes 7, 9, 13 and 21).

Write-down of Inventories
The Group writes-down the costs of inventories to net realizable value whenever net
realizable value becomes lower than cost due to damage, physical deterioration,
obsolescence, changes in price levels or other causes.

Estimates of net realizable value are based on the most reliable evidence available
at the time the estimates are made of the amount the real estate inventories and
leasehold rights are expected to be realized. These estimates take into consideration
fluctuations of price or cost directly relating to events occurring after the reporting
date to the extent that such events confirm conditions existing at the reporting date.

No inventories were written down to their net realizable values in 2017 and 2016.

The combined carrying amounts of the Group’s inventories amounted to

P3,819.53 million and P3,186.34 million as at December 31, 2017 and 2016,
respectively (Note 8).

Estimating Useful Lives of Property and Equipment and Intangible Assets with Finite
Lives
The Group estimates the useful lives of property and equipment and intangible
assets with finite lives based on the period over which the assets are expected to be
available for use. The estimated useful lives of property and equipment and
intangible assets with finite lives are reviewed periodically and are updated if
expectations differ from previous estimates due to physical wear and tear, technical
or commercial obsolescence and legal or other limits on the use of the assets.

In addition, the estimation of the useful lives of property and equipment and
intangible assets with finite lives is based on collective assessment of industry
practice, internal technical evaluation and experience with similar assets. It is
possible, however, that future results of operations could be materially affected by
changes in estimates brought about by changes in factors mentioned above. The
amounts and timing of recorded expenses for any period would be affected by
changes in these factors and circumstances. A reduction in the estimated useful lives
of the property and equipment and intangible assets with finite lives would increase
recorded depreciation and amortization expenses and decrease noncurrent assets.

Property and equipment, net of accumulated depreciation and amortization

amounted to P1,009.93 million and P863.42 million as at December 31, 2017 and
2016, respectively. Accumulated depreciation and amortization of property and
equipment amounted to P91.87 million and P40.72 million as at December 31, 2017
and 2016, respectively (Note 10).

Intangible assets with finite lives, net of accumulated amortization amounted to

P299.07 million and P240.32 million as at December 31, 2017 and 2016,
respectively. Accumulated amortization of the intangible assets with finite lives
amounted to P55.85 million and P11.94 million as at December 31, 2017 and 2016,
respectively (Note 11).

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F-112
 Impairment of Goodwill
The Group determines whether goodwill is impaired at least annually. This requires
the estimation of value in use of the cash-generating units to which the goodwill is
allocated. Estimating value in use requires management to make an estimate of the
expected future cash flows from the cash-generating unit and to choose a suitable
discount rate to calculate the present value of those cash flows.

The carrying amount of goodwill amounted to P350.38 million as at December 31,

2017 and 2016 (Note 11).

Fair Value Measurement of Investment Property

The Group carries its investment property at fair value, with changes in fair value
being recognized in profit or loss. The Group engages independent valuation
specialists to determine the fair value. For the investment property, the appraisers
used a valuation technique based on comparable market data available for such
property.

Investment property amounted to P46,423.55 million and P32,535.14 million as at

December 31, 2017 and 2016, respectively. Unrealized gains from changes in fair
values of investment property recognized in profit or loss amounted to
P4,175.51 million, P1,830.05 million, and P811.06 million in 2017, 2016 and 2015,
respectively (Note 12).

Realizability of Deferred Tax Assets

The Group reviews its deferred tax assets at each reporting date and reduces the
carrying amount to the extent that it is no longer probable that sufficient future
taxable profit will be available to allow all or part of the deferred tax assets to be
utilized. The Group’s assessment on the recognition of deferred tax asset on
deductible temporary difference and carryforward benefits of NOLCO is based on the
projected taxable income in the following periods.

Deferred tax assets amounted to P1,479.98 million and P810.05 million as at

December 31, 2017 and 2016, respectively (Note 24).

5. Segment Information

Operating Segments
The reporting format of the Group’s operating segments is determined based on the
Group’s risks and rates of return which are affected predominantly by differences in
the products and services produced. The operating businesses are organized and
managed separately according to the nature of the products produced and services
provided, with each segment representing a strategic business unit that offers
different products and serves different markets.

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The Group’s reportable segments are real estate development, leasing, and
hospitality. The real estate development segment is engaged in the development of
real estate assets to be held as trading inventory and for sale. This segment was
developed as part of the Group's tactical approach to early stage growth, as part of
that plan we will be transitioning out of this segment once the current inventory has
been fully sold. The leasing and hospitality segments which are focused in recurring
revenue will be the core pillars of the Group's growth plans moving forward. The
leasing segment is engaged in the acquisition and/or development of real estate
assets in the retail, office and industrial sector that are held for rentals. The
hospitality segment is engaged in the acquisition and/or development of hotels which
will be managed and operated the Group. The hospitality segment includes the
development of a homegrown hotel brand with a unique sale-and-manage business
model.

Others pertain to the segments engaged in marketing, property management

activities and hotel operations.

Management monitors the operating results of its business units separately for the
purpose of making decisions about resource allocation and performance
assessment. Segment performance is evaluated based on operating profit or loss
and is measured consistently with the operating profit or loss in the consolidated
financial statements.

The Group has three significant reportable segments for 2017, the real estate
development, leasing, and hospitality. For 2016, there are two reportable segments,
namely real estate development and leasing.

Segment Assets and Liabilities

Segment assets include all operating assets used by a segment and consist primarily
of operating cash, receivables, real estate inventories, prepaid expenses and other
current assets, property and equipment and computer software licenses, net of
accumulated depreciation and amortization, investment property and other
noncurrent assets. Segment liabilities include all operating liabilities and consist
primarily of accounts payable and other current liabilities, customers’ deposits and
other noncurrent liabilities. Segment assets and liabilities do not include deferred
taxes.

Inter-segment Transactions
Segment revenues, expenses and performance include sales and purchases
between operating segments. Inter-segment transactions are set on an arm’s length
basis similar to transactions with nonrelated parties.

Major Customer
The Group does not have a single external customer from which sales revenue
generated amounted to 10% or more of the total revenues of the Group.

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Operating Segments
Analyses of financial information by business segment follow:

2017
Real Estate
Development Leasing Hospitality Others Eliminations Consolidated
Revenue
External revenues P1,184,355,749 P4,774,301,151 P453,381,038 P199,874,830 P - P6,611,912,768
Inter-segment 1,605,472,501 9,035,454 1,174,779 799,890,355 (2,415,573,089) -
Total Revenue P2,789,828,250 P4,783,336,605 P454,555,817 P999,765,185 (P2,415,573,089) P6,611,912,768
Segment Results P991,663,253 P2,685,742,883 (P50,289,790) (P287,124,730) (P809,153,131) P2,530,838,485
Total Comprehensive Income
Attributable to
Equity holders of the Parent P1,646,013,940
Non-controlling interests 884,824,545
P2,530,838,485
Segment Assets P53,105,409,593 P51,991,081,885 P2,116,618,390 P2,346,711,631 (P45,230,504,373) P64,329,317,126
Segment Liabilities P40,195,601,857 P30,593,283,788 P1,747,094,510 P2,878,338,907 (P33,400,762,588) P42,013,556,474
Other Information
Capital expenditures P1,187,358,305 P9,495,292,718 P48,452,134 P173,740,000 P - P10,904,843,157
Depreciation and amortization P16,896,534 P30,086,587 P35,379,144 P1,013,239 P - P83,375,504

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F-115
2016
Real Estate
Development Leasing Others Eliminations Consolidated
Revenue
External revenue P1,269,821,941 P2,259,090,844 P182,803,163 P - P3,711,715,948
Inter-segment - - 548,769,876 (548,769,876) -
Total Revenue P1,269,821,941 P2,259,090,844 P731,573,039 (P548,769,876) P3,711,715,948
Segment Results P264,788,316 P1,074,585,472 (P259,715,232) P390,649,965 P1,470,308,521
Total Comprehensive Income
Attributable to
Equity holders of the Parent P1,079,113,320
Non-controlling interests 391,195,201
P1,470,308,521
Segment Assets P39,839,822,265 P41,839,952,263 P1,891,084,458 (P33,517,367,720) P50,053,491,266
Segment Liabilities P31,323,280,475 P21,304,392,294 P1,667,558,852 (P24,460,043,941) P29,835,187,680
Other Information
Capital expenditures P1,391,402 P11,004,637,943 P88,323,785 P - P11,094,353,130
Depreciation and amortization P755,025 P9,575,738 P22,621,735 P - P32,952,498

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 Capital expenditures on noncurrent assets represent additions to property and
equipment, computer software licenses, intangible assets and investment property.
Noncash expenses pertain to depreciation and amortization expense attributable to
the reportable segments.

The Group has only one geographical segment, which is the Philippines.

6. Cash and Cash Equivalents

This account consists of:

Note 2017 2016

Cash on hand P8,180,404 P81,689,009
Cash in banks 27 1,306,347,033 489,906,103
Short-term placements 27 785,896,439 4,895,279,265
P2,100,423,876 P5,466,874,377

Cash in banks earn annual interest at the respective bank deposit rates. Short-term
placements are made for varying periods of up to three months depending on the
immediate cash requirements of the Group, and earn annual interest at the
respective short-term placement rates. Total interest income from cash in banks and
short-term placements amounted to P35.46 million, P32.80 million and
P11.58 million in 2017, 2016 and 2015, respectively.

7. Receivables

This account consists of:

Note 2017 2016

Installment contracts receivable P1,894,391,622 P1,135,827,341
Rent receivable 839,624,292 209,373,450
Receivables from:
Tenants 187,756,702 51,531,502
Leasehold rights’ buyers 162,872,941 59,886,183
Contractors 105,188,466 45,000,000
Condominium corporation and unit
owners 58,578,494 58,038,820
Hotel operations 35,233,874 25,854,803
Receivable from minority - 56,605,263
Advances to employees 68,266,726 30,561,125
Others 68,586,226 40,667,880
3,420,499,343 1,713,346,367
Less allowance for impairment loss 1,098,574 1,098,574
27 P3,419,400,769 P1,712,247,793

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The details of installment contracts receivable from real estate buyers follow:

Note 2017 2016

Installment contracts receivable P1,901,741,960 P1,524,512,517
Less unearned interest income 1,010,065 71,382,689
Net installment contracts receivable 1,900,731,895 1,453,129,828
Less noncurrent portion 27 6,340,273 317,302,487
P1,894,391,622 P1,135,827,341

Installment contracts receivable from real estate buyers pertain to receivables from
the sale of condominium and subdivision units. These receivables are collectible in
monthly installments over a period of one to five years. These non-interest bearing
installment contracts receivable are discounted using effective annual interest rates
ranging from 5.00% to 15.00% that are specific to the tenor of the installment
contracts receivable. Titles to real estate properties are not transferred to the buyers
until full payment has been made.

Total real estate revenue in 2017, 2016, 2015 amounted to P819.54 million,
P931.93 million and P641.47 million, respectively. Real estate revenue is recognized
using percentage of completion method as permitted by FRSC, based on the
estimated completion of a physical proportion of the contract work. Gross profit in
2017, 2016, and 2015 amounted to P457.30 million, P436.16 million and
P270.87 million, respectively.

The details of receivables from leasehold rights’ buyers follow:

Note 2017 2016

Installment receivables from leasehold
rights’ buyers P413,182,333 P429,514,387
Less unearned interest income 25,927,930 43,607,684
Net installment receivables from
leasehold rights’ buyers 387,254,403 385,906,703
Less noncurrent portion 27 224,381,462 326,020,520
Current portion P162,872,941 P59,886,183

Receivables from leasehold rights’ buyers pertain to receivables from the sale of
leasehold rights in Dragon8. These receivables are collectible in monthly installments
over a period of one to five years. These non-interest bearing installment receivables
from leasehold rights buyers are discounted using effective annual interest rates
ranging from 4.00% to 15.00% that are specific to the tenor of the installment
receivables.

Rent receivable pertains to receivables arising from the lease of commercial spaces
relating to the Group’s CityMall operations. These are generally collectible within 30
days.

Receivables from condominium corporation and unit owners includes receivables

from buyers for taxes and registration fees advanced on their behalf.

Receivables from tenants includes utilities, common usage service area fees and
other charges billed to tenants which are due within 30 days upon billing.

Receivables from contractors pertains to the reimbursable share of contractors in the

promotional cost incurred during the construction. These are generally collectible
within 30-60 days.

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 Receivables from hotel operations consists of receivables from corporate hotel
guests and are non-interest bearing and generally settled within 30 days.

The Group recognized impairment loss on its installment contracts receivable

amounting to P1.10 million in 2015 (Note 20).

The total interest income recognized from the installment contracts receivable and
receivables from leasehold rights’ buyers amounted to P92.51 million,
P86.49 million and P109.28 million in 2017, 2016 and 2015, respectively.

8. Inventories

This account consist of:

2017 2016
Real estate inventories - at cost P3,814,585,376 P3,184,389,728
Hotel inventories - at cost 4,948,649 1,954,515
P3,819,534,025 P3,186,344,243

Real estate inventories represent the cost of construction and development of

completed and in-progress residential, commercial and office units for sale. Projects
of the Group include The Skysuites Tower, W.H. Taft Residences, The Uptown
Place, Injap Tower, FirstHomes Subdivision, DD HappyHomes-Mandurriao, DD
HappyHomes-Tanauan, DD HappyHomes-Zarraga and Hotel101-Fort.

The SkySuites Tower

On September 1, 2014, the Group acquired from Rizal Commercial Banking
Corporation (the “RCBC”) the unfinished commercial, office and residential project,
“The SkySuites Tower”, in Quezon City for a total consideration of P700 million
payable over four years. The Group was required to deliver to RCBC an irrevocable
standby letter of credit to guarantee the payment of the remaining balance payable to
RCBC. At the closing date of the transaction, RCBC delivered to the Group the
physical possession and control over “The SkySuites Tower”. Portion of the total
acquisition cost of “The SkySuites Tower” and cost to be incurred in its development
and completion was recognized as part of “Real estate inventories” and “Investment
property” accounts in the consolidated statements of financial position for the parts
pertaining to residential units for sale and commercial and office units held for
leasing, respectively.

W.H. Taft Residences

On November 5, 2012, the Group acquired and took over the development of
W.H. Taft Residences (the “W.H. Taft”), a condominium project along Taft Avenue in
the City of Manila, from Philtown Properties, Inc. (the “Philtown”). The Group also
acquired the land where the W.H. Taft is located from the Landowner. The
development of the W.H. Taft was formerly initiated under an unincorporated joint
venture agreement between Philtown and the Landowner. The project was
completed in September 2015.

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The Uptown Place and Injap Tower
On December 27, 2013, the Group entered into an unincorporated joint venture
agreement with Injap Investments, Inc. (“III”) for the joint development of “The
Uptown Place” at General Luna St., Iloilo City and “Injap Tower” at Mandurriao
District, Iloilo City (the “Projects”). The agreement stipulates that III shall contribute
land and the Group shall finance and develop the Projects and be exclusively
responsible for the management and supervision of the construction of the Projects.
In consideration for III’s land contribution, the Group delivered some saleable units of
the Projects to III. The costs incurred in the development of the Projects are recorded
as part of “Real estate inventories” and “Investment property” accounts in the
consolidated statements of financial position. The projects were completed in 2014.

FirstHomes Subdivision
In October 2012, the Group completed its first horizontal development project located
at Navais, Mandurriao, Iloilo City. FirstHomes is a 1.30 hectare townhouse project
consisting of 112 units.

DD HappyHomes-Mandurriao
On May 31, 2014, as a result of the business combination, the Group acquired
DDHH horizontal, residential real estate project in Mandurriao, Iloilo.

DD HappyHomes-Tanauan and DD HappyHomes-Zarraga

In 2016, the Group acquired additional landsites for horizontal, residential real estate
projects in Tanauan, Leyte and Zarraga, Iloilo.

Hotel101-Fort
In 2016, HOA entered into a Memorandum of Agreement and Deed of Absolute
Conveyance with a minority shareholder of HOA to acquire a parcel of land to be
used for the construction of Hotel101-Fort project (Note 21). Hotel101-Fort started
construction in 2017.

Hotel101-Davao
On August 22, 2017, HOA acquired a parcel of land in Davao City with an area of
5,384 square meter for the development of Hotel101-Davao.

Real estate inventories recognized as “Cost of real estate sales” amounted to

P362.24 million, P495.76 million, and P370.60 million in 2017, 2016 and 2015,
respectively (Note 18).

Capitalized borrowing costs amounted to P277.65 million and P97.60 million as at

December 31, 2017 and 2016 using 5.20% and 4.26% as capitalization rates,
respectively (Note 15).

No inventory write-down was recognized on real estate inventories in 2017, 2016

and 2015.

Hotel inventories mainly consists of consumable items used in the operations of

“Injap Tower Hotel”, “Jinjiang Inn Ortigas”, “Jinjiang Inn Makati” and
“Hotel101-Manila”. The cost of hotel inventories recognized under “Cost of hotel
operations” in the consolidated statements of comprehensive income amounted to
P275.54 million and P61.01 million in 2017 and 2016, respectively.

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9. Prepaid Expenses and Other Current Assets

This account consists of:

Note 2017 2016

Input VAT - net P2,697,098,423 P1,945,569,458
Advances to contractors and suppliers 1,525,749,720 855,184,903
Creditable withholding taxes 395,042,945 141,813,031
Prepaid expenses:
Taxes 24,708,552 25,711,001
Rent 22 15,856,373 62,369,917
Marketing and multimedia 10,000,000 27,350,787
Commission 7,062,334 7,062,334
Insurance 4,773,170 3,259,013
Others 79,684,831 31,873,967
Refundable deposits 13, 22, 27 17,909,395 8,646,060
Other current assets 44,655,474 142,441,063
P4,822,541,217 P3,251,281,534

Input VAT represents accumulated input taxes from purchases of goods and
services for business operations and purchases of materials and services for the
building and leasehold construction which can be applied against future output VAT.

The Group has written off input VAT amounting to P2.6 million, P83.48 million and
P18.10 million in 2017, 2016 and 2015, respectively (Note 20).

Advances to contractors and suppliers represent amount paid as downpayments to

contractors and suppliers to facilitate the initial construction of the Group’s projects.

Creditable withholding taxes pertain to taxes withheld by the Group’s customers

which can be applied against any future income tax liability.

Advances to employees include advances for marketing events, official business

trips and other approved disbursements that are not yet liquidated as at cut-off date.
These advances are subject to liquidation within 30 days.

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10. Property and Equipment

The movements and balances of this account consist of:

Equipment Furniture Room

Leasehold and and Fixtures and
Note Land Building Improvements Showroom Fixtures Components Total
Cost
Balance, January 1, 2016 P80,986,000 P - P8,197,500 P60,368,224 P12,859,584 P - P162,411,308
Assets acquired through
business combination
(As restated - Note 28) 28 263,100,000 107,419,274 494,489 16,793,383 8,276,720 21,913,139 417,997,005
Additions - 15,546,836 2,108,418 38,127,734 9,141,604 173,008 65,097,600
Transfer/reclassification - 258,632,000 - - - - 258,632,000
Balance, December 31, 2016
(As restated - Note 28) 344,086,000 381,598,110 10,800,407 115,289,341 30,277,908 22,086,147 904,137,913
Additions - 5,258,661 190,198,715 60,433,571 5,301,810 17,459,998 278,652,755
Transfer/reclassification 12 (80,986,000) - - - - - (80,986,000)
Balance, December 31, 2017 12 263,100,000 386,856,771 200,999,122 175,722,912 35,579,718 39,546,145 1,101,804,668
Accumulated Depreciation
and Amortization
Balance, January 1, 2016 - - 3,689,127 9,233,046 3,737,921 - 16,660,094
Depreciation and amortization - 1,116,210 1,751,178 15,089,045 4,881,998 1,221,631 24,060,062
Balance, December 31, 2016 - 1,116,210 5,440,305 24,322,091 8,619,919 1,221,631 40,720,156
Depreciation and amortization - 7,762,013 5,419,675 24,239,761 3,459,563 10,272,871 51,153,883
Balance, December 31, 2017 - 8,878,223 10,859,980 48,561,852 12,079,482 11,494,502 91,874,039
Carrying Amount
December 31, 2016 P344,086,000 P380,481,900 P5,360,102 P90,967,250 P21,657,989 P20,864,516 P863,417,757
December 31, 2017 P263,100,000 P377,978,548 P190,139,142 P127,161,060 P23,500,236 P28,051,643 P1,009,930,629

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F-122
11. Goodwill and Intangible Assets

This account consists of:

2016
(As restated -
Note 2017 Note 28)
Hotel101 brand 28 P664,300,000 P664,300,000
Goodwill 28 350,377,742 350,377,742
Franchise rights 28 132,969,940 154,569,940
Advertising production cost 75,464,730 31,102,041
Computer software licenses - net 58,838,233 26,209,013
Concession right 31,801,838 28,442,588
P1,313,752,483 P1,255,001,324

Hotel101 Brand
The Hotel101 brand is an asset with indefinite useful life and is assessed for
impairment whenever there is an indication that the asset may be impaired. The
method used to estimate the fair value of Hotel101 brand is the RfR based on cost
savings from owning the brand name. The cost savings are calculated based on
royalty rates of comparable brands and the forecast revenues of HOA.

Franchise Rights
This amount pertains to the rights of the Group to operate “JinJiang Inn” franchise
chain of hotels in the Philippines.

The Group entered into a Brand License or Franchise Agreement with Jinjiang Inn
Co, Ltd. (“Licensor”) of Shanghai, China for a period of 15 years from September 11,
2026. The Group is given the right to establish regular chains and develop franchise
chains of hotels. In consideration for this exclusive grant of license, the Group is
obliged to pay a lump sum franchise fee. Once the established hotels become
operational, fees such as royalty fees and ongoing management fees will be remitted
to the Licensor.

Amortization of the franchise rights in 2017 amounted to P21.60 million.

Goodwill
Goodwill comprises the excess of the acquisition costs over the fair value of the
identifiable assets and liabilities in the acquisition of DDHH and HOA. Goodwill was
computed based on fair values of net assets acquired.

In 2017, the Group finalized its purchase price allocation on the acquisition of HOA
which resulted in a goodwill of P266.10 million (Note 28).

No impairment loss is recognized for the goodwill account in 2017 and 2016.

The recoverable amount of goodwill has been determined based on a valuation

using cash flow projections covering a five-year period based on long range plans
approved by management.

Management believes that any reasonably possible change in the key assumptions
on which the recoverable amount is based would not cause its carrying amount to
exceed its recoverable amount.

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F-123
The calculation of value in use are most sensitive to the following assumptions:

Gross Margins. Gross margins are based on average values achieved immediately
before the budget period. These are increased over the budget period for anticipated
efficiency improvements. Values assigned to key assumptions reflect past
experience, except for efficiency improvement.

Discount Rate. The Group uses the weighted-average cost of capital as the discount
rates, which reflect management’s estimate of the risk. This is the benchmark used
by management to assess operating performance and to evaluate future investment
proposals.

The recoverable amount of the cash-generating unit was determined to be higher

than its carrying amount as at December 31, 2017. Hence, management assessed
that there is no impairment loss in the value of goodwill in 2017.

Advertising Production Cost

Advertising production cost pertains to the production cost incurred by the Group in
developing the CityMalls commercials which can be used and aired over a period of
time. This is being amortized over five years. Costs incurred in 2017 and 2016
amounted to P54.06 million and P31.91 million, respectively. Amortization in 2017
and 2016 amounted to P9.70 million and P0.81 million, respectively.

Concession Right
The Parent Company entered into a Joint Venture Agreement with the City
Government of Iloilo for the financing, design, construction, development, operation
and maintenance of the Iloilo-Guimaras Ferry Terminal (“Ferry Terminal”) and the
surrounding areas within the property. The construction cost of the Ferry Terminal
amounted to P31.80 million. The Ferry Terminal started operations in April 2017.

Computer Software Licenses

The movements and balances of the “Computer software licenses - net” account
consist of:

Note 2017 2016

Cost
Balance at beginning of year P37,335,505 P13,107,753
Assets acquired through business
combination 28 - 5,002,994
Additions 42,733,417 19,224,757
Balance at end of year 80,068,922 37,335,504
Accumulated Amortization
Balance at beginning of year 11,126,491 3,041,704
Amortization for the year 20 10,104,198 8,084,787
Balance at end of year 21,230,689 11,126,491
P58,838,233 P26,209,013

The computer software licenses have been built, installed or supplied by the
manufacturer ready to operate or require some customization based on the Group’s
specific requirements.

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F-124
12. Investment Property

This account consists of:

Construction
Note Land Building in Progress Total
January 1, 2016 P12,422,918,697 P3,202,257,985 P4,304,739,693 P19,929,916,375
Additions 1,469,913,114 120,569,010 9,392,849,622 10,983,331,746
Reclassifications 2,955,499,483 (2,955,499,483) -
Transfer to property and equipment 10 - - (258,632,000) (258,632,000)
Assets acquired through business
combination 28 - 72,385,000 - 72,385,000
Sale of leasehold rights - (21,913,753) - (21,913,753)
Unrealized gains from changes in
fair values of investment property 939,090,349 890,959,419 - 1,830,049,768
December 31, 2016 14,831,922,160 7,219,757,144 10,483,457,832 32,535,137,136
Additions 1,264,566,391 93,923,298 8,275,268,944 9,633,758,633
Transfer to property and equipment 10 80,986,000 3,288,276 - 84,274,276
Reclassifications (89,297,044) 10,567,868,789 (10,478,571,745) -
Sale of leasehold rights - (4,133,652) - (4,133,652)
Unrealized gains from changes in
fair values of investment property 1,663,858,235 2,510,652,828 - 4,174,511,063
December 31, 2017 P17,752,035,742 P20,391,356,683 P8,280,155,031 P46,423,547,456

The following table provides the fair value hierarchy of the Group’s investment
property as at December 31, 2017 and 2016:

Level 2
Date of Valuation 2017 2016
Land Various P17,752,035,742 P14,831,922,160
Commercial Various 19,158,134,783 17,013,016,976
Corporate/office Various 9,513,376,931 690,198,000
P46,423,547,456 P32,535,137,136

The Group’s investment property is stated at fair value, which has been determined
based on valuations performed by an accredited independent appraiser.

Valuation Techniques and Significant Unobservable Inputs

The fair values of the investment property were arrived at using the Market Data
Approach for land and Cost Approach for buildings.

Market data approach is an approach that considers available market evidences.

The aforesaid approach is based on sales and listings of comparable property
registered within the vicinity. The technique of this approach requires the
establishment of comparable property by reducing reasonable comparative sales
and listings to a common denominator. This is done by adjusting the differences
between the subject property and those actual sales and listings regarded as
comparable. The properties used as basis of comparison are situated within the
immediate vicinity of the subject property. The unobservable inputs to determine the
market value of the property are the following: location characteristics, size and
shape of the lot and time element.

Cost approach is a comparative approach to the value of the building and

improvements or another asset that considers as a substitute for the purchase of a
given property, the possibility of constructing another property that is a replica of, or
equivalent to, the original or one that could furnish equal utility with no undue cost
resulting from delay. It is based on the reproduction cost (new) of the subject
property or asset, less total (accrued) depreciation based on the physical wear and
tear, and obsolescence to which an estimate of entrepreneurial incentive or
developer’s profit/loss is commonly added.

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F-125
 Capitalized borrowing costs amounted to P1,732.32 million and P767.66 million as at
December 31, 2017 and 2016 using 5.20% and 4.26% as capitalization rates,
respectively (Note 15). The Group also capitalized rent expenses which were
incurred for the rental of land properties where ongoing construction of CityMall
branches are situated (Note 22).

Rental income in 2017, 2016 and 2015 and the operating lease commitments of the
Group as a lessor are fully disclosed in Note 22.

The Group recognized unrealized gains from changes in fair values of investment
property amounting to P4,174.51 million, P1,830.05 million and P811.06 million in
2017, 2016 and 2015, respectively.

Revenue and cost recognized related to leasehold rights’ sales which are presented
under “Leasehold rights’ sales” and “Cost of leasehold rights” accounts amounted to
P21.61 million and P4.13 million in 2017, respectively, P292.66 million and P21.91
million in 2016, respectively, and P139.71 million and P8.36 million in 2015,
respectively.

The total direct operating expense recognized in profit or loss arising from the
Group’s investment property that generated rental income amounted to
P116.05 million, P210.41 million and P69.93 million in 2017, 2016 and 2015,
respectively. On the other hand, the Group recognized total direct operating expense
of P70.07 million, P41.29 million and P13.47 million in 2017, 2016 and 2015,
respectively, for investment property that are not yet leased out.

13. Other Noncurrent Assets

This account consists of:

Note 2017 2016

Investment in an associate P417,795,000 P30,240,265
Deposits for future land acquisition 28 233,158,245 158,184,085
Refundable deposits - net of current
portion 22, 27 104,129,973 85,271,486
Advances to contractors and suppliers - 642,110,046
Prepaid rent - net of current portion 22 45,540,608 58,880,566
Input VAT - net of current portion 18,045,445 21,803,302
Others 3,930,607 26,046,072
P822,599,878 P1,022,535,822

In August 2016, the Group acquired 33.33% of the equity interest in Milflores de
Boracay Corporation (“MDB”), a corporation incorporated and operating in the
Philippines. The equity interest in MDB were subsequently disposed in 2017.

In 2017, the Group acquired 40% equity ownership in Contemporain Development

Corporation (CDC), a corporation incorporated and operating in the Philippines. The
principal activity of CDC is real estate development.

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Presented below is CDC’s summary of financial information as of and for the year
ended December 31:

2017
Percentage ownership interest 40%
Current assets P278,202,660
Noncurrent assets 905,067,843
Current liabilities (290,583,904)
Noncurrent liabilities (204,277,723)
Net assets (100%) 688,408,876
Group’s share of net assets 275,363,550
Goodwill 142,431,450
Carrying amount of interest in an associate P417,795,000

Total comprehensive loss of CDC in 2017 amounted to P8.41 million. The Group did
not recognize its share in the income/loss of CDC since the amount is not material.

Advances to contractors and suppliers represent amount paid as downpayments to

contractors and suppliers expected to be recouped for more than one year.

Refundable deposits pertain to non-interest bearing deposits paid to and held by the
Group’s lessors which are refundable at the end of the lease term. The refundable
deposits included as part of “Prepaid expenses and other current assets - net”
account in the consolidated statements of financial position pertain to deposits to
lessors with terms of one year or less. Noncurrent refundable deposits included in
“Other noncurrent assets” account are discounted using the effective annual interest
rates ranging from 4.75% to 5.77% that are specific to the tenor of the refundable
deposits. The difference between the discounted and face values of the refundable
deposits was recognized as part of “Prepaid rent” account which is amortized on a
straight-line basis over the lease term and is recognized in profit or loss as additional
rent expense in “General and administrative expenses - Rent” account. On the other
hand, interest is accreted on these refundable deposits using the effective interest
rate method and is recognized as part of “Interest income” account in the
consolidated statements of comprehensive income.

The details of refundable deposits follow:

Note 2017 2016

Refundable deposits P159,781,577 P131,609,135
Less discount on refundable deposits 37,742,209 37,691,589
Net refundable deposits 122,039,368 93,917,546
Less current portion 9 17,909,395 8,646,060
Noncurrent portion P104,129,973 P85,271,486

Interest income earned for these refundable deposits amounted to nil, nil and P0.65
million in 2017, 2016 and 2015.

Deposits for future land acquisition pertain to the series of payments made by HOA
to acquire real estate properties located in the province of Aklan, Palawan and Cebu,
Philippines. The Transfer Certificates of Title and Deeds of Sale will be conveyed to
HOA upon full payment of the agreed price in the succeeding years.

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14. Accounts Payable and Other Current Liabilities

This account consists of:

Note 2017 2016

Trade payables 27 P631,485,847 P827,369,626
Retention payable - current 17, 27 387,801,809 264,991,202
Payable to RCBC 8, 17, 27 352,105,670 100,000,000
Withholding tax payable 168,211,470 27,492,016
Unearned rent income 17, 22 158,951,857 28,869,805
Security deposits 22, 27 66,643,566 89,928,266
Deposits from unit owners 27 25,653,916 45,498,479
Commission payable 27 13,839,082 13,590,797
Payable to a landowner 27 7,000,000 12,145,000
Accrued expenses: 27
Project costs 1,687,568,890 845,397,065
Interest 15 303,792,666 280,578,447
Others 184,620,619 22,763,109
Other payables 27 69,928,952 81,335,046
P4,057,604,344 P2,639,958,858

Trade payables and accrued project costs are liabilities arising from services
provided by the contractors and subcontractors. These are non-interest bearing and
are normally settled within 30 days.

Retention payable pertains to the amount retained by the Group from its payment to
contractors to cover cost of contractors’ noncompliance with the construction of the
Group’s projects. Amounts retained by the Group varies from different contractors.

As a result of the acquisition of The SkySuites Tower, the Group recognized a total
noninterest-bearing liability to RCBC amounting to P700.00 million, payable over four
years. The total amount of the Group’s obligation to RCBC was discounted using
effective interest rate of 5.60%. Interest is accreted on this non-interest bearing
liability using the effective interest rate method and is recognized as part of “Interest
expense” account in the consolidated statements of comprehensive income. Current
portion of the liability amounted to P352.11 million and P100.00 million as at
December 31, 2017 and 2016, respectively.

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15. Short-term and Long-term Debts

Notes Payable
Details of the account are as follows:

Note 2017 2016

Balance at beginning of the year P18,747,085,477 P15,526,000,000
Availments 3,545,258,750 6,600,000,000
Liabilities assumed through business
combination 28 - 800,300,000
Payments (3,990,773,643) (4,179,214,523)
27 18,301,570,584 18,747,085,477
Less short-term notes and current
portion of long-term notes 3,452,170,869 3,486,004,312
Noncurrent portion 14,849,399,715 15,261,081,165
Less unamortized debt issue costs 121,801,770 233,243,642
P14,727,597,945 P15,027,837,523

Long-term Notes Payable

Parent Company
a. On March 23, 2016, the Parent Company obtained a total of P1.50 billion
unsecured, bilateral long-term loans from a financing institution with scheduled
drawdown dates. The Parent Company has made drawdowns amounting to P1.5
billion during the year. The loan payments are to be made in five consecutive
annual installments to commence at the end of the 36th month after the initial
drawdown date. The Parent Company pays interest on the outstanding principal
amount of the loan on each interest payment date for the interest period then
ending at a fixed rate per annum determined on the interest rate setting date
equal to the higher of: (i) the applicable benchmark rate as determined by the
lender by reference to the PDST-R2 rate plus 1.75%; or (ii) floor rate based on
the prevailing BSP overnight rate plus 1.25%. The proceeds from these
borrowings were used by the Parent Company to partly finance its capital
expenditures for the development of additional CityMall branches and
construction of the Jollibee Tower and Phase 1 of the Meridian Park. Related
debt issue costs from this loan amounted to P15.25 million.

Outstanding balance of this loan amounted to P1.50 billion as at December 31,

2017 and 2016.

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b. On July 30, 2015, the Parent Company obtained a total of P1.50 billion
unsecured, bilateral, long-term loans from a financing institution with scheduled
drawdown dates. The Parent Company has made drawdowns amounting to
P0.50 billion and P1.00 billion in 2016 and 2015, respectively. The principal
repayments are to be made in five annual amortizations equivalent to 5.0% of the
total principal amount of the loan amount drawn, beginning on the 36th month
from initial drawdown date. The Parent Company pays interest on the
outstanding principal amount of the loan on each interest payment date for the
interest period then ending at a fixed rate per annum determined on the interest
rate setting date equal to the higher of: (i) the applicable benchmark rate as
determined by the lender by reference to the PDST-R2 rate plus 1.75 bps; or
(ii) floor rate based on the prevailing Bangko Sentral ng Pilipinas overnight rate
plus 125 bps. The proceeds from these borrowings were used by the Parent
Company to partly finance the development of The Meridian Park, a 4.75 hectare
ongoing, mixed-use development real estate property situated in Pasay City.
Related debt issue costs from this loan amounted to P2.75 million and
P14.66 million in 2016 and 2015, respectively.

Outstanding balance of the loan as at December 31, 2017 and 2016 amounted to
P1.50 billion.

c. On May 18, 2015, the Parent Company obtained a total of P5.00 billion
unsecured, bilateral long-term loans from a financing institution with scheduled
drawdown dates. The Parent Company has made drawdowns amounting to
P2.00 billion and P3.00 billion in 2016 and 2015, respectively. The loan
payments are to be made in five consecutive annual installments to commence
at the end of the 36th month after the initial drawdown date. The Group pays
interest on the outstanding principal amount of the loan on each interest payment
date for the interest period then ending at a fixed rate per annum determined on
the interest rate setting date equal to the higher of: (i) the applicable benchmark
rate as determined by the lender by reference to the PDST-R2 rate plus a spread
of 2.00% or (ii) 6.00%. The proceeds from these borrowings were used by the
Group to partly finance its capital expenditures for the development of additional
CityMall branches. Related debt issue costs from this loan amounted to
P17.53 million and P42.63 million in 2016 and 2015, respectively.

Outstanding balance of the loan as at December 31, 2017 and 2016 amounted to
P5.00 billion.

d. On October 30, 2014, the Parent Company obtained a total of P7.40 billion
unsecured, bilateral long-term loans from various financing institutions. The loan
payments are to be made in seven consecutive annual installments to
commence at the end of the 12th month after the initial borrowing date. The
Parent Company pays interest on the outstanding principal amount of the loan on
each interest payment date for the interest period then ending at a fixed rate per
annum determined on the interest rate setting date equal to the higher of: (i) the
applicable benchmark rate as determined by the lender by reference to the
PDST-R2 rate plus a spread of 2.35% or (ii) 5.25%. The proceeds from these
borrowings were used by the Parent Company to partly finance its capital
expenditures, primarily for the development of The Meridian Park, the Dragon8,
The SkySuites Tower and roll-out of the first 12 CityMalls and for general
corporate purposes. Related debt issue costs from this loan amounted to
P98.77 million in 2014.

Payments made in 2017 and 2016 amounted to P74.00 million. Outstanding

balance of the loan as at December 31, 2017 and 2016 amounted to
P7.18 billion and P7.25 billion, respectively.

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HOA
e. On August 11, 2016, as a result of the acquisition of HOA, several long-term
notes payable of HOA for a total amount of P100.30 million were assumed by the
Parent Company. The principal amounts and related interests are due monthly.
Interest is based on negotiated rates or prevailing market rates. Principal
payments made in 2017 and 2016 amounted to P11.51 million and P2.90 million,
respectively.

Current portion of these loans amounted to P12.68 million and P12.00 million as
at December 31, 2017 and 2016, respectively. Outstanding long-term portion
amounted to P70.40 million and P83.09 million as at December 31, 2017 and
2016, respectively.

Short-term Loans Payable

Parent Company
a. The Group obtained short-term loans from various financial institutions which is
payable within one year. The proceeds from these borrowings were used for
working capital purposes more specifically in the development of the Group’s
on-going projects. The interest rates on these short-term and long-term
borrowings are repriced monthly based on negotiated rates or prevailing market
rates.

Total loan availments in 2017 and 2016 amounted to P2.76 billion and
P2.54 billion, respectively. Payments made in 2017 and 2016 amounted to
P4.00 billion and P4.10 billion, respectively.

Outstanding balance of the loans amounted to P2.94 billion and P2.64 billion as
at December 31, 2017 and 2016, respectively.

HOA
a. On August 11, 2016, as a result of the acquisition of HOA, short-term notes
payable of HOA amounting to P700.00 million were assumed by the Group. This
loan is due on March 23, 2017 and bears interest of 5.5% per annum. The loan
was fully settled in 2017.

PCLI
a. In 2016, PCLI obtained short-term loans from a local bank amounting to
P63.00 million which is payable within one year. The proceeds from these
borrowings were used for additional working capital requirements. The principal
amounts are payable lump sum at maturity and related interests are due
monthly. Interest is fixed at 3% per annum.

The long-term debt agreements contain, among others, covenants relating to

maintenance of certain financial ratios, working capital requirements, restrictions on
loans and guarantees, disposal of a substantial portion of assets, capital
expenditures, significant changes in the ownership, payments of dividends and
redemption of capital stock.

The Group is in compliance with the covenants of the debt agreements as of

December 31, 2017 and 2016.

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The movements in debt issue costs are as follows:

2017 2016
Balance at the beginning of year P233,243,642 P137,500,808
Adjustments (84,842,786) -
Additions - 120,378,724
Amortization (26,599,086) (24,635,890)
Balance at end of year P121,801,770 P233,243,642

Interest expense, exclusive of the capitalized borrowing costs, recognized in profit or

loss amounted to P643.82 million, P330.24 million and P114.35 million in 2017, 2016
and 2015, respectively. Total capitalized borrowing costs charged under “Real estate
inventories” and “Investment property” accounts amounted to P1.63 billion and
P865.26 million as at December 31, 2017 and 2016, respectively (Notes 8 and 12).

Amounts due beyond one year are shown under “Long-term notes payable - net of
debt issue costs” account in the consolidated statements of financial position.

Bonds Payable
Details of the account are as follows:

Note 2017 2016

Balance at beginning of the year P5,300,000,000 P -
Availments 9,700,000,000 5,300,000,000
27 15,000,000,000 5,300,000,000
Less unamortized debt issue costs 204,695,725 82,341,601
P14,795,304,275 5,217,658,399

On November 28, 2016, the SEC approved the Parent Company’s application the
shelf registration of fixed rate bonds with an aggregate principal amount of
P15.00 billion, to be offered in one or several tranches.

The first tranche, issued on December 15, 2016, carried a due date of December 15,
2026 and fixed interest rate of 5.9721% per annum. Interest is payable quarterly in
arrears on March 15, June 15, September 15, and December 15 of each year.
Related costs from the issuance amounted to P82.34 million.

The second tranche, issued on July 21, 2017, carried a due date of July 21, 2024
and fixed interest rate of 6.0952% per annum. Interest is payable quarterly in arrears
on January 21, April 21, July 21 and October 21 of each year. Related costs from the
issuance amounted to P133.19 million.

The movements in bond issue costs are as follows:

2017 2016
Balance at the beginning of year P82,341,601 P -
Additions 133,194,298 82,657,468
Amortization (10,840,174) (315,867)
Balance at end of year P204,695,725 P82,341,601

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 Amortization of bond issue costs as at December 31, 2017 and 2016 amounted to
P10.84 million and P0.31 million, respectively. Interest expense from this bond
amounted to P459.97 million and nil for the years ended December 31, 2017 and
2016, respectively. Due dates of the bonds are as follows:

Parent Company bonds - due 2026 P5,300,000,000

Less unamortized bond issue costs 75,863,276
Parent Company bonds - due 2027 9,700,000,000
Less unamortized bond issue costs 128,832,449
P14,795,304,275

16. Customers’ Deposits

Customers' deposits represent nonrefundable reservation fees paid to the Group by

prospective buyers which are to be applied against the installment contracts
receivable upon recognition of revenue. This account also includes excess
collections from buyers over the related revenue recognized based on the
percentage of completion method.

17. Other Noncurrent Liabilities

This account consists of:

Note 2017 2016

Security deposits 22, 27 P366,088,073 P87,348,140
Retention payable - net of current 14 364,023,876 315,243,078
Payable to RCBC - net of current
portion 14, 27 - 329,914,758
Accrued rent expense 27 86,562,248 102,593,538
Unearned rental income 61,145,152 8,285,875
Others 22 579,209 769,663
P878,398,558 P844,155,052

Accrued rent expense pertains to the excess of rent expense over rental payments
made to lessors in accordance with PAS 17, Leases.

Security deposits account pertains to deposits collected from tenants for the lease of
the Group’s investment property. These deposits are non-interest bearing and
refundable at the end of the lease term. Security deposits are discounted using the
effective interest rates ranging from 5.53% to 5.64% that are specific to the tenor of
the deposits. The difference between the discounted value and face values of
security deposits was recognized as part of “Unearned rent income” account which is
amortized on a straight-line basis over the lease term and is recognized in profit or
loss as additional rent income in the “Rent income” account in the consolidated
statements of comprehensive income. Interest is accreted on these security deposits
using the effective interest rate method and is recognized as part of “Interest
expense” account in the consolidated statements of comprehensive income.

Interest expense for the amortization of security deposits amounted to P4.26 million,
P0.26 million, P0.20 million in 2017, 2016 and 2015, respectively.

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 The details of security deposits follow:

2017 2016
Balance at beginning of year P87,348,140 P91,724,199
Additions 368,260,719 5,170,037
Discount (89,520,786) (9,546,096)
Balance at end of year P366,088,073 P87,348,140

The movement in the unamortized discount on security deposits follows:

2017 2016
Balance at beginning of year P9,546,096 P8,526,960
Additions 84,232,363 1,274,199
Accretion (4,257,673) (255,063)
Balance at end of year P89,520,786 P9,546,096

18. Cost of Real Estate Sales

This account consists of:

Note 2017 2016 2015

Construction costs P317,910,058 P462,979,693 P314,177,121
Land and land
development costs 35,472,480 27,115,672 37,775,458
Other project costs 8,853,584 5,668,220 18,651,496
8 P362,236,122 P495,763,585 P370,604,075

19. Selling Expenses

This account consists of:

Note 2017 2016 2015

Marketing P108,477,804 P116,349,038 P67,164,278
Commission 61,570,653 37,890,739 33,962,001
Salaries, wages and
other benefits 21i 15,816,718 8,143,909 3,598,699
Transportation and
travel 4,135,244 2,985,854 356,725
Rent 21c, 22 3,530,690 4,181,307 4,847,380
Representation 202,545 377,259 889,853
Retirement costs 23 160,804 44,641 113,972
Miscellaneous 3,466,801 2,691,053 2,097,989
P197,361,259 P172,663,800 P113,030,897

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20. General and Administrative Expenses

This account consists of:

Note 2017 2016 2015

Taxes and licenses P229,335,803 P76,921,437 P148,298,133
Salaries, wages and
other benefits 21i 185,745,272 132,566,459 75,561,221
Outsourced services 173,800,322 89,467,756 37,910,146
Electricity and water 117,834,033 91,588,883 35,955,709
Rent 21c, 22 85,166,269 80,508,845 15,628,046
Depreciation and
amortization 10, 11 83,375,504 32,952,498 8,965,701
Professional fees 42,939,639 20,257,001 15,479,442
Other expenses - penalties 26,824,986 - -
Repairs and maintenance 15,626,876 16,777,654 1,212,862
Transportation and travel 13,894,157 13,107,704 14,047,180
Representation 12,572,047 13,029,982 6,839,413
Printing and office supplies 11,600,147 7,121,349 9,753,005
Property management
supplies 10,530,811 9,213,677 3,138,293
Donations 10,495,456 - 5,554,424
Insurance 10,304,854 10,657,661 5,216,261
Communications 10,203,467 8,004,007 4,335,575
Retirement costs 23 7,790,584 1,092,925 1,152,388
Input VAT written off 9 2,579,609 83,475,465 18,104,261
Management fees 21a 2,354,832 2,678,571 3,032,836
Impairment loss on
receivables 7 - - 1,098,574
Miscellaneous 40,920,274 36,030,527 17,318,749
P1,093,894,942 P725,452,401 P428,602,219

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21. Related Party Transactions

The Group, in the normal course of business, has transactions with its related parties
as follows:
Outstanding Balances
Due from Due to
Amount of Related Related
Category Year Ref/Note Transaction Parties Parties Terms and Conditions
Parent Company’s
Key Management -
Personnel
Management fees 2017 a P2,678,571 P - P - Demandable; non-interest bearing;
unsecured; payable in cash
2016 a 2,678,571 - - Demandable; non-interest bearing;
unsecured; payable in cash
2015 a 2,678,571 - - Demandable; non-interest bearing;
unsecured; payable in cash
Sales 2015 b 1,116,121 - - 20% down payment and 80% collectible
in cash; no impairment
Stockholders
Rent expense 2017 c 3,397,207 - - Demandable; non-interest bearing;
unsecured; payable in cash
2016 c 3,672,896 - - Demandable; non-interest bearing;
unsecured; payable in cash
2015 c 3,395,181 - - Demandable; non-interest bearing;
unsecured; payable in cash
Acquisition of HOA 2017 d - - 429,944,449 Payable by way of DD shares
2016 d 429,944,449 - 429,944,449 Payable by way of DD shares
Other Related Parties
Land acquired 2017 e - - 383,281,305 Demandable; non-interest bearing;
unsecured; payable in cash
2016 e - - 383,281,305 Demandable; non-interest bearing;
unsecured; payable in cash
2017 e - - 122,400,000 Payable by way of condo units
2016 e 122,400,000 - 122,400,000 Payable by way of condo units
2015 e 266,192,013 - 544,871,305 Demandable; non-interest bearing;
unsecured; payable in cash
Cash advances 2017 f 1,713,562 103,522,051 9,094,657 Demandable; non-interest bearing;
received unsecured; collectible in cash;
no impairment
2016 f - 101,808,489 10,170,186 Demandable; non-interest bearing;
unsecured; collectible in cash;
no impairment
2015 f 58,417,380 58,567,380 8,789,068 Demandable; non-interest bearing;
unsecured; collectible in cash;
no impairment
Acquisition of HOA 2016 g 356,643,000 - 135,243,000 Demandable; non-interest bearing;
unsecured; collectible in cash;
no impairment
Rent income 2017 h 189,941,376 - - Demandable; non-interest bearing;
unsecured; collectible in cash;
no impairment
2016 h 89,487,076 - - Demandable; non-interest bearing;
unsecured; collectible in cash;
no impairment
2015 h 47,649,689 - - Demandable; non-interest bearing;
unsecured; collectible in cash;
no impairment
2017 P103,522,051 P944,720,411

2016 P101,808,489 P1,081,038,940

a. Executive Management Services Agreement

The Group entered into an agreement with a shareholder for executive
corporate, strategic, administrative and financial oversight services relative to the
real estate business of the Group. The term of this agreement is one year
effective January 1, 2012. This is renewable under the same terms and
conditions upon mutual agreement of the parties. On December 8, 2016, the
Group’s BOD authorized the extension of the aforesaid agreement from
January 1 to December 31, 2017 under the same terms and conditions set out in
2016, payable on a quarterly basis. The fee, which includes staffing costs for
services rendered by the shareholders, amounted to P2.68 million as at
December 31, 2017, 2016 and 2015, respectively (Note 20).

b. Sale of Real Estate Inventories

The Group sold condominium units to its key management personnel amounting
to P1.16 million in 2015.

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c. Lease of Showrooms and Sales Office
The Group leases showrooms and sales office from III and Jollibee Foods
Corporation (JFC), respectively. The terms of the lease are three to five years,
renewable for the same period under the same terms and conditions. The rent
shall escalate by 7% to 10% each year (Notes 19 and 20). Sales office rental
with JFC ended contract as of September 30, 2017.

d. Acquisition of HOA
The Parent Company, entered into a Share Purchase Agreement (SPA) with III
with the consideration amounting to the fair value of DD shares to be issued to
III, as a consideration transferred in exchange for the latter’s 40% share in HOA.
These shares will be issued within 180 days from the closing date (Note 28). As
at December 31, 2017, the share swap application is pending approval with the
SEC.

e. Land Acquisitions
The Group has outstanding liabilities to minority shareholders of PDDG
amounting to P383.28 million for the acquisition of certain parcels of land which
will be used in the on-going CityMalls. The stated unsecured, non-interest
bearing liabilities are to be settled by the Group in 2018.

In 2016, HOA entered into a Memorandum of Agreement and Deed of Absolute

Conveyance with a minority shareholder wherein HOA, in consideration of the
land owned by the minority shareholder, settled to pay the latter in kind by way of
condominium hotel (condotel) units in the Hotel101-Fort project (32-storey)
totaling 60 condotel units plus a portion of the deck referred to as the "Deck Unit"
(Note 8).

f. Cash Advances
The amount pertains to unsecured, non-interest bearing advances granted to
and received from related parties for working capital requirements. These
advances are generally settled within one year from the date of grant.

g. Acquisition of HOA
Payable to affiliates pertains to the amount of to be paid by the Parent Company
as part of consideration for the purchase of shares of Chan C. Bros. Holdings,
Inc. (CCBHI) and Staniel Realty and Development Corp. (SRDC) in HOA. The
amount of consideration was settled in 2017.

h. Lease of Mall Spaces

The Group entered into various lease agreements with related parties covering
its investment property portfolio. The amount pertains to the rent income earned
by the Group from leasing out some of its commercial spaces in Dragon8 and
CityMalls to JFC and the SM Group. These leases generally provide for either
fixed monthly rent subject to escalation rates or a certain percentage of gross
sales. The terms of the leases are for periods ranging from 5 to 15 years. The
fixed monthly rent shall escalate by an average of 5% to 10% each year. The
corresponding receivables from related party tenants are recorded in the “Rent
receivables” account.

i. Key Management Personnel Compensation

The short-term benefits of other key management personnel amounted to
P20.10 million, P20.30 million and P18.61 million in 2017, 2016 and 2015,
respectively.

Except when indicated above, all outstanding due to/from related parties are to be
settled in cash.

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 Related Party Transactions and Balances Eliminated During Consolidation
The terms, conditions, balances and the volume of related party transactions which
were eliminated during consolidation are as follows:

a. Advances from the Parent Company to the subsidiaries:

2017 2016
Advances P31,743,910,670 P18,152,034,305

Advances are non-interest bearing, unsecured and payable in cash. Interest

income from these advances amounted to P914,420,977.

b. Sales of condominium units of the Parent Company to DDSC:

2017 2016
Sales P1,604,833,499 P -

c. Management fees charged by the Parent Company to the subsidiaries:

2017 2016
Management fees P195,000,000 P195,000,000

d. Cost allocation charges by the Parent Company and CM to the subsidiaries:

2017 2016
Cost allocation charges P488,907,897 P -

e. Other intercompany charges within the Group amounted to P95,453,371.

22. Leases

Group as Lessee
The Group leases office and parking spaces and showrooms. The terms of the lease
are for periods ranging from one to five years, renewable for the same period under
the same terms and conditions. The rent shall escalate by an average of 5% to 10%
each year.

The Group also entered into various noncancellable operating lease agreements
covering certain parcels of land wherein some of the CityMalls will be situated or are
being constructed. The terms of the leases are for periods ranging from 24 to 40
years. The rent shall escalate by an average of 5% to 10% each year.

The Group is required to pay advance rental payments and refundable deposits on
its leases. These are shown under “Prepaid expenses and other current assets - net”
and “Other noncurrent assets” accounts, respectively, in the consolidated statements
of financial position (Notes 9 and 13).

Total rent expense included as part of “Selling expenses” and “General and
administrative expenses” accounts amounted to P88.70 million, P84.69 million and
P20.48 million in 2017, 2016 and 2015, respectively (Notes 19 and 20). Rent
expense capitalized as part of “Investment Property - CIP” account amounted to
P85.64 million, P3.50 million and P83.84 million as at December 31, 2017, 2016 and
2015, respectively (Note 12).

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 The scheduled maturities of noncancellable minimum future rental payments are as
follows:

2017 2016
Less than one year P84,656,071 P99,784,794
Between one and five years 407,821,108 346,329,912
More than five years 2,407,225,545 2,905,900,809
P2,899,702,724 P3,352,015,515

Group as Lessor
The Group entered into various lease agreements with third parties and related
parties covering its investment property portfolio. These leases generally provide for
fixed monthly rent subject to escalation rates except for a few tenants, which pay
either a fixed monthly rent or a percentage of gross revenues, whichever is higher.
The terms of the leases are for periods ranging from 2 to 15 years. The fixed monthly
rent shall escalate by an average of 5% starting on the third year and every year
thereafter.

Upon inception of the lease agreement, tenants are required to pay advance rentals
and security deposits shown under “Accounts payable and other current liabilities”
and “Other noncurrent liabilities” accounts in the consolidated statements of financial
position (Notes 14 and 17).

Rent income amounted to P909.15 million, P268.67 million, and P116.55 million in
2017, 2016 and 2015, respectively. Total contingent rent income amounted to
P218.77 million, P38.25 million and P11.68 million in 2017, 2016 and 2015,
respectively (Note 14).

The scheduled maturities of noncancellable minimum future rental collections are as

follows:

2017 2016
Less than one year P1,193,120,622 P271,087,555
Between one and five years 4,773,598,798 863,527,136
More than five years 3,651,592,345 931,150,836
P9,618,311,765 P2,065,765,527

23. Retirement Benefits

The Parent Company does not have an established retirement plan and only
conforms to the minimum regulatory benefit under Republic Act. No. 7641, The
Retirement Pay Law, which is of the defined benefit type and provides a retirement
benefit equal to 22.5 days’ pay for every year of credited service for employees who
attain the normal retirement age of sixty (60) with at least five (5) years of service.

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The present value of the defined benefit obligation (DBO) is shown below:

2017 2016
Beginning of year P6,121,432 P4,983,866
Current service cost 7,635,883 893,855
Interest cost 315,505 243,711
Actuarial gain from:
Changes in financial assumptions (244,376) -
Changes in demographic assumptions (4,375,476) -
Experience adjustments (1,778,219) -
End of year P7,674,749 P6,121,432

Retirement costs recognized in profit or loss amounted to P7.95 million and

P1.14 million in 2017 and 2016, respectively, which were charged as follows:

Note 2017 2016

Selling expenses 19 P160,804 P44,641
General and administrative expenses 20 7,790,584 1,092,925
P7,951,388 P1,137,566

Defined benefit cost, net of tax, recognized under “Other comprehensive income”
amounted to P4.48 million and nil in 2017 and 2016, respectively.

The following were the principal actuarial assumptions at the reporting date:

2017 2016
Discount rate 5.70% 5.38%
Future salary increases 5.00% 5.00%

Assumptions regarding future mortality are based on the 2001 CSO Table -
Generational. The average expected remaining working life of employees retiring at
the age of 60 is 31.5 and 30.7 for both males and females in 2017 and 2016,
respectively.

The weighted-average duration of DBO is 16.0 years and 19.8 years in 2017 and
2016, respectively.

The DBO is exposed to actuarial, longevity and interest rate risks.

The Parent Company has no plans to make contributions in 2018.

Sensitivity Analysis
The calculation of the DBO is sensitive to the assumptions set out above. The
following table summarizes how the impact on the DBO at the end of the reporting
period would have increased (decreased) as a result of a change in the respective
assumptions by 1%:

2017
DBO
Increase Decrease
Discount rate (1% movement) P823,304 (P665,427)
Future salary growth (1% movement) 769,003 (636,885)

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 2016
DBO
Increase Decrease
Discount rate (1% movement) P1,298,017 (P1,024,860)
Future salary growth (1% movement) 1,221,992 (990,504)

While the Parent Company believes that the assumptions are reasonable and
appropriate, significant differences between actual experience and assumptions may
materially affect the recognized income and expenses and related assets or
obligations.

Maturity Profile of the DBO

2017
Carrying Contractual Within Within More than
Amount Cash Flows 1 Year 1-5 Years 5 Years
DBO P7,674,749 P11,129,517 P - P1,445,934 P9,683,583

2016
Carrying Contractual Within Within More than
Amount Cash Flows 1 Year 1-5 Years 5 Years
DBO P6,121,432 P15,619,762 P - P4,951,220 P10,668,542

Asset-liability Matching Strategies to Manage Risks

The Group does not have a formal retirement plan and therefore has no plan assets
to match against the liabilities under the retirement obligation.

Funding Arrangements
The Group does not have a formal retirement plan, benefit claims under the
retirement obligations are paid directly by the Group when they become due.

24. Income Taxes

Income tax expense (benefit) consists of:

2017 2016 2015

Current* P58,630,651 (P34,001,309) P93,875,651
Deferred 1,449,929,108 468,370,715 177,321,390
P1,508,559,759 P434,369,406 P271,197,041
*Current tax expense in 2016 includes adjustments to prior year’s current income tax amounting to
P59,306,436.

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The reconciliation of the income tax expense computed at the statutory income tax
rate to the actual income tax expense as shown in profit or loss is as follows:

2017 2016 2015

Income before income tax P4,034,919,594 P1,904,677,927 P893,979,778
Income tax at the statutory
income tax rate P1,210,475,878 P571,403,378 P268,193,933
Income tax effects of:
Nondeductible expenses 304,336,477 35,641,071 4,620,824
Expired NOLCO 13,532,384 - -
Interest income subjected to
final tax (10,360,225) (9,841,220) (1,588,044)
Applied NOLCO (3,694,204) - -
Nontaxable income (3,559,987) (107,392,756) (530,413)
Deferred tax adjustment (2,051,831) (55,441,067) -
Stock issuance cost (118,733) - -
Unrecognized DTA - - 500,741
P1,508,559,759 P434,369,406 P271,197,041

The components of the Group’s deferred tax assets and liabilities, relating to
temporary differences are shown below.

2016
(As restated -
2017 Note 28)
NOLCO P1,236,174,040 P657,301,081
Accrued rent expense 85,166,727 30,034,919
MCIT 83,171,195 33,819,649
Unearned rent income 61,434,186 8,777,664
Unearned interest income on installment
contracts receivable 8,087,197 77,652,764
Unrealized loss on fair value measurements 2,086,778 203,855
Retirement benefits liability 1,475,039 1,836,430
Impairment loss on creditable withholding taxes 1,062,192 -
Unearned hotel revenues 991,820 89,297
Impairment loss on contracts receivables 329,572 329,572
DTA 1,479,978,746 810,045,231
Unrealized gains on fair value measurements 2,261,154,717 905,137,199
Excess of financial realized gross profit over
taxable realized gross profit 665,545,849 296,224,679
Borrowing costs 538,442,493 339,941,728
Hotel101 brand 199,290,000 199,290,000
Depreciation expense on depreciable
investment property 171,109,721 52,273,517
Accrued rent income 65,428,583 6,151,702
Unamortized debt issue costs 61,993,367 69,973,093
Unamortized bond issue costs 61,408,718 24,702,480
Franchise rights 38,880,000 45,360,000
Property and equipment 1,860,825 2,490,000
Accrued interest and management income 609,087 2,396,918
DTL 4,065,723,360 1,943,941,316
Net DTL P2,585,744,614 P1,133,896,085

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 The details of the Group’s NOLCO which are available for offsetting against future
taxable income are as follows:

Year Amount Remaining Year of

Incurred Incurred Applied Expired Balance Expiration
2017 P1,906,542,951 P - P - P1,906,542,951 2020
2016 1,337,185,426 - - 1,337,185,426 2019
2015 890,007,602 (13,155,846) - 876,851,756 2018
2014 124,398,256 (78,137,106) (46,261,150) - 2017
P4,258,134,235 (P91,292,952) (P46,261,150) P4,120,580,133

The details of MCIT, which can be claimed as tax credits against future regular
corporate income tax liabilities, are as follow:

Year Amount Remaining Year of

Incurred Incurred Applied Expired Balance Expiration
2017 P36,302,020 P - P - P36,302,020 2020
2016 26,877,660 (1,013,695) - 25,863,965 2019
2015 21,005,210 - - 21,005,210 2018
P84,184,890 (P1,013,695) P - P83,171,195

25. Earnings Per Share

EPS is computed as follows:

2017 2016 2015

Net income attributable to
equity holders of the Parent
Company P1,641,535,290 P1,079,113,320 P559,405,589
Dividends on preferred shares (647,780,000) (494,505,000) -
Net income attributable to
common shareholders of the
Parent Company 993,755,290 584,608,320 559,405,589
Weighted average number of
common shares for basic EPS 2,229,730,000 2,229,730,000 2,229,730,000
Dilutive shares arising from
stock options 2,462,500 - -
Adjusted weighted average
number of common shares
for diluted EPS 2,232,192,500 2,229,730,000 2,229,730,000
Basic EPS 0.4457 0.2622 0.2509
Diluted EPS 0.4452 0.2622 0.2509

Basic EPS is computed by dividing net income for the year attributable to common
equity holders of the Parent Company by the weighted average number of common
shares issued and outstanding during the year adjusted for any subsequent
preferred stock dividends declared.

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 Diluted EPS is computed by dividing net income for the year attributable to common
equity holders of the Company by the weighted average number of common shares
issued and outstanding during the year plus the weighted average number of
common shares that would be issued on conversion of all the dilutive potential
common shares into common shares. The calculation of diluted earnings per share
does not assume conversion, exercise, or other issue of potential common shares
that would have an antidilutive effect on earnings per share.

In 2017, potential dilutive debt or equity instruments pertain to the stock options that
have vested in 2017. In 2016, the Company has no potential dilutive debt or equity
instruments.

The convertible preferred shares has no impact in the calculation of diluted EPS
since the convertibility of the preferred shares will start on the 3rd year from the issue
date which was in 2016.

26. Equity

The authorized capital stock of the Parent Company consist of:

2017 2016
Authorized Capital Stock
Common - P0.10 par value P500,000,000 P500,000,000
Preferred - P100 par value 20,000,000,000 20,000,000,000
Number of Shares Authorized for Issue
Common 5,000,000,000 5,000,000,000
Preferred 200,000,000 200,000,000

The movements in the number of subscribed shares are as follows:

2017 2016
Common
Balance at beginning and end of the year 2,229,730,000 2,229,730,000
Preferred
Balance at beginning of the year 100,000,000 -
Subscription during the year - 100,000,000
Balance at end of the year 100,000,000 100,000,000

Common Shares
On January 30, 2014, the Parent Company filed with the SEC a Notice of Filing of
Registration Statement for the registration of up to 579,730,000 common shares with
par value of P0.10, to be offered by way of a primary offer.

On March 24, 2014, in accordance with the certificate of permit to offer securities for
sale issued by the SEC, 579,730,000 common shares of the Parent Company with
par value of P0.10 were registered and offered for sale at an offer price of P2.00 per
share.

On November 11, 2015, the Parent Company’s BOD approved the creation of
45,504,693 options underlying the Parent Company’s common shares to be issued
pursuant to the Parent Company’s Plan. The aforesaid corporate act was ratified by
the Parent Company’s stockholders on January 5, 2016.

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The Plan covers the senior management of the Parent Company as identified by the
Chairman and Chief Executive Officer. The Plan allows all covered senior
management to acquire at market price at grant date such number of shares of stock
not exceeding 2% of the issued and outstanding capital stock of the Parent Company
or 45,504,693 shares, after a vesting period of three (3) years. The share options will
be exercisable starting from their respective vesting dates up to seven (7) years from
grant date.

The approval of the Stock Option Plan was ratified by the Shareholders on
January 5, 2016. The SEC approved the exemption from registration requirements
for the issuance of 9,850,000 common shares on September 25, 2017. The Plan was
submitted to PSE for approval. As of December 31, 2017, the Plan is still pending
approval by the PSE.

On December 8, 2016, the Parent Company’s BOD resolved to expand the coverage
of the Plan to include rank and file regular employees of the Parent Company. The
Group did not recognize the fair value of the option since it is not material.

The Parent Company’s public ownership percentage and total number of

shareholders are 25.62% and 125, respectively, as at December 31, 2017 and 2016.

Preferred Shares
On November 11, 2015, the Parent Company’s BOD approved the increase in the
authorized capital stock from P500.00 million to P20.50 billion with P100 par value.
The aforesaid corporate act was ratified by the Parent Company’s stockholders on
January 5, 2016. On the same date, the Parent Company’s BOD and stockholders
approved the creation and issuance of 200,000,000 non-voting Preferred Shares
with P100 par value.

On March 28, 2016, the SEC rendered effective the Registration Statement and
other papers and documents attached thereto filed by the Parent Company, and
issued the Order of Registration of Subscriptions to Preferred Shares amounting to
P10 billion cumulative, non-voting, non-participating, redeemable at the option of the
Parent Company, convertible at the ratio of 1 preferred share to 1 common share,
perpetual Preferred Shares at an offer price of P100 per share. The Certificate of
Permit to Offer Securities for Sale was issued by the SEC on the same date.

On April 14, 2016, the Parent Company has secured approval from the SEC to issue
Preferred Shares following the successful offer and distribution of subscriptions to
100,000,000 preferred shares amounting to P10,000,000,000.

The total number of preferred shareholders as at December 31, 2017 and 2016 are
92 and 87, respectively.

Retained Earnings
On June 25, 2015, the BOD declared cash dividends of P0.05 per share equivalent
to P111.49 million to common stockholders of record as at July 13, 2015 and were
paid on July 27, 2015.

On June 23, 2016, the BOD declared regular cash dividends of P1.619 per share
and special cash dividends of P0.0867 per share, amounting to P170.57 million to
preferred stockholders of record as at July 8, 2016 and were paid on July 16, 2016.

On September 20, 2016, the BOD declared cash dividends of P1.6199 per share
equivalent to P161.95 million to preferred stockholders of record as at
October 4, 2016 and were paid on October 14, 2016.

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 On December 8, 2016, the BOD declared cash dividends of P1.61945 per share
equivalent to P161.95 million to preferred stockholders of record as at
January 4, 2017 and were paid on January 14, 2017.

On March 21, 2017, the BOD declared cash dividends of P1.61945 per share
equivalent to P161.95 million to preferred stockholders of record as at April 4, 2017
and were paid on April 17, 2017.

On June 21, 2017, the BOD declared cash dividends of P1.61945 per share
equivalent to P161.95 million to preferred stockholders of record as at July 6, 2017
and were paid on July 14, 2017.

On September 27, 2017, the BOD declared cash dividends of P1.61945 per share
equivalent to P161.95 million to preferred stockholders of record as at
October 11, 2017 and were paid on October 16, 2017.

On December 6, 2017, the BOD declared cash dividends of P1.61945 per share
equivalent to P161.95 million to preferred stockholders of record as at
January 2, 2018 and were paid on January 15, 2018.

27. Financial Risk and Capital Management Objectives and Policies

Objectives and Policies

The Group has significant exposure to the following financial risks primarily from its
use of financial instruments:

ƒ Credit Risk
ƒ Liquidity Risk
ƒ Interest Rate Risk

This note presents information about the Group’s exposure to each of the above
risks, the Group’s objectives, policies and processes for measuring and managing
risks, and the Group’s management of capital.

The main purpose of the Group’s dealings in financial instruments is to fund its
respective operations and capital expenditures.

The BOD has overall responsibility for the establishment and oversight of the
Group’s risk management framework. The BOD has established the Executive
Committee, which is responsible for developing and monitoring the Group’s risk
management policies. The committee identifies all issues affecting the operations of
the Group and reports regularly to the BOD on its activities.

The Group’s risk management policies are established to identify and analyze the
risks faced by the Group, to set appropriate risk limits and controls, and to monitor
risks and adherence to limits. Risk management policies and systems are reviewed
regularly to reflect changes in market conditions and the Group’s activities. All risks
faced by the Group are incorporated in the annual operating budget. Mitigating
strategies and procedures are also devised to address the risks that inevitably occur
so as not to affect the Group’s operations and forecasted results. The Group,
through its training and management standards and procedures, aims to develop a
disciplined and constructive control environment in which all employees understand
their roles and obligations.

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The Group’s principal financial assets include cash and cash equivalents,
receivables, due from related parties and refundable deposits. These financial assets
are used to fund the Group’s operations and capital expenditures.

Credit Risk
Credit risk represents the risk of loss the Group would incur if credit customers and
counterparties fail to perform their contractual obligations. The risk arises principally
from the Group’s cash and cash equivalents, receivables, due from related parties
and refundable deposits. The objective is to reduce the risk of loss through default by
counterparties.

In respect of installments contracts receivable, credit risk is managed primarily

through credit reviews and an analysis of receivables on a continuous basis.
Customer payments are facilitated by post-dated checks. Exposure to bad debts is
not significant as titles to real estate properties are not transferred to the buyers until
full payment has been made. There are no large concentrations of credit risk given
the Group's diverse customer base.

Credit risk arising from rent receivable is primarily managed through a tenant
selection process. Prospective tenants are evaluated on the basis of payment track
record and other credit information. In accordance with the provisions of the lease
contracts, the lessees are required to deposit with the Group security deposits and
advance rentals which helps reduce the Group’s credit risk exposure in case of
defaults by the tenants. For existing tenants, the Group has put in place a monitoring
and follow-up system. Receivables are aged and analyzed on a continuous basis to
minimize credit risk associated with these receivables.

The carrying amount of financial assets represents the maximum credit exposure.
The maximum exposure to credit risk at the reporting period follows:

Note 2017 2016

Cash and cash equivalents* 6 P2,092,243,472 P5,385,185,368
Receivables** 7 3,650,122,504 2,355,570,800
Due from related parties 21 103,522,051 101,808,489
Refundable deposits*** 9, 13 122,039,368 93,917,546
P5,967,927,395 P7,936,482,203
*Excluding “Cash on hand” account.
** This includes both current and noncurrent portions of the account.
*** This is presented as part of “Prepaid expenses and other current assets - net” and “Other noncurrent
assets” accounts.

The following is the aging analysis per class of financial assets as at December 31:
2017 Neither Past Due but not Impaired
Past Due 1 to 30 31 to 60 More than
Note nor Impaired Days Days 60 Days Impaired Total
Cash and cash equivalents 6 P2,092,243,472 P - P - P - P - P2,092,243,472
Receivables* 7 2,650,872,115 89,543,135 118,300,155 790,308,525 1,098,574 3,650,122,504
Due from related parties 21 103,522,051 - - - - 103,522,051
Refundable deposits** 9, 13 122,039,368 - - - - 122,039,368
P4,968,677,006 P89,543,135 P118,300,155 P790,308,525 P1,098,574 P5,967,927,395

* Including current and noncurrent portions.

** This is presented as part of “Prepaid expenses and other current assets - net” and “Other noncurrent assets” accounts.

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 2016 Neither Past Due but not Impaired
Past Due 1 to 30 31 to 60 More than
Note nor Impaired Days Days 60 Days Impaired Total
Cash and cash equivalents 6 P5,385,185,368 P - P - P - P - P5,385,185,368
Receivables* 7 2,157,912,172 5,382,847 24,793,057 166,384,150 1,098,574 2,355,570,800
Due from related parties 21 101,808,489 - - - - 101,808,489
Refundable deposits** 9, 13 93,917,546 - - - - 93,917,546
P7,738,823,575 P5,382,847 P24,793,057 P166,384,150 P1,098,574 P7,936,482,203

* Including current and noncurrent portions.

** This is presented as part of “Prepaid expenses and other current assets - net” and “Other noncurrent assets” accounts.

The following is the credit quality of the Group’s financial assets:

2017
Medium
Note High Grade Grade Low Grade Total
Cash and cash equivalents* 6 P2,092,243,472 P - P - P2,092,243,472
Receivables** 7 2,740,415,250 118,300,155 791,407,099 3,650,122,504
Due from related parties 21 103,522,051 - - 103,522,051
Refundable deposits*** 9, 13 122,039,368 - - 122,039,368
P5,058,220,141 P118,300,155 P791,407,099 P5,967,927,395

*Excluding “Cash on hand” account.

**This includes both current and noncurrent portions of the account.
***This is presented as part of “Prepaid expenses and other current assets - net” and “Other noncurrent assets”
accounts.

2016
Medium
Note High Grade Grade Low Grade Total
Cash and cash equivalents* 6 P5,385,185,368 P - P - P5,385,185,368
Receivables** 7 2,163,295,019 24,793,057 167,482,724 2,355,570,800
Due from related parties 21 101,808,489 - - 101,808,489
Refundable deposits*** 9, 13 93,917,546 - - 93,917,546
P7,744,206,422 P24,793,057 P167,482,724 P7,936,482,203

*Excluding “Cash on hand” account.

**This includes both current and noncurrent portions of the account.
***This is presented as part of “Prepaid expenses and other current assets - net” and “Other noncurrent assets”
accounts.

The Group assessed the credit quality of unrestricted cash as high grade since this is
deposited with reputable banks with low probability of insolvency.

Receivables assessed as high grade pertains to receivable from buyer that had no
default in payment; medium grade pertains to receivable from buyer who has history
of being 31 to 60 days past due; and low grade pertains to receivable from buyer
who has history of being over 60 days past due. Receivable balances are being
monitored on a regular basis to ensure timely execution of necessary intervention
efforts. The Group performs credit investigation and evaluation of each buyer to
establish paying capacity and creditworthiness. The Group will assess the
collectibility of its receivables and provide a corresponding allowance provision once
the account is considered impaired.

The credit risk for due from related parties and refundable deposits is considered
negligible since these accounts are still collectible based on the assessment of
debtor’s ability to pay and collection agreement.

Liquidity Risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations
as they fall due. The Group manages liquidity risks by forecasting projected cash
flows and maintaining balance between continuity of funding and flexibility in
operations. Treasury controls and procedures are in place to ensure that sufficient
cash is maintained to cover daily operational working capital requirements.
Management closely monitors the Group’s future and contingent obligations and set
up required cash reserves as necessary in accordance with internal requirements.

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The following are the contractual maturities of financial liabilities, including estimated
interest payments and excluding the impact of netting agreements:
As at December 31, 2017
Carrying Contractual 1 Year 1 Year - More than
Note Amount Cash Flow or Less 5 Years 5 Years
Financial Liabilities
Accounts payable and
other current liabilities* 14 P3,730,441,017 P3,730,441,017 P3,730,441,017 P - P -
Due to related parties 21 944,720,411 944,720,411 944,720,411 - -
Dividends payable 152,131,628 152,131,628 152,131,628 - -
Notes payable** 15 18,179,768,814 22,386,849,472 4,340,384,493 15,573,201,545 2,473,263,434
Bonds payable 15 14,795,304,275 23,640,964,080 910,277,244 3,643,630,518 19,087,056,318
Other noncurrent
liabilities 17 878,398,558 878,398,558 - 224,174,529 654,224,029
* Excluding statutory obligations and unearned rent income account.
** This includes both current and noncurrent portions of the account.

As at December 31, 2016

Carrying Contractual 1 Year 1 Year - More than
Note Amount Cash Flow or Less 5 Years 5 Years
Financial Liabilities
Accounts payable and
other current liabilities* 14 P2,583,597,037 P2,583,597,037 P2,583,597,037 P - P -
Due to related parties 21 528,694,491 528,694,491 528,694,491 - -
Dividends payable 161,945,000 161,945,000 161,945,000 - -
Notes payable** 15 18,513,841,835 19,648,589,515 3,525,683,666 9,161,455,485 6,961,450,364
Bonds payable 15 5,217,658,399 8,475,763,710 317,400,526 1,270,481,329 6,887,881,855
Other noncurrent
liabilities 17 844,155,052 909,060,873 346,439,797 460,027,538 102,593,538
* Excluding statutory obligations and unearned rent income account.
** This includes both current and noncurrent portions of the account.

Interest Rate Risk

The Group interest risk management policy is to minimize interest rate cash flow risk
exposures to changes in interest rates. The Group has short-term and long-term
bank borrowings with fixed interest rates. Therefore, the Group is not subject to the
effect of changes in interest rates.

Fair Values
The following methods and assumptions are used to estimate the fair value of each
class of financial instruments:

Cash and Cash Equivalents/Due from Related Parties/Accounts Payable and Other
Current Liabilities/Due to Related Parties
The carrying amounts of cash and cash equivalents, due from related parties,
refundable deposits, accounts payable and other current liabilities, short-term notes
payable and due to related parties approximate their fair values due to the relatively
short-term nature of these financial instruments.

Receivables
The fair values of installment contract receivable and receivables from leasehold
rights’ buyers from are based on the discounted value of future cash flows using the
applicable rates for similar types of instruments. The fair value of other receivables is
approximately equal to their carrying amounts due to the short-term nature of the
financial assets.

Refundable Deposits/Payable to RCBC/Security Deposits

Refundable deposits, payable to RCBC and security deposits are reported at their
present values, which approximate the cash amounts that would fully satisfy the
obligations as at reporting date.

Short-term Notes Payable/Long-term Notes Payable/Bonds Payable

The fair value of the interest-bearing fixed-rate short-term and long-term debts is
based on the discounted value of expected future cash flows using the applicable
market rates for similar types of loans as of reporting date.

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 Capital Management
The Group’s objectives when managing capital are to increase the value of
shareholders’ investment and maintain high growth by applying free cash flows to
selective investments. The Group sets strategies with the objective of establishing a
versatile and resourceful financial management and capital structure.

The BOD monitors the return on capital, which the Group defines as net operating
income divided by total shareholders’ equity. The BOD also monitors the level of
dividends to shareholders.

The BOD seeks to maintain a balance between the higher returns that might be
possible with higher levels of borrowings and the advantages and security afforded
by a sound capital position. The Group defines capital as equity, which includes
capital stock, additional paid-in capital and retained earnings. There were no
changes in the Group’s approach to capital management as at December 31, 2016
and 2015. The Group is not subject to externally-imposed capital requirements.

28. Business Combinations

2016 Acquisition: HOA

On August 11, 2016, as amended on October 10, 2016, the Parent Company
entered into a Share Purchase Agreement (SPA) with III, CCBHI and SRDC
(collectively known as the “shareholders”) for the sale and purchase of shareholders’
shares of HOA. Details of the shares acquired by the Parent Company are as
follows:

Number of Percentage
Shares Interest Par Value
III 40,000 40% P40,000,000
CCBHI 15,000 15% 15,000,000
SRDC 15,000 15% 15,000,000
70,000 70% P70,000,000

Total consideration price are as follows:

Fair Value of
Cash Shares to be
Consideration Issued
III P - P429,944,449
CCBHI 178,321,500 -
SRDC 178,321,500 -
P356,643,000 P429,944,449

The market value of the common shares at the date of the amended agreement,
October 12, 2016, is P55.30.

Based on the SPA, the purchase price, payable to III in common shares of DD is
computed at a 5% premium over the weighted average of the closing prices of DD’s
shares of stock for a period of 30 trading days ending the day prior to the closing
date (“weighted average price per share”).

Thus the weighted average price per share to be used in computing for the number
of shares to be issued is P61.1625, pending approval by SEC as at December 31,
2017.

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SPA provides that the Parent Company shall enjoy all the rights, privileges and
benefits, and have all the corresponding obligations, of a shareholder owning 70% of
the outstanding capital stock of HOA, including board representation as at execution
of the agreement or cut-off date.

The acquisition gave the Parent Company 70% ownership and control, based on
PFRS 3, Business Combination, of HOA effective August 11, 2016. For convenience
purposes, the Group used July 31, 2016 as the cut-off date in determining the net
assets of HOA.

HOA, a company incorporated in the Philippines, is a hospitality firm primarily

engaged in the ownership, operations and development of hotel projects. HOA will
serve as the Group’s hospitality arm. The investment in HOA will allow the Group to
benefit from the booming tourism prospects for the Philippines in the years to come,
as well as to fully optimize the use and value of its string of prime properties in
various strategic areas around the country.

In 2016, the Group used preliminary fair values of the identifiable net assets in
calculating the excess of acquisition cost over net assets acquired as at acquisition
date amounting to P864.53 million as fair values were still in the process of valuation
as of the year ended. Upon finalization of the purchase price allocation exercise in
2017, the Group restated the amounts of net assets acquired, non-controlling interest
and goodwill recognized in 2016, in accordance with PFRS 3. The Group did not
recognize adjustment on the total comprehensive income since this does not have
significant impact.

The following table summarizes the final amounts of the identifiable net assets of
HOA are as follows:

Provisionary Final
Amounts Amounts
(July 31) (July 31)
Assets
Cash P112,200,000 P112,200,000
Receivables 373,100,000 373,100,000
Inventories 143,200,000 143,200,000
Prepaid expenses and other current assets -net 165,600,000 165,600,000
Property and equipment - net 1,006,628,897 423,000,000
Investment property 72,400,000 72,400,000
Other noncurrent assets 168,500,000 995,900,000
2,041,628,897 2,285,400,000
Liabilities
Accounts payable and other current liabilities 170,400,000 170,400,000
Customers’ deposits 155,900,000 155,900,000
Notes payable 800,300,000 800,300,000
Deferred tax liabilities - net 48,600,000 299,300,000
Other noncurrent liabilities 1,900,000 1,900,000
1,177,100,000 1,427,800,000
Net assets acquired 864,528,897 857,600,000
Acquisition cost 786,587,449 786,587,449
Non-controlling interest 77,941,448 337,108,907
864,528,897 1,123,696,356
Excess of acquisition cost over net assets
acquired/Goodwill P - P266,096,356

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 From August 11 to December 31, 2016, the Group’s share in HOA’s revenues and
net loss amounted to P79.91 million and P39.50 million, respectively. If the
combination had taken place at the beginning of 2016, the Group’s share in HOA’s
total revenues and net loss would have been P211.06 million and P79.55 million,
respectively.

The Group’s other comprehensive income was not adjusted by the effect of the
finalization of the purchase price allocation since the impact is not material.

29. Note to Consolidated Statements of Cash Flows

The Group’s noncash activities are as follows:

a. Transfer from “Property and equipment” account to “Investment property”

account amounting to P80.99 million in 2017;

b. Transfer from “Inventories” account to “Investment property” account amounting

to P3.29 million in 2017;

c. Transfer from “Investment property” to “Property and equipment” account

amounting to P258.60 million in 2016;

d. Capitalized borrowing cost on “Investment property” and “Inventories” accounts

amounting to P965.00 million and P180.04 million in 2017, respectively

e. Capitalized borrowing cost on “Investment property” and “Inventories” accounts

amounting to P767.70 million and P97.60 million in 2016, respectively; and

f. Transfer from “Leasehold rights” to “Investment property” account amounting to

P158.44 million in 2015.

Changes in Liabilities Arising from Financing Activities

January 1, Other December 31,

2017 Cash Flows Movements 2017
Bonds payable P5,217,658,399 P9,566,805,702 P10,840,174 P14,795,304,275
Short-term loans payable
and current maturities
of long-term notes
payable, net of debt
issue costs 3,486,004,312 (33,833,443) - 3,452,170,869
Long-term notes payable -
net of current maturities
and debt issue costs 15,027,837,523 (300,239,578) - 14,727,597,945
Other noncurrent liabilities 844,155,052 286,349,176 - 1,130,504,228
Total liabilities from
financing activities P24,575,655,286 P9,519,081,857 P10,840,174 P34,105,577,317

30. Events After the Reporting Date

On January 22, 2018, the Parent Company paid the second quarterly interest to its
P9.70 billion bonds in amount of P147,808,600.

On February 14, 2018, CICI acquired a parcel of land in Sta Barbara, Iloilo with an
area of 38,564 square meter for P134,974,000.

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ANNEX 1

DoubleDragon Properties Corp.

MS-05-06-1723
February 1, 2018

Prepared by
KMC Savills, Inc.

KMC Savills, Inc.

Philippine Market Study 11th Floor, Sun Life Centre
5th Avenue
Bonifacio Global City 1634
Philippines
 Executive Summary
KMC Savills (Consultant) has been appointed by the Client to conduct an independent Market Study
(Study) covering general economic and real estate market trends in the Philippines. This Study
focuses on the market scan of relevant developments in the Philippines with focus on the community
malls, offices, hotels and industrial leasing sectors. Analysis on the overall development trends as
well as existing and prospective competition that are seen to impact the future market dynamics in
the country.

The key findings of the study are as follows:

Macroeconomic
The Philippine economy has shown remarkable growth in the past few years, being one of the fastest-
growing economies in Southeast Asia. The current macroeconomic indicators are all positive,
reflected by robust underlying fundamentals: advantageous demographics, healthy public finances,
strong private consumption, a growing outsourcing industry, and a steady inflow of Overseas Filipino
Workers (OFW) remittances.

Despite the high private consumption and increasing BPO service exports driving growth, there are
some structural challenges in the country’s investment-light type of growth. Overall, this resulted in a
weak level of infrastructure. Public spending only accounted for 10.3% of GDP over the last five
years, suggesting a conservative fiscal policy. Historically speaking, capital formation has been only
around 21.0% of GDP. Capital formation and public spending — two factors which the country
severely lacks at the moment — are necessary for future growth as they would result to a more
inclusive and sustainable growth trajectory.

Another major challenge lies in the Philippines’ monetary policy. If the fiscal stimulus starts to increase
amid the booming economy while the country retains a rather loose monetary policy; it creates
significant pressure that might result to overheating. The current administration’s push for full
government funding on infrastructure should put a strain on the country’s relatively stable inflation
rate. Headline inflation has begun to stabilize above 3.0% in 2017 after its all-time lows in 2016.
Keeping an accommodative monetary stance risks depreciating the Philippine peso further. This
should result to higher import costs and should likely spill over to inflation. As such, some tightening
from the Bangko Sentral ng Pilipinas (BSP) is expected once inflation significantly exceeds its target
range.

However, the Philippine government remains rather bullish that the country can sustain a growth of
7.0% to 8.0% for the next two to three years, whereas major institutions are more conservative.
According to the World Bank, the Philippines has achieved macroeconomic stability along with high
GDP growth rates and has established a clear growth trajectory that is more inclusive. Therefore, the
World Bank maintains its forecast on the Philippine economy’s growth for 2017 and 2018 at 6.4%
and 6.6%, respectively. Meanwhile, the International Monetary Fund (IMF) has remained optimistic
with its growth forecast of 6.8% for 2017. Despite the slow global economic growth and the expected
normalization of interest rates in the US, the IMF believes that the Philippines will remain as one of
the fastest growing economies in the region.

Community Malls
The retail market environment in the Philippines is primarily driven by a growing population, and high
GDP growth resulting to rising incomes. Real household income from 2012 to 2015 increased by a
CAGR of 1.8%, 0.6% and 2.2% in NCR, Luzon, Visayas and Mindanao, respectively. The country’s
population has also shown positive expansion with a 5-year CAGR of 1.8% in 2015. In addition, the
gradual shift of the population from rural to urban areas has also bolstered growth of the sector. In
the Visayas and Mindanao, the population within urban areas correspondingly accounts for 36% and
44% in 2015 from 32% and 39% in 2010.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 2

 Listed retail developers have been taking advantage of the agglomeration effect in the highly
urbanized areas in the Philippines. The top developers in the country led by SM Prime Holdings,
Ayala Land and Robinsons Land have established their regional and super regional malls in the highly
urbanized cities outside of the capital. Retail developments outside Metro Manila and first-class cities
in the provinces are going to the direction of a more formal and modern retailing. This movement
creates an opportunity for the listed developers to reach out to local markets and venture in
community malls.

The community mall stock in Luzon constitutes to 49.0% of the Philippines overall supply with an
aggregate gross leasable area of around 535,000 sq m. Among developers, Waltermart corners the
largest market share with a total of 21 malls reaching over 263,000 sq m of GLA in 2016. Likewise,
community malls of listed developers are mostly present in Luzon keeping their focus on developing
regional and super regional malls in other parts of the country.

The Visayas and Mindanao regions host a number of community malls primarily situated in second-
class (e.g. Digos in Davao del Sur) and third-class (e.g. Passi City in Iloilo) cities, and first-class
municipalities (e.g. Consolacion in Cebu). The community mall segment in these regions are mainly
dominated by established local retail developers. The Gaisano Grand Group of Companies first
established its community malls in Cebu and has now reached a total of 29 community malls
throughout Visayas and Mindanao with an estimated collective GLA of over 263,000 sq m. Another
pertinent player in the local market is Gaisano Capital gaining a fair market share of almost 170,000
sq m of gross leasable area.

Altogether, the development in the community mall segment has continuously shown considerable
growth potential. With most top listed developers delegating majority of the market share to younger
retail developers, there is an opportunity for further expansion towards this segment.

Local retail players Gaisano Grand and Gaisano Capital have yet to disclose any plans of adding
new community malls. At present, Waltermart has stated its intention of acquiring more lots for future
developments to attain its target of opening at least four malls a year. By far, DoubleDragon is
expected to be the leading player in the community mall classification targeting a total of 100 CityMalls
by 2020. Its overall total then will be around 700,000 sq m of GLA.

Office
The primary driver of office space demand in the Philippines is the Outsourcing and Offshoring (O&O)
market. As per IBPAP, the Philippines is currently the top choice for voice-based services since it has
a significant advantage in terms of well-educated workforce, communication proficiency, and
competitive wage levels. Manila and Cebu have been ranked highly in Tholons’ research of top
outsourcing destinations wherein Manila has consistently been present in the top 10 since 2012.

In recent quarters, political uncertainty and onshoring have raised concerns in the O&O sector which
may likely impede its growth. Moreover, the prevailing technological trends (e.g., Robotic Process
Automation and Artificial Intelligence) are expected to introduce ambiguity in the sector’s growth in
the coming years. This may augment the demand coming from new technology-enabled services,
but may dampen the growth of services that may become redundant due to automation or
streamlining.

On the other hand, another industry expected to drive office demand are the offshore gaming
companies. Offshore gaming is gambling conducted via internet to be offered exclusively to offshore
authorized players. Offshore gaming companies are either Philippine Offshore Gaming Operators
(POGO), entities who provide and participate in offshore gaming services, or service providers who
deliver components of offshore online gaming operations. The Philippines is currently eyed as an
attractive destination for offshore gaming because of competitive costs and availability of prime-grade
buildings.

The strong demand of office space from these sectors have led to a continuous rise in construction
of Grade A office buildings in Metro Manila. Around 426,400 sq m of new office space were completed

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 3

 in the first half of 2017. Due to the availability of land for development, bulk of building completions
in the last decade came from BGC, accounting for more than half of the new supply with 248,400 sq
m. The business district is currently sought after as an attractive location for consolidation of
operations and is considered the next prime location.

However, declining rental growth is observed in certain submarkets in Metro Manila, indicating
significant supply pressure. However, keeping rents affordable during this massive inflow of
completions should sustain the take-up velocity in Metro Manila. A critical factor on the first half’s
impressive performance is due to landlords’ willingness to mitigate rents in order to stay competitive.
As such, we should see sustained pressure on rentals until next year as we still expect around
892,100 sq m of new office space in the next 12 months.

The Metro Manila market is expected to remain healthy especially with the diversified occupier
demand from the expanding O&O and POGO markets. In addition, occupier demand is expected to
briskly absorb the building completions in the coming quarters. Vacancies are still expected to remain
in single digits, but the influx of supply is expected to put downward pressure on the rents. Landlords
who are to remain competitive in the coming quarters should be able to facilitate the quick absorption
of new stock and keep vacancies at a reasonable level.

Hotel
As per the Philippine Statistics Authority (PSA), it is estimated that tourism accounts for 8.6% of GDP
in 2016. Figures from the Department of Tourism (DOT) indicate that domestic tourists dominate the
tourism industry in the Philippines. As much as 79.5% of tourists visiting the country’s various regions
in 2016 are Filipinos while only 19.8% are foreigners. However, foreign visitor arrivals for 2016
reached a total of 5.8 million, posting a 9.7% increase from the previous year. The country’s largest
source markets remain to be key Asian countries; Korea (25.1%), Japan (9.1%), and China (11.5%),
as well as USA with a share of 14.8% of the total arrivals.

The Philippines still pales in comparison to its neighbors’ visitor arrivals. The infrastructure chain—
airport, access road, accommodation, and world-class attractions and activities—is the main
hindrance to the growth of tourism. Given the high potential of tourism, the sector has become one
of the priority development areas of the government, with around US$23 billion budget over the six-
year term of President Duterte for tourism infrastructure, as per the National Tourism Development
Plan of DOT.

On the other hand, Philippines’ warmer ties with China and Korea provides a gateway for tourism’s
growth. Chinese tourist arrivals surged in the first half of the year as it jumped 33.4% to 455,000
visitors from 341,000 in the same period last year. Beijing’s revocation of its travel advisory against
the Philippines may have led to the surge of tourist visa applications by 250%, and is expected to
increase further with the Bureau of Immigration’s grant of Visa Upon Arrivals (VUA) to Chinese
nationals. At the current pace of Chinese tourists, the DOT estimates it will hit one million Chinese
arrivals by 2017. Along with this, the continuous support from South Korea’s tourism executives is
expected to aid the realization of seven-million arrivals target for 2017.

The hospitality market is seen to expand aggressively with around 6,200 upscale rooms expected to
come in Metro Manila from 2017 to 2020, and around 11,400 rooms from major players of budget
hotels in the Philippines. However, this supply is expected to cater to the expected 10 million foreign
tourists coming in by 2020. Moreover, estimates done by DOT suggests domestic tourists are
expected to grow to around 65 million travelers by 2020.

Lastly, we do not see a significant threat from other forms of hospitality establishment, such as
AirBNB as these platforms serve a specific niche in the market. It is likely the more budget conscious
travelers are, the more likely they would utilize newer and affordable options. As such, Economy
hotels are highly at risk and to a lesser extent, Standard hotels. As such, we do not see any significant
competition in the First Class and Deluxe segments.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 4

 Industrial
The warehousing market in the Philippines is comparatively fragmented from other countries as there
is no clear player dominating a significant share. This may be due to most manufacturers taking more
control over its distribution network which may own their warehousing facilities. 3PL involvement has
been limited towards delivering goods directly from factory to distribution center to customer. In some
instances, a 3PL manages the distribution hub of the manufacturer which reduces the need for their
own storage facilities (i.e. Monde Nissin’s large distribution facilities).

However, manufacturers have only limited their involvement in the warehousing segment in the
distribution network. The Consultant has yet to observe large manufacturing companies fully engaged
in the delivery of their goods. This is because it is a non-core function which entails high operating
costs. In the medium term, it is sufficient for large manufacturers to further obtain assistance from
3PLs to manage their distribution facilities.

Currently, internet sales have yet to make a dent on the total retail sales in the Philippines. Although
growth in this segment has been very quick, we estimate growth to be limited in the typical hubs (i.e.
Metro Manila or Cebu) where logistics networks are supported by: above-average public
infrastructure; little monopoly power from logistics firms; and sufficient warehouse supply. Given how
online platforms utilize warehouse facilities, we should expect demand to concentrate in these hubs
or in nearby regions.

Lastly, industrial property demand is likely to increase with the expansion of the modern retailing
format in the Philippines. These retailers may demand more prompt deliveries with a higher emphasis
on quality. The current distribution system in most parts of the provinces may not be up to par to their
standards. As such, we should expect a more modern logistics network to take hold in these areas.
We believe that with rising urbanization in the provinces coupled with increasing household incomes,
this transformation in the market is highly possible. Plans of expanding smaller-format community
malls in the provinces have already begun.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 5

Table of Contents
1. Introduction ......................................................................................................................... 7
1.1. Objectives ........................................................................................................................ 7
1.2. Assignment Methodology ................................................................................................. 7
1.3. Assumptions and Limitations ............................................................................................ 7
2. Macroeconomic Overview .................................................................................................. 8
2.1. Structure of the Economy ................................................................................................. 8
2.2. Population and Income ................................................................................................... 15
2.3. Economic Outlook and Challenges ................................................................................. 19
3. Community Mall Market .................................................................................................... 21
3.1. Overview of Philippine Retailing...................................................................................... 21
3.1.1. Modern versus Traditional Formats ............................................................................ 22
3.1.2. E-commerce in the Philippine .................................................................................... 25
3.2. Community Mall Market Commentary ............................................................................. 27
3.2.1. Classifications of Shopping Centers ........................................................................... 28
3.2.2. Community Malls Supply ........................................................................................... 34
4. Office Market ..................................................................................................................... 41
4.1. Office Market Commentary ............................................................................................. 41
4.1.1. Outsourcing Industry.................................................................................................. 41
4.1.2. Offshore Gaming ....................................................................................................... 42
4.2. Office Market Supply ...................................................................................................... 43
4.2.1. Development Activities............................................................................................... 44
4.3. Office Market Demand.................................................................................................... 46
4.4. Office Market Performance ............................................................................................. 48
4.4.1. Rents......................................................................................................................... 48
4.4.2. Investments ............................................................................................................... 49
4.5. Office Market Outlook..................................................................................................... 49
5. Hotel Market ...................................................................................................................... 54
5.1. Philippines Tourism Industry Overview ........................................................................... 54
5.1.1. Domestic Travelers .................................................................................................... 55
5.1.2. Visitor Arrivals to the Philippines ................................................................................ 56
5.2. Hotel Market Supply ....................................................................................................... 58
5.2.1. Classifications of Hotels ............................................................................................. 58
5.2.2. Current Stock ............................................................................................................ 61
5.2.3. Development Activity ................................................................................................. 71
5.3. Hotel Market Demand..................................................................................................... 72
5.3.1. Segments of Demand ................................................................................................ 72
5.4. Hotel Market Performance .............................................................................................. 73
5.4.1. Occupancy ................................................................................................................ 73
5.5. Hotel Market Outlook ...................................................................................................... 73
6. Industrial Market Overview ............................................................................................... 75
6.1. Philippine Industrial Sector Overview .............................................................................. 75
6.1.1. Manufacturing sector ................................................................................................. 76
6.1.2. Logistics Network ...................................................................................................... 77
6.2. Industrial Leasing Market Overview ................................................................................ 81
6.3. Industrial Leasing Market Performance ........................................................................... 82
6.3.1. Rents......................................................................................................................... 82
6.4. Industrial Market Outlook ................................................................................................ 82

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 6

1. Introduction
KMC Savills (Consultant) has been appointed by the Client to conduct an independent Market Study
(Study) covering general economic and real estate market trends in the Philippines.

1.1. Objectives
This Study focuses on the following:

 Market scan of relevant developments in the Philippines with focus on the community malls,
offices, hotels and industrial leasing sectors.
 Analysis on the overall development trends as well as existing and prospective competition
that are seen to impact the future market dynamics in the country.

1.2. Assignment Methodology

In the preparation of this report, the Consultant has accessed its extensive internal database, and
sought information from credible online sources and news websites. The Consultant also interviewed
key informants to obtain data related to the existing and upcoming developments in the trade area.

Lastly, the Consultant also capitalized on our experience and knowledge of the Philippine real estate
market to reach the conclusion and recommendations.

1.3. Assumptions and Limitations

In the course of the Study, only verbal planning and relevant government bureau information were
gathered. It is not the responsibility of the Consultant to obtain official certifications regarding the
regulatory restrictions concerning the trade area.

Moreover, the market scan was conducted within a specific fieldwork period and within the time frame
of this engagement. Only pertinent data collected within the set period were used in the Study. Market
information and projections may prove to be inaccurate and must be interpreted only as an indicative
estimate of probabilities, as opposed to certainties. This includes estimates on variables such as, but
not limited to, prices, income, population count, development costs, interest rates, and growth rates.

All in all, the Consultant used all reasonable endeavors to complete the scope of work, provide a
comprehensive report, and identify and verify all material and factual information on which the
objectives of this engagement were based on.

Finally, the Consultant stresses that this market study has been undertaken for the sole purpose of
assisting in the determination of the supply and demand dynamics in the area. No guarantees or
warranty as to the accuracy of the projected future market movements were made.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 7

2. Macroeconomic Overview
2.1. Structure of the Economy
Graph 2.1
Real GDP Growth, YoY

8.0%

6.0%

4.0%

2.0%

0.0%

Source: PSA, BSP, IMF, KMC Savills Research

The Philippine economy has shown remarkable growth in the past few years, being one of the fastest-
growing economies in Southeast Asia. The current macroeconomic indicators are all positive,
reflected by robust underlying fundamentals: advantageous demographics, healthy public finances,
strong private consumption, a growing outsourcing industry, and a steady inflow of Overseas Filipino
Workers (OFW) remittances. According to the World Trade Organization, the export of services from
the Philippines to the rest of the world accounted for US$ 24.1 billion, growing at a 14.0% CAGR from
2006 to 2016, compared to a global growth of 5.1%. Likewise, OFW remittances have more than
doubled during the same period to US$ 26.9 billion – growing at a 7.7% CAGR.

Figure 1. Demographic Window in Asia Pacific

Source: United Nations and Savills Research

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 8

 Graph 2.2
Real GDP Growth of ASEAN Countries, YoY

Indonesia Malaysia Philippines Singapore Thailand Vietnam

8%

7%

6%

5%

4%

3%

2%

1%

0%

Source: World Bank, KMC Savills Research

Within the past three decades, the Philippines has started its transformation from a highly agricultural
economy to a service-based one, almost entirely disregarding industrialization that is common to
most economies. Currently, private services account for roughly half of gross domestic product
(GDP), making it the biggest sector in the economy. While primary production (agriculture, hunting,
forestry, and fishing) and the secondary sector (industrial sector) have continuously decreased their
respective contribution to GDP; services have increased its share to 58.1% of GDP as of the second
quarter of 2017 from 51.4% in 1998.

The main contributing reasons to this transformation are the overall inadequacy of infrastructure, the
high capital expenditure needed for a productive manufacturing industry, and the presence of a
reasonably qualified, English-speaking and relatively large labor pool. These have resulted in the
Philippines having a comparative advantage in “soft infrastructure” i.e. its labor force rather than in
physical infrastructure.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 9

 Graph 2.3
Structure of Production, % of Real GDP
Agriculture Industry Services

70%

60%

50%

40%

30%

20%

10%

0%

Source: PSA, KMC Savills Research

The labor pool contributes to the economy mainly through two different channels: first, by seeking
employment abroad and in return, providing funds for consumption through remittances; and second,
by participating in the services export sector through the business process outsourcing (BPO)
industry. As a result, the country has been able to sustain a relatively high level of domestic
consumption. Domestic demand currently stands at 66.2% of GDP as of the second quarter of 2017.
It is growing at a steady rate of 5.5% to 7.0% per annum in the last five years, and has been the main
driver of the economic growth. The youthful and rapidly expanding population is likely to support
these dynamics.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 10

 Graph 2.4
Structure of Demand, % of Real GDP

Household Consumption Government Expenditure Capital Formation Exports Imports

80%

70%

60%

50%

40%

30%

20%

10%

0%

Source: PSA, KMC Savills Research

Although OFW remittances are a key contributor to the economy, the export of services via the BPO
industry continues to capture a larger share of the local economy with a great potential of driving
growth in the future. It has indirectly fueled further consumption by being the fastest-growing industry
to provide jobs. According to the World Trade Organization, the export of services from the Philippines
to the rest of the world accounted for US$ 24.1 billion, growing at a 14.0% CAGR from 2006 to 2016,
compared to a global growth of 5.1%. Based on data from the IT and Business Process Association
of the Philippines (IBPAP), the industry employment has increased from 100,000 direct employees
to 1.1 million, while indirectly engaged supporting services are estimated to employ three times more.

Graph 2.5
BPO Revenues and Employment
Industry Revenues (LHS) Full-Time Equivalents (RHS)

45 2,400

30 1,600
US$ billion

'000

15 800

0 0

Source: IBPAP, KMC Savills Research

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 11

 In terms of GDP, the export of services has almost tripled from 2006 to 2016 and is likely to continue
its growth trajectory with the ongoing globalization and the growing outsourcing trend. For the longest
time, the Philippines has been a net importer of goods and services, and it has been weakening its
trade position. Due to the low competitiveness level of the country and the advantageous labor costs,
the export sector is still geared towards low value-added goods and manufactured products. The
main exports are electronic products, specifically semiconductors from foreign multinationals,
accounting for roughly half of the total exports revenue. Other key export goods include other
manufactured goods, machinery & transport equipment, agricultural and fishery products, and
textiles. The main trade partners of the country, aside from the United States of America (USA), are
from the Asia-Pacific region namely Japan, China, and Korea. However, due to the nature of the
export sector, foreign trade is still vulnerable to a weakening in the external economic environment.

Graph 2.6
GDP Contribution by Island Group
NCR Rest of Luzon Visayas Mindanao

8%

6%

4%

2%

0%

Source: PSA, KMC Savills Research

Regionally, the National Capital Region (NCR) and the rest of Luzon contributed 73.0% of the
country’s output in 2016. As such, GDP growth has been predominantly driven by much of Luzon
and its neighboring islands (i.e. Palawan). The agglomeration of much of the country’s industrial
estates are in Central and Southern Luzon, which have enjoyed quality infrastructure in recent
decades. However, in terms of growth, many regions in the Visayas and Mindanao have outpaced
the national growth rate. Although smaller in scale, household consumption has improved in the
provinces with the help of OFW remittances.

Table 1. Real GRDP Growth, by Region

Region 2010 2011 2012 2013 2014 2015 2016
NCR 7.4% 3.2% 7.0% 9.1% 5.8% 6.7% 7.5%
CAR 6.5% 1.3% -2.9% 5.4% 3.3% 4.0% 2.1%
1 - Ilocos Region 6.8% 2.5% 7.2% 7.0% 6.4% 5.4% 8.4%
2 - Cagayan Valley -0.8% 5.7% 7.2% 6.6% 7.2% 4.1% 3.3%
3 - Central Luzon 10.0% 7.1% 7.2% 4.5% 9.2% 5.6% 9.5%
4A - CALABARZON 11.7% 1.6% 7.0% 6.6% 5.1% 5.8% 4.8%
4B - MIMAROPA -0.3% 3.1% 4.1% 1.3% 8.3% 2.0% 2.7%
5 - Bicol Region 3.5% 1.9% 8.8% 8.2% 4.3% 8.9% 5.7%
6 - Western Visayas 4.5% 6.2% 7.0% 3.4% 5.2% 8.8% 6.1%
7 - Central Visayas 12.9% 6.8% 9.4% 7.4% 7.7% 4.9% 8.8%

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 12

 8 - Eastern Visayas 3.0% 2.1% -6.8% 4.6% -2.4% 4.6% 12.4%
9 - Zamboanga Peninsula 1.4% 0.1% 12.4% 4.2% 6.6% 7.7% 4.7%
10 - Northern Mindanao 6.5% 5.8% 6.5% 5.4% 7.1% 5.7% 7.6%
11 - Davao Region 5.6% 3.7% 7.0% 6.7% 9.3% 8.2% 9.4%
12 - SOCCSKSARGEN 2.2% 5.3% 7.3% 8.4% 6.2% 3.3% 5.0%
13 - CARAGA 10.7% 8.5% 11.5% 8.2% 9.4% 4.5% 2.5%
ARMM 6.7% -0.3% 0.0% 3.8% 3.0% -0.4% 0.3%
Average 7.6% 3.7% 6.7% 7.1% 6.1% 6.1% 6.9%
Source: PSA, KMC Savills Research

Despite the high private consumption and increasing exports driving growth, there are some structural
challenges in the country’s investment-light type of growth. Overall, this resulted in a weak level of
infrastructure. Public spending only accounted for 10.3% of GDP over the last five years, suggesting
a conservative fiscal policy. Historically speaking, capital formation has been only around 21.0% of
GDP. Capital formation and public spending — two factors which the country severely lacks at the
moment — are necessary for future growth as they would result to a more inclusive and sustainable
growth trajectory.

Graph 2.7
Inflation and Various Interest Rates
Headline Inflation T-Bill 91-day Avg. Bank Lending Rate
RRP Rates Overnight 10-Year Govt Bond Yield

12%

10%

8%

6%

4%

2%

0%

Source: BSP, KMC Savills Research

Another major challenge lies in the Philippines’ monetary policy. If the fiscal stimulus starts to increase
amid the booming economy while the country retains a rather loose monetary policy; it creates
significant pressure that might result to overheating. The current administration’s push for full
government funding on infrastructure should put a strain on the country’s relatively stable inflation
rate. Headline inflation has begun to stabilize above 3.0% in 2017 after its all-time lows in 2016.
Keeping an accommodative monetary stance risks depreciating the Philippine peso further. This
should result to higher import costs and should likely spill over to inflation. As such, some tightening
from the Bangko Sentral ng Pilipinas (BSP) is expected once inflation significantly exceeds its target
range.

There is also a structural issue within the legal framework when it comes to foreign ownership.
Current foreign ownership restrictions in the Constitution continue to curb overseas investors in
executing investments as land ownership is tightly controlled. Generally, foreign ownership is limited
to a maximum of 40% of a company’s equity. Although there are special cases wherein foreigners

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 13

 are allowed to own 100% of a company, the Negative List outlines the industries that are prohibited
with the corresponding limit on foreign equity.

This currently results in a lack of healthy competition in the market place and favors the domestic
players. In addition, most foreign investments are currently channeled mainly to the outsourcing and
services sectors, which do not require large investments, relative to more capital-intensive sectors.

Graph 2.8
Inflows of Capital
OFW Cash Remittances BPO Industry Export Revenue

Net F oreign Direct Investments Net Foreign Portfolio Investments

70

60

50

40
billion US$

30

20

10

-10

Source: BSP, WTO, KMC Savills Research

On the bright side, the improving macroeconomic fundamentals and the efforts by the Philippine
government to relax foreign ownership rules are expected to accelerate foreign direct investments
(FDI), whose main sources are the US, Hong Kong, United Kingdom, and Japan. Currently, net FDI
remains weak compared to other Association of Southeast Asian Nations (ASEAN) member countries
such as Malaysia, Thailand and Indonesia. In 2016, net FDI reached an all-time high of US$ 7.9
billion suggesting a positive trend in hard investments. A further boost can be expected once the
ASEAN integration gains momentum, as it is expected to attract an increased number of regional
companies especially in the manufacturing sector.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 14

 Graph 2.9
FDI by ASEAN Country
Philippines Thailand Indonesia Malaysia Vietnam

30

25

20
billion US$

15

10

Source: World Bank, CEIC, BSP, KMC Savills Research

2.2. Population and Income

As the country sustains its positive growth trajectory, we expect household income to grow in tandem
with it. Real household incomes have grown at a compound annual growth rate (CAGR) of 1.6%
during the period of 2012 – 2015. The country’s GDRP and household income are higher in NCR and
the rest of Luzon. On the other hand, Mindanao posted a faster real income growth of 2.2% during
the same period despite posting the lowest average household income.

Graph 2.10
Average Annual Household Income, PhP '000 at constant 2006 prices
NCR Rest of Luzon Visayas Mindanao

350

300

250
'000

200

150

100

50

Source: PSA, KMC Savills Research

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 15

 Real household incomes are highly reflective of the level of development in each region. The highly
industrialized and urbanized regions of CALABARZON (Region 4A) and Central Luzon (Region 3)
have above average household incomes. Region 7, where Metro Cebu is located, has the highest
average household income in the Visayas while Region 11, where Metro Davao is located, has the
highest average household income in Mindanao.

Table 2. Annual Household Income by Region, in PhP ‘000, at constant 2006 prices
CAGR
Region 2006 2009 2012 2015
2012-2015
NCR 293 296 305 322 1.8%
CAR 184 185 200 203 0.5%
1 - Ilocos Region 134 156 165 177 2.4%
2 - Cagayan Valley 134 152 148 165 3.7%
3 - Central Luzon 186 185 197 211 2.3%
4A - CALABARZON 198 210 219 223 0.6%
4B - MIMAROPA 103 119 134 153 4.5%
5 - Bicol Region 118 128 123 129 1.6%
6 - Western Visayas 123 133 153 154 0.2%
7 - Central Visayas 136 154 163 166 0.6%
8 - Eastern Visayas 118 134 124 129 1.3%
9 - Zamboanga Peninsula 118 122 119 124 1.4%
10 - Northern Mindanao 134 139 137 145 1.9%
11 - Davao Region 127 138 143 166 5.1%
12 - SOCCSKSARGEN 107 126 119 125 1.7%
13 - CARAGA 111 123 126 124 -0.5%
ARMM 83 95 91 89 -0.7%
Average 164 174 180 189 1.6%
Source: PSA, KMC Savills Research

In addition, people will also tend to reside where rapid economic development is present. As such,
much of the country’s population is located in Luzon excluding Metro Manila. The bulk are again
located in CALABARZON and Central Luzon with a total of 28.6 million people of the 100.9 million
recorded in 2015. The rest of Luzon also had above average population growth with a CAGR of 1.9%
during 2007 – 2015. On the other hand, the country’s CAGR during the same period was at 1.5%.
Visayas and Mindanao posted below average growth at 1.4% and 1.2%, respectively.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 16

 Graph 2.10
Total Population
NCR Rest of Luzon Visayas Mindanao

120

100

80
millions

60

40

20

Source: PSA, KMC Savills Research

With the accelerating population growth and the expanding economy, much of the country’s various
regions have hastened their urbanization. Based on the Philippine Statistics Authority’s definition, the
Philippine populace residing in urban areas account to almost half of total population. In Luzon, these
areas are again located in CALABARZON and Central Luzon.
Graph 2.12
Urban Population
NCR Rest of Luzon Visayas Mindanao % of Population

60 90%

40 60%
millions

20 30%

0%

Source: PSA, KMC Savills Research

Growth of the urban population greatly exceeded the country’s population growth with a CAGR of
3.6% during 2007 – 2015. If we assume a relatively similar growth rate, we expect the urban
population to hit 57.2 million people by 2020F. This will account for 53.0% of the total population. We
expect Luzon to carry the bulk of this growth, but the Visayas and Mindanao areas may be able to

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 17

 manage similar growth rates in the future. The region of Eastern Visayas still lags compared to its
neighbors, but the rate of urbanization has been rapid with a CAGR of 12.3% during the same period.

Table 3. Proportion of Urban Population to Total by Region

Region 2007 2010 2015
NCR 100.0% 100.0% 100.0%
CAR 19.6% 26.3% 32.4%
1 - Ilocos Region 11.4% 12.7% 15.1%
2 - Cagayan Valley 8.8% 11.6% 16.5%
3 - Central Luzon 48.3% 51.6% 55.0%
4A - CALABARZON 54.5% 59.7% 64.8%
4B - MIMAROPA 18.2% 22.3% 29.5%
5 - Bicol Region 12.7% 15.3% 20.3%
6 - Western Visayas 32.2% 34.7% 38.7%
7 - Central Visayas 39.9% 43.7% 48.0%
8 - Eastern Visayas 5.7% 8.7% 12.7%
9 - Zamboanga Peninsula 31.8% 33.9% 37.3%
10 - Northern Mindanao 38.3% 41.3% 47.3%
11 - Davao Region 54.2% 59.3% 68.3%
12 - SOCCSKSARGEN 43.0% 46.5% 48.5%
13 - CARAGA 24.8% 27.5% 31.5%
ARMM 17.7% 13.7% 12.4%
Average 42.4% 45.3% 49.3%
Source: PSA, KMC Savills Research

We expect the regions in the Visayas and Mindanao to experience above average population and
real household income growth rates as economic development spills over to mostly rural areas. Much
of the current administration’s thrust has been focused on infrastructure projects outside of Metro
Manila. The Visayas and Mindanao areas have fairly trailed behind Luzon in terms of infrastructure.
Other than international-quality ports, both areas have yet to have their own methodical and large-
scale rail lines or expressways.

A key challenge in these regions have been its geographic and political characteristics. The Visayas
has always been fragmented with its multiple islands. On the other hand, Mindanao has had its fair
share of challenges with several separatist groups present in the island.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 18

 Figure 2. Upcoming Major Infrastructure Projects in the Philippines

Source: DPWH, KMC Savills Research

2.3. Economic Outlook and Challenges

The economy sustained its growth of 6.4% in the first half of 2017 and is expected to remain on track
as the country continues to capitalize on its strong macroeconomic fundamentals. The Philippine
government remains rather bullish that the country can sustain a growth of 7.0% to 8.0% for the next
two to three years, whereas major institutions are more conservative.

According to the World Bank, the Philippines has achieved macroeconomic stability along with high
GDP growth rates and has established a clear growth trajectory that is more inclusive. Therefore,
World Bank maintains its forecast on the Philippine economy’s growth for 2017 and 2018 at 6.4%
and 6.6%, respectively. Meanwhile, the International Monetary Fund (IMF) has remained optimistic
with its growth forecast of 6.8% for 2017. Despite the slow global economic growth and the expected
normalization of interest rates in the US, the IMF believes that the Philippines will remain as one of
the fastest growing economies in the region.

In the short term, private consumption will remain as the major driver of economic growth, while the
youthful and rapidly expanding population is likely to support these dynamics in the long run.
However, considering the long-term growth, the challenge of a consumption-heavy but investment-
light economic structure makes growth less inclusive and it poses a threat to the sustainability of this
momentum, unless the economy sees more investments. The current bottlenecks in effectively
executing public spending and attracting investments are in the roll out of infrastructure projects, and
to some degree, reducing corruption through increased transparency and reduced red tape.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 19

 The question on infrastructure is seen to remain at the forefront as the ASEAN integration starts
gaining momentum. The integration is expected to boost the manufacturing industry, but increase in
production might not reach its desired level. This is due to its high dependence on basic infrastructure
that the country still needs to effectively address. Also, the current delay in opening areas of the
economy to foreign competition continues to hinder the potential gains of this integration, which is
focused on free trade and open market.

On the financial side, the BSP’s loose monetary policy is expected to boost short-term growth, but
risks may rise once the fiscal stimulus starts to kick in. The abundant liquidity is likely to increase
credit risk, once the global rate hike starts. However, the BSP has been vigilant in monitoring the
banks’ exposure to the real estate sector in order to avoid overleveraging. Furthermore, the BSP has
yet to raise rates despite the US Federal Reserve further tightening their monetary policy this year.

Graph 2.13
Foreign Exchange Rate and PSEi Performance
PHP-USD (LHS) PSEi (RHS)

55 9,000

52 7,500

49 6,000

46 4,500

43 3,000

40 1,500

37 0

Source: BSP, PSE, KMC Savills Research

On the other hand, the Philippine peso continues to depreciate – weakening to as much as 6.0% in
2016. A further weakening in the peso should lead to higher import prices and create inflationary
pressure in the domestic market. Although inflation is still within the central bank’s target range for
2017, it may be a matter of time when the BSP starts to follow suit.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 20

3. Community Mall Market
3.1. Overview of Philippine Retailing
Large domestic corporations have dominated the modern retailing market which started to expand in
the 1980’s. SM Investments opened the first SM Supermarket in SM Makati, Ayala Center in 1985
and its neighborhood supermarket, SM SaveMore, in Riverbanks Center, Marikina in 1998. During
the same year, Rustan’s Group of Companies pioneered the hypermarket concept in the Philippines
with its first Shopwise store in Festival Supermall, Alabang. This led to the emergence of other
popular grocery chains such as Robinsons Supermarket, Waltermart and Puregold Price Club.

Table 4. Definition of Store-based Retailers

Retailer Definition
Modern retail outlets selling groceries w ith a selling space of betw een 400
Supermarkets and 2,500 sq m. These outlets are frequently the anchor store in a shopping
centre.
Modern grocery retail outlets w ith a primary focus on selling groceries but
also sell a range of non-grocery merchandise. These outlets have a selling
Hypermarkets
space of over 2,500 sq m and are frequently located out-of-tow n or as the
anchor store in a shopping centre.
Mixed retail outlets selling mainly non-grocery merchandise and at least five
Department Stores lines in different departments, usually w ith a sales area of over 2,500 sq m
and arranged over several floors.
Traditional retail outlets that that sells a w ide range of predominantly grocery
products w ith a selling space less than <400 sq m. These outlets are
Independent Small Grocers
usually not chained and not commercially branded. Mainly family-ow ned,
often referred to as Mom and Pop stores.
Source: Euromonitor, KMC Savills Research

The modern grocery retailer (supermarkets and hypermarkets) has established itself as the main
anchor of major shopping centers alongside the department store retailer. Large shopping malls like
SM Supermalls and Robinsons Malls have in-house anchors while the Rustan’s brand is distributed
to other malls that cater to the middle- and upper-class consumers. Other retailers like Waltermart
and Puregold use the two-pronged approach by opening both shopping mall-based and stand-alone
stores, as an expansion strategy to be more accessible to the masses.

Table 5. Top 10 Supermarket Retailers, Market Share of Total Sales

Superm arket Retailer Supe rm arket Brand 2016
SM Retail Inc SM Supermarket and SM SaveMore 21.6%
Robinsons Retail Holdings, Inc Robinsons Supermarket 10.9%
Rustan's Group of Cos Rustan's Supermarket 9.0%
Metro Retail Stores Group Metro Supermarket and Metro Fresh 'N Easy 3.7%
Puregold Price Club Inc Puregold Supermarket 3.0%
New City Commercial Corp NCCC 2.4%
Gaisano Grand Group of Cos Gaisano Grand Mall 1.9%
Gaisano Capital Group Gaisano Capital 1.4%
Waltermart Supermarket Inc Waltermart Supermarket 1.1%
Liberty Commerical Center Inc LCC 0.5%
Others Others 44.7%
Total Total 100.0%
Source: Euromonitor, KMC Savills Research

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 21

 Table 6. Top 5 Hypermarket Retailers, Market Share of Total Sales
Hyperm arket Retailer Hype rm arket Brand 2016
Puregold Price Club Inc Puregold Hypermarket 53.5%
SM Retail Inc SM Hypermarket 29.8%
Vicsal Development Corp Super Metro Hypermarket 6.3%
Prince Warehouse Club Inc Prince Hypermart 5.4%
Rustan's Group of Cos Shopw ise 5.1%
Total Total 100.0%
Source: Euromonitor, KMC Savills Research

Table 7. Top 10 Department Store Retailers, Market Share of Total Sales

Departm ent Store Retailer Departm ent Store Brand 2016
SM Retail Inc SM Department Store 42.6%
Robinsons Retail Holdings, Inc Robinsons Department Store 8.6%
Vicsal Development Corp Metro 5.5%
Gaisano Grand Group of Cos Gaisano Grand Mall 3.2%
Gaisano Capital Group Gaisano Capital 2.7%
Rustan's Group of Cos Rustan's Department Store 2.2%
DSG Sons Group Inc DSG Sons Department Store 1.2%
New City Commercial Corp NCCC 1.0%
Marks & Spencer Plc Marks & Spencer 0.9%
Unitop General Merchandise Inc Unitop Department Store 0.8%
Others Others 31.4%
Total Total 100.0%
Source: Euromonitor, KMC Savills Research

Lastly, only a few supermarket and department store retailers are foreign due to hefty barriers to
entry. According to Section 8 of Republic Act No. 8762, retail enterprises with a paid-up capital of
less than US$2.5 million shall be reserved exclusively for Filipino citizens and wholly owned Filipino
corporations. The restriction applies to foreign retail enterprises who need to fulfill the minimum paid-
up capital US$2.5 million in order to be granted at most 60% equity and set up retail operations in
the country. On the other hand, enterprises with a paid-up capital of US$ 7.5 million may be wholly
owned by foreigners. However, foreign enterprises with granted equity are required to invest in a
minimum of US$ 830,000 per store. For high end and luxury enterprises to be wholly owned by
foreigners, a minimum paid-up capital of US$ 250,000 is required per store.

Foreign retail enterprises and high end and luxury enterprises are required to have a minimum net
worth of US$200 million and US$50 million in its parent company respectively. Secondly, the
enterprise has branches or franchises operating worldwide unless one store is capitalized at a
minimum of US$25 million. Thirdly, the enterprise has a five-year track record in retailing. Lastly, only
enterprises incorporated in countries which allow the entry of Filipino retailers shall be allowed to
engage in retail trade in the Philippines.

3.1.1. Modern versus Traditional Formats

The independent small grocer is considered as the traditional counterpart of today's hypermarkets
and supermarkets. This is one of the established grocery retailers in the Philippines until the early
1980’s. Groceries were originally sold in family-owned, independent stores that were located in
residential neighborhoods in which consumers had ease of access. These small grocers played an
important role in their communities. As per Euromonitor, they sell in small quantities to consumers
who purchase items per unit rather than the whole package and act as quasi-banks that extend
microcredit to their key clientele. This is also typical of informal retailing, specifically sari-sari stores,
which are easy to set up due to low capital requirements. Although, the lack of proper regulation and
official documentation makes the sari-sari store a fragmented market; this is the main retail format
for most Filipinos and an important marketing channel of businesses to promote consumables to the
masses. The typical sari-sari store is a neighborhood variety store that carries mostly food and
beverage items that can be sold individually. According to Nielsen, a typical store has the capacity to

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 22

 carry up to 200 items due to its limited floor space. These items are distributed to the stores by
wholesale and retail partners.

Table 8. Definition of Store-based Grocery Retail Formats

Retail Form at
Modern Retailing
Traditional Retailing
Informal Retailing
Source: Euromonitor, KMC Savills Research
Definition
Aggregation of grocery channels that have emerged based on the
concept of chained retail (i.e. supermarkets, hypermarkets).
Aggregation of channels that are invariably non-chained and are,
therefore, ow ned by families and/or run on an individual basis (i.e.
independent small grocers).
Aggregation of channels that have similar characteristics of traditional
retailing except that they lack documentation and regulation (i.e. sari-
sari stores).

Figure 3. The Sari-Sari Store

Source: Wikimedia Commons

According to Euromonitor, a shift in buying preferences may likely occur when disposable income
rises; consumers will likely opt for a higher-quality format. This high propensity to spend makes
modern retail more attractive as consumers gradually adapt the mall culture as a lifestyle in urban
areas with the accessibility of both modern grocery (i.e. supermarkets and hypermarkets) and non-
grocery (i.e. department stores) retail channels. Compared to independent small grocers, these retail
channels are much larger in size and offer more variations of grocery items. As such, we expect the
modern retailer to overtake traditional retail in the future.

Table 9. Market Share of Store-based Grocery Retail Formats, 2016

Retail Form at Sales Outle ts
Modern Retailing 30.6% 0.3%
Traditional Retailing 5.2% 0.6%
Informal Retailing 64.2% 99.2%
Source: Euromonitor, KMC Savills Research

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 23

 Graph 3.1
Number of Outlets of Modern vs Traditional Grocery Retailers
Hypermarkets and Supermarkets Independent Small Grocers

4
'000 outlets

Source: Euromonitor, KMC Savills Research

As real household incomes continuously grow with the expanding economy, households should start
to shift their buying preferences. For instance, the number of modern grocery retailers have almost
doubled since 2005. This has been driven by robust household consumption, and retailers are
expected to capitalize on households’ growing appetite for a wider variety of goods. Retailers have
expanded aggressively since 2010. A few modern retailers have opted acquiring several grocery
chains in tandem with their organic store expansion.

Graph 3.2
Modern Grocery Retailing by Growth of Number of Outlets and Sales
Sales Value Number Outlets

600,000 3

500,000
2

400,000

2
PhP millions

'000 outlets

300,000

200,000

1
100,000

0 0

Source: Euromonitor, KMC Savills Research

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 24

 Major retailers ramped up acquisition and introduced new-store formats to cater to a broader range
of consumers and extend their reach outside Metro Manila. Puregold Price Club (PGOLD) became
the second largest hypermarket and supermarket retailer in the Philippines with the introduction of its
smaller grocery store format in 2010, called Puregold Jr. Supermarket. In order to expand its market
coverage, PGOLD went public in 2011 and raised PhP6.3 billion. In the same year, PGOLD had the
highest number of store openings in a year with 38 new stores. In the next two years, PGOLD opened
31 new organic stores and acquired two supermarket chains: Gant Group of Companies known as
Parco supermarkets, with all 19 stores located in Metro Manila, and Company E Corporation, with 15
existing stores and 40 newly-opened stores in Metro Manila, Rizal and Cavite, which later merged
with PGOLD.

Table 10. Acquisitions of Top Modern Grocery Retailers, 2013-2014

Retailer Investm ent Ope rator
Puregold Price Club Parco Supermarkets Gant Group of Companies
Puregold Price Club Grocer E Supermart Company E Corporation
Robinsons Retail Holdings EZ Mart and EZ Supermarket Eurogrocer
Robinsons Retail Holdings Jayniths's Supermarket JAS 8 Retailing Management Corp.
Source: PGOLD, RRHI, KMC Savills Research

Similarly, Robinsons Retail Holdings, Inc. (RRHI) listed with the Philippine Stock Exchange in 2013
with an initial public offering and raised PhP28.1 billion. In the same year, RRHI acquired Eurogrocer
Corp, the operator of EZ Mart and EZ Supermarket in the province of Tarlac, Northern Luzon. In
2014, RRHI acquired Jaynith's Supermarket, a three-store supermarket chain in Metro Manila, Rizal
and Laguna owned and operated by JAS 8 Retailing Management Corporation. At the same time,
RRHI opened its Robinsons Selections and Robinsons Easymart, catering to higher- and lower-end
consumers respectively.

Table 11. Selling Space sq m per Capita of Non-Grocery Retailing by Country

Country 2011 2012 2013 2014 2015 2016
Philippines 0.13 0.13 0.13 0.13 0.13 0.13
Indonesia 0.11 0.11 0.11 0.11 0.12 0.12
Malaysia 0.53 0.53 0.52 0.52 0.51 0.51
Thailand 0.16 0.16 0.16 0.17 0.17 0.17
Source: Euromonitor, PSA, BPS Indonesia, NSO (Malaysia, Thailand), KMC Savills Research

Despite the aggressive expansion of retailers in recent years, modern retailing has yet to fully
penetrate the Philippine market. In terms of non-grocery retail space per capita, the Philippines and
Indonesia have low penetration rates compared to Malaysia’s 0.5 sq m per capita. We expect, as
incomes improve coupled with rising urbanization in the provinces, the Philippines should be able to
accommodate more and larger modern retail formats.

3.1.2. E-commerce in the Philippine

Sales from internet retailing reached PhP28.1 billion in 2016 and has posted robust growth these
past years. Internet retailing sales registered a 19.0% CAGR during 2006-2016 compared to the 4.4%
CAGR of store-based retailers during the same period. However, this category only accounts for a
fraction of total retail sales in the country.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 25

 Graph 3.3
Sales Value of Store-based vs Internet Retailers
Store-based Retailing Internet Retailing

3,500,000

3,000,000

2,500,000
PhP millions

2,000,000

1,500,000

1,000,000

500,000

Source: Euromonitor, KMC Savills Research

According to the Internet and Mobile Marketing Association of the Philippines (IMMAP), there was an
estimated 35 million internet users in mid-2014 and is likely to growth to 70 million by 2018. Growth
has been extremely quick in recent years due to the advent of the smartphone which enabled a
deeper penetration of internet usage.

However, we foresee that a key bottleneck to growth is households’ accessibility to formal financial
services. Based on the BSP’s 2014 Consumer Finance Survey, 86% of Filipino households do not
have a deposit account. In addition, only 2.2% of the population uses credit cards to make payments
according to the World Bank Group. Most individuals who have bank accounts lack the qualifications
to own credit cards. Therefore, consumer spending relies heavily on cash payments over credit cards.
Since credit card penetration is very low, cash-on-delivery is the popular payment mode for online
transactions. This typically applies to consumers who regularly shop online but do not own credit
cards.

In addition, we expect much of the disruption to be limited to retailers of apparel and consumer
electronics. Online transactions in Apparel and Footwear, and Consumer Electronics accounted for
almost half of the total in 2016. Furthermore, these categories posted robust expansion after
registering a CAGR of 9.2% and 35.8% during 2006-2016, respectively. On the other hand, Media
Products were the most popular products sold via the internet which consisted of in-game purchases
and digital purchases of mobile games, console games and computer games. It registered a CAGR
of 29.8% during the same period and has overtaken apparel internet sales since 2012.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 26

 Graph 3.4
Internet Sales Breakdown, 2016

9.1%
20.6% Apparel and Footwear

6.1%

Consumer Electronics

Media Products

Personal Accessories and Eyewear

28.0%
36.3%

Others

Source: Euromonitor, KMC Savills Research

The large local players have started to adjust their respective strategies to incorporate internet
retailing in their operations. Retailers like SM and Robinsons utilized the Lazada platform to launch
the SM Store Online in 2014, and the Robinsons Appliances and Savers Appliances Online in 2015
respectively. In 2015, Waltermart introduced its online grocery service while SM Supermarket
announced its partnership with Metromart and Robinsons Supermarket with HappyFresh the
following year.

Lastly, the forecasted growth of online retailing is expected to remain in double digits in the
foreseeable future. Much of the growth is expected to result from an expanding base of greater
internet usage and consumers with high disposable income. We expect much of this growth to
concentrate in highly urbanized areas of the country with an established logistics network. Other than
this, we expect financial inclusivity to limit growth in the future. As such, store-based retailing should
still be the pre-dominant channel in the market.

3.2. Community Mall Market Commentary

The retail market environment in the Philippines is primarily driven by a growing population, and high
GDP growth resulting to rising incomes. In the second quarter of 2017, the national economy remains
robust with a GDP growth of 5.9%. Moreover, real household income from 2012 to 2015 increased
by a CAGR of 1.8%, 0.6% and 2.2% in NCR, Luzon, Visayas and Mindanao, respectively. The
country’s population has also shown positive expansion with a 5-year CAGR of 1.8% in 2015.

The continuous expansion in retail development is also brought about by the urbanization or the
gradual shift of population from rural to urban areas. In the Visayas and Mindanao, the population
within urban areas correspondingly accounts for 36% and 44% in 2015 from 32% and 39% in 2010.

The PSA distinguishes rural and urban areas in terms of population density, street pattern, and
presence of establishments and facilities for basic services. In 2004, the National Statistics
Coordination Board released a more specific definition of an urban area. The area requires a
barangay with a population size of 5,000 or more, has at least one business establishment with a
minimum of 100 employees, has five or more business establishments with a minimum of 10
employees each, or has five or more facilities within a two-kilometer radius from the barangay hall.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 27

 Retail developers persistently take advantage of these factors in establishing shopping centers in
different urban cities and municipalities in the country. Most of these developers also carry their
affiliated brands of supermarkets, department stores, fashion stores and fast food chains to promote
brand association, and help support the leasing profile of the shopping centers.

3.2.1. Classifications of Shopping Centers

The International Council of Shopping Centers (ICSC) defines a shopping center as a group of retail
establishments, comprised of commercial multi-branded rental units and common areas, that is
planned, developed and managed as a single property.

With the continuous state of change in the trends driven by the diversification of consumer
preferences, the developers are following the shift in demand by creating new formats to protect their
market share and investment performance. However, anchor tenants are still dominated by
supermarkets, and department stores that focus on non-discretionary products.

In the Philippines, the classification of a shopping center is determined by its size, location, concept,
and tenant mix. The size of a shopping center is measured by the Gross Floor Area (GFA) or Gross
Leasable Area (GLA), and is generally related to its location. Shopping centers are situated in urban
areas that are further categorized by income classes by the Department of Finance – Bureau of Local
Government Finance (DOF – BLGF) as shown in Table 10.

Table 12. Income classifications of cities and municipalities

Average Annual Income in PhP
Class
Municipality City
1st > 55,000,000 > 400,000,000
2nd 45,000,000 ≥ 55,000,000 320,000,000 ≥ 400,000,000
3rd 35,000,000 ≥ 45,000,000 240,000,000 ≥ 320,000,000
4th 25,000,000 ≥ 35,000,000 160,000,000 ≥ 240,000,000
5th 25,000,000 ≥ 15,000,000 80,000,000 ≥ 160,000,000
6th < 15,000,000 < 80,000,000
Source: DOF - BLGF

Most shopping centers situated in first-class cities and established CBDs have GLAs of more than
20,000 sq m. These draw a broad trade area while shopping centers in less urbanized areas have
GLAs of around 5,000 to 20,000 sq m catering to a smaller local catchment.

Additionally, the concept of a shopping center indicates its target market positioning and is primarily
conveyed through the design. Most shopping centers are enclosed but current emerging trends are
leaning toward open-air and leisure-type establishments.

Table 13. Classifications of shopping centers

Average GLA No. of Anchor
Classification Location
in sq m Tenants

High density residential areas;

Retail Strip 1,000 ≥ 10,000 0
CBDs

Lifestyle Mall 20,000 ≥ 30,000 CBDs and townships 0

Second and third-class cities;

Community Mall 5,000 ≥ 20,000 1-2
First-class municipalities

Regional Mall 20,000 ≥ 90,000 First and second-class cities >2

Super Regional First-class cities with established

> 90000 >3
Mall CBDs

Source: ICSC, KMC Savills Research

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 28

 The classification of a shopping center is also identified by its tenant mix. It refers to the assortment
of goods and services available through the nature of the anchors, the price points they represent
and the customer base they serve. The presence of anchor tenants may also determine the
classification of a shopping center as shown in Table 11. Anchor tenants primarily drive traffic to a
shopping center and suggest the market it accommodates. Shopping centers may focus on lower-
order retailing by offering essential or non-discretionary products targeting day-to-day convenience
shopping, or higher-order retailing which concentrates on discretionary products catering to
specialized and occasional shopping.

An example of an open-air shopping center is a retail strip. Retail developments in this format usually
have no enclosed walkways linking attached row of retail stores arranged in a straight line, L-shape
or U-shape orientation. Retail strips offer narrow mix of goods and personal services catering only to
a limited market. Tenants in this classification are mostly restaurants, coffee shops and fashion
outlets. The Bonifacio High Street is a retail strip developed by Ayala Land, Inc. It is situated at the
center of the Bonifacio Global City (BGC) in Taguig City offering international clothing brands, health
and beauty stores, restaurants and cafes.

Figure 4. Retail Strip: Bonifacio High Street

Source: Wikimedia Commons

Lifestyle malls, similar to retail strips, highlight a more outdoor setting with leisure or entertainment
as a unifying concept. Typically located near central business districts and large mixed-use
developments, lifestyle malls are dominated by upscale specialty stores with dining, fashion, leisure
and entertainment offerings. No anchor tenants are present in this classification.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 29

 Figure 5. Lifestyle Mall: Venice Piazza Grand Canal Mall

Source: Wikimedia Commons

Megaworld Corporation is known to incorporate lifestyle malls in its townships. One of its most
recently opened lifestyle mall is the Venice Piazza Grand Canal Mall located in McKinley Hill, just
outside BGC. This lifestyle mall has an Italian setting conforming to the overall theme of the McKinley
Hill township. Apart from the grand canal featuring iconic gondolas, Venice Piazza Grand Canal Mall
also offers various international restaurant chains and clothing brands, and houses five Venice
Cineplex theaters.

A classification of shopping centers which cater to a more limited catchment area is the community
mall. The gross leasable area of a community mall ranges from 5,000 sq m to around 20,000 sq m,
with one to two anchor tenants occupying around one third of its GLA. Community malls are usually
located in first-class municipalities, second and third-class cities capable of drawing a significant local
catchment area. It is convenience-oriented, heavily focused on offering essential retail merchandise
and services. Most of the community malls established by listed retail developers often carry its
affiliated supermarket brand, department store and fast food chains. Since the focus of community
malls is the local trade area, the most typical anchor tenant is a supermarket supported by other
tenants such as general merchandise stores, local fast food chains, and other local and independent
brands.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 30

 Figure 6. Community Mall: CityMall Kalibo

Source: Google Images

One of the fast-growing brand of community malls is CityMall by DoubleDragon Properties Corp. In
April 2016, the developer opened CityMall Kalibo located in a first-class municipality in the Western
Visayas region. It features SM’s Savemore supermarket as its anchor tenant, and houses ACE
Hardware, SM Appliance Center, Simply Shoes, BDO, and DoubleDragon’s affiliated fast food chains
like Mang Inasal, Jollibee and Chowking. CityMall Kalibo is surrounded by residential areas and is
proximate to the Kalibo Public Market, local transport terminals, local government offices and
educational institutions.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 31

 Figure 7. Location of CityMall Kalibo

CityMall Kalibo

Source: KMC Savills Research

On the other hand, regional malls draw a broader catchment with wider range of general merchandise
and fashion oriented offerings. Located in first and second-class cities, regional malls hold more than
20,000 sq m to 90,000 sq m of gross leasable area with two or more anchor tenants. A typical regional
mall is enclosed with inward facing stores connected by a common walkway and focuses mainly on
non-discretionary retail featuring national chains, and entertainment.

Robinsons Place Malolos, a regional mall developed by Robinsons Land Corporation, is located in
the first-class City of Malolos, the capital city of the province of Bulacan. It holds more than 40,000
sq m of GLA featuring Robinsons Supermarket and Robinsons Department Store as its anchor
tenants. The regional mall also carries stores under the developer’s brand such as Robinsons
Appliances, Handyman and Toys R Us. There are also a handful of national chains or retail brands
with multiple outlets nationwide, offering discretionary products like fashion, health and beauty
products. Multiple national fast food chains and restaurants are also present together with other
consumer support services like banks, travel and logistics services, and beauty and wellness centers.
Moreover, Robinsons Place Malolos also offer entertainment through Robinsons Movieworld and an
activity center where local events are hosted. Lastly, the regional mall is situated along a national
road with very close proximity to other retail establishments, provincial government offices, hospitals
and educational institutions.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 32

 Figure 8. Location of Robinsons Place Malolos

Robinsons Place Malolos

Source: KMC Savills Research

A larger version of a regional center is the super regional mall with over 90,000 sq m of gross leasable
area. It caters to a more extensive trade area, situated in highly urbanized cities and central business
districts. A super regional mall houses three or more anchor tenants and has a wider variety of fashion
and entertainment offerings. Moreover, it is comprised of stronger lineup of international chains
compared to a regional mall.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 33

 Figure 9. Super Regional Mall: SM Mall of Asia

Source: Wikimedia Commons

One of the biggest regional malls in the country is SM Mall of Asia. This massive 400,000-sq m retail
complex developed by SM Prime Holdings, Inc. is situated inside the Bay Area CBD in Pasay City. It
caters to three first-class cities in Metro Manila namely Parañaque City, Pasay City, and City of
Manila. The mall highlights several anchors such as the SM Hypermarket, SM Department Store,
ACE Hardware, SM Appliance Center, and Toy Kingdom. It also houses several flagship stores of
national and international brands such as H&M, Forever21, Uniqlo, MANGO, Huawei, Motorola and
Pizza Hut. SM Mall of Asia also boast of its entertainment offerings including the IMAX Cinema, SM
Bowling, SM Skating Rink, Kodanda Archery Range, and soon a football stadium atop the mall.

3.2.2. Community Malls Supply

Listed retail developers have been taking advantage of the agglomeration effect in the highly
urbanized areas in the Philippines. The top developers in the country led by SM Prime Holdings,
Ayala Land and Robinsons Land have established their regional and super regional malls in the highly
urbanized cities in the country. These developers maintain heavy focus on food, groceries, and
general merchandise but also introduced higher-order retailing to penetrate the market through
fashion, accessories and homeware stores. Integration of leisure and entertainment in shopping
centers are also being positioned through cinemas, arcades and fitness centers.

Driven by the growing population and increasing real household income, retail developments outside
Metro Manila and first-class cities in the provinces are going to the direction of a more formal and
modern retailing. This movement creates an opportunity for the listed developers to reach out to local
markets and venture in community malls. However, the expansion in community malls is mainly
concentrated in Luzon. With the exception of Robinsons Land, top listed developers still choose to
invest in larger-scale shopping centers in Visayas and Mindanao, leaving the community malls supply
dominated by smaller local players.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 34

 Graph 3.5
Community Malls Stock by Island Group
Luzon Visayas Mindanao

50

40

30
No. of community malls

20

10

Source: KMC Savills Research

Leading local retail developers in Visayas and Mindanao includes Gaisano Grand Group, founded by
Benito S. Gaisano and currently owns Gaisano Grand Malls. Another local key player in the region is
Gaisano Capital, founded by Edmund S. Gaisano and currently operates Gaisano Capital Malls and
Gaisano Central Malls. On the other hand, Waltermart Supermarket, Inc. positions Waltermart Malls
in Luzon where it leads in terms of number of community malls. Lastly, DoubleDragon Properties
Corp. started to establish CityMalls in 2015 opening 10 community malls in a span of one year.
DoubleDragon is expected to surpass all other community mall developers with 100 CityMalls in its
retail portfolio nationwide by the year 2020.

In 2015, SM acquired Cherry Foodarama, a local supermarket brand with three existing stores in
Luzon. Recently, SM transformed the store in Rizal to a three-level community mall and renamed it
SM Cherry Antipolo. It now houses more than 17,000 sq m of GLA, making it the only community
mall under the leading mall developer.

Table 14. Number of Community Malls by Top Listed Developers

No. of Community Malls Type of Anchor
Developer Present Location
2016 2020F Tenant
DoubleDragon Properties Corp. 10 100 Supermarket Luzon, Visayas, Mindanao

Waltermart Supermarket, Inc. 21 37 Supermarket Luzon

Gaisano Grand Group 29 32 Supermarket Visayas, Mindanao

Gaisano Capital 21 21 Supermarket Luzon, Visayas, Mindanao

Robinsons Land Corporation 17 17 Supermarket Luzon, Visayas, Mindanao

Supermarket and
Vista Land & Lifescapes, Inc. 5 7 Luzon, Visayas
Department Store
Supermarket and
Ayala Land, Inc. 3 4 Luzon
Department Store
Filinvest Land, Inc. 1 3 Supermarket Luzon
SM Prime Holdings, Inc. 0 1 Supermarket Luzon
DSG Sons Group Inc. 1 1 Supermarket Mindanao
Source: KMC Savills Research

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 35

 The community mall stock in Luzon constitutes to 49.0% of the Philippines overall supply with an
aggregate gross leasable area of around 535,000 sq m. Among developers, Waltermart corners the
largest market share with a total of 21 malls reaching over 263,000 sq m of GLA in 2016. Waltermart
Malls are located within Metro Manila and nearby provinces in Luzon, such as Laguna, Cavite and
Bulacan. Likewise, community malls of listed developers are mostly present in Luzon keeping their
focus on developing regional and super regional malls in other parts of the country.

Figure 10. Geographical Profile of Community Malls in Luzon

Source: KMC Savills Research

Another young retail developer entered the community mall segment in 2015. DoubleDragon opened
its first community mall, CityMall Arnaldo-Roxas located in Western Visayas. In the same year, it
established its presence in Luzon with CityMall Anabu in Cavite, and in Mindanao with CityMall
Tetuan in Zamboanga del Sur. Since then, it has aggressively penetrated the local market
constructing over 160,000 sq m of GLA in a span of almost three years. At present, DoubleDragon
has a total of 27 CityMalls nationwide with more than half of its supply situated in the Visayas.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 36

 Figure 11. Geographical Profile of Community Malls in Visayas

Source: KMC Savills Research

The Visayas and Mindanao regions also host a number of community malls primarily situated in
second-class cities like Digos in Davao del Sur, third-class cities such as Passi City in Iloilo, and first-
class municipalities like Consolacion in Cebu. The community mall segment in these regions are
mainly dominated by established local retail developers. The Gaisano Grand Group of Companies
first established its community malls in Cebu and has now reached a total of 29 community malls
throughout Visayas and Mindanao with an estimated collective GLA of over 263,000 sq m. Another
pertinent player in the local market is Gaisano Capital gaining a fair market share of almost 170,000
sq m of gross leasable area. It primarily focuses on the VisMin region but has also started to establish
community malls in Luzon particularly in the provinces of Bicol and Mindoro.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 37

 Figure 12. Geographical Profile of Community Malls in Mindanao

Source: KMC Savills Research

Altogether, the development in the community mall segment has continuously shown considerable
growth potential. With most top listed developers delegating majority of the market share to younger
retail developers, there is an opportunity for further expansion towards this segment. Among the top
listed developers, only Ayala has an upcoming community mall situated in Marikina and expected to
be completed in 2018.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 38

 Local retail players Gaisano Grand and Gaisano Capital have yet to disclose any plans of adding
new community malls. At present, Waltermart has stated its intention of acquiring more lots for future
developments to attain its target of opening at least four malls a year. By far, DoubleDragon is
expected to be the leading player in the community mall classification targeting a total of 100 CityMalls
by 2020. Its overall total then will be around 700,000 sq m of GLA.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 39

 In terms of anchor tenants, most of the existing community malls house a supermarket under the
same enterprise. Robinsons Malls carry its own brand, Robinsons Supermarket, while Gaisano
Capital houses Gaisano Central Supemarket. Although, three CityMalls feature other supermarket
brands, the most recently opened malls feature SM’s Savemore. Meanwhile, Ayala and Filinvest
partners with other supermarket brands such as Metro Supermarket, South Grocer and LCC
Supermarket. On the other hand, Vista Group focuses on higher-order retailing by positioning All
Home or All Shoppe as anchor tenant in its community malls.

Lease rates vary on the location and classification of a shopping center. The typical base rate outside
of Metro Manila starts at around PhP500 per sq m to PhP800 per sq m with an overage rate of 3.0%
to 5.0% on gross sales. These rates may vary especially for anchors and other tenants with higher
turnover rates. There are also special cases where rents are based on percentage sales alone like
in UP Town Center where prevailing lease rates are greater than 10.0%. Lastly, the typical lease
period is one year, renewable for every succeeding year.

The presence of community malls in newly urbanized areas creates a new platform for the local retail
market. As household incomes in these areas continue to grow due to improvement in employment
and inflow of OFW remittances, consumers are expanding their options by advancing to a higher
quality of life. DoubleDragon should continue to take advantage of this opportunity by tapping more
of the local market through the introduction of a more modern formats of retailing through CityMalls.
These community malls maintain focus on food and groceries through Savemore, its anchor tenant,
and major fast food chains like Jollibee and Mang Inasal. Some CityMalls now feature cinemas
providing entertainment in the local market.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 40

4. Office Market
4.1. Office Market Commentary
Table 15. Key Figures of Grade A Offices
2Q2017 Makati CBD BGC Ortigas Alabang Quezon City Bay Area
Average net rental rate (PhP/sq m/month) 1,038.11 912.27 658.51 630.60 718.48 712.76
Upper net rental rate (PhP/sq m/month) 1,500.00 1,200.00 825.00 700.00 800.00 750.00
Vacancy rate (%) 3.1% 3.8% 1.2% 5.3% 10.7% 3.7%
Current Stock (sq m) 1,101,074 1,400,745 538,068 401,296 463,183 394,633
Development Pipeline 2017-2020 (sq m) 117,373 646,999 318,359 225,388 320,628 401,328
Source: KMC Savills Research

The Philippine office market has had consistent strong expansion. Historical data show a steady
growth in office stock accompanied by healthy net take-up. With the strong outlook on the country’s
economy, construction activities are proliferating to accommodate the perceived upcoming demand
from the Outsourcing and Offshoring (O&O) and Offshore Gaming industries.

4.1.1. Outsourcing Industry

The primary driver of office space demand in the Philippines is the O&O market. As per IBPAP, the
Philippines is currently the top choice for voice-based services since it has a significant advantage in
terms of well-educated workforce, communication proficiency, and competitive wage levels. Manila
and Cebu have been ranked highly in Tholons’ research of top outsourcing destinations wherein
Manila has consistently been present in the top 10 since 2012. Other business districts included in
the top 100 outsourcing destinations for 2017 are Bacolod, Davao, and Laguna.

Table 16. Tholons City Rankings

Region Country City 2012 2013 2014 2015 2016 2017
Asia Pacific India Bangalore 1 1 1 1 1 1
Asia Pacific India Mumbai 2 2 3 3 3 2
Asia Pacific India Delhi (NCR) 3 4 4 4 4 3
Asia Pacific Philippines Manila (NCR) 4 3 2 2 2 4
Asia Pacific India Hyderabad 6 6 6 6 6 5
Americas Brazil Sao Paulo 13 18 20 24 27 6
Europe Ireland Dublin 8 9 10 12 10 7
Europe Poland Kraków 11 10 9 9 9 8
Asia Pacific India Chennai 5 5 5 5 5 9
Americas Argentina Buenos Aires 15 24 28 33 33 10
Source: Tholons, KMC Savills Research

Furthermore, to maintain the current growth trajectory, the government has also been supportive of
the industry, signaling the importance of the sector to the economy. There are several economic
zones under the Philippine Economic Zone Authority (PEZA) designated for outsourcing companies
which offers tax incentives. In addition, the government has also introduced specialized schools to
cater to outsourcing needs. The recently created Department of Information and Communication
Technology is tasked to promote the ICT sector and work towards ensuring its consistent growth.

However, political uncertainty and onshoring have raised concerns in the O&O sector which may
likely impede its growth. Moreover, the prevailing technological trends (e.g., Robotic Process
Automation and Artificial Intelligence) are expected to introduce ambiguity in the sector’s growth in
the coming years. This may augment the demand coming from new technology-enabled services,
but may dampen the growth of services that may become redundant due to automation or
streamlining.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 41

 Graph 4.1
BPO Revenues and Full-Time Equivalents (FTEs)

Industry Revenues (US$) Full-Time Equivalents (FTEs)

35 2,100

30 1,800

25 1,500

Thousands
Billions

20 1,200

15 900

10 600

5 300

0 0

Source: IBPAP

Hence, sustained growth of the sector will be dependent on the government’s initiative on keeping
up with technological trends and being able to shift to higher-value services. If the country
successfully shifts to higher-value services, the outsourcing sector is estimated to employ on average
100,000 additional Full-Time Equivalents (FTEs), or the ideal number of full-time employees, per year
until 2022 and grow to US$38.9 billion in revenues by 2022.

4.1.2. Offshore Gaming

Another industry expected to drive office demand are the offshore gaming companies. Offshore
gaming is gambling conducted via internet to be offered exclusively to offshore authorized players.
Offshore gaming companies are either Philippine Offshore Gaming Operators (POGO), entities who
provide and participate in offshore gaming services, or service providers who deliver components of
offshore online gaming operations. The Philippines is currently eyed as an attractive destination for
offshore gaming because of competitive costs and availability of prime-grade buildings.

Offshore gaming has been well accepted with 76 applications for 'offshore' online gaming licenses
upon the start of accommodation. One operator is expected to require at least 2,000 sq m of office
space. However, it is still uncertain if the offshore gaming sector will sustain this growth and be the
next major demand driver of the office market. Philippine Amusement and Gaming Corporation
(PAGCOR) currently limits the number of licenses to be released to 50.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 42

4.2. Office Market Supply
Graph 4.2
Grade A Office Stock in Metro Manila
Makati CBD BGC Ortigas Center
Alabang CBD Bay Area Quezon City
4,500

4,000

3,500

3,000
'000 sq m (GLA)

2,500

2,000

1,500

1,000

500

Source: KMC Savills Research

The major submarkets in Metro Manila consist of Makati CBD, Ortigas Center, Bonifacio Global City
(BGC), Quezon City, Alabang, and Bay Area. Makati CBD is the oldest and most prestigious business
district among the submarkets. The business district has 1,101,000 sq m of office space and houses
top companies in the Philippines like Ayala Corp. and the Philippine Stock Exchange.

On the other hand, Ortigas Center is the second oldest financial district with 558,000 sq m of office
space. The business district is considered comprehensive with the right balance of commercial,
residential and technological zones. The CBD is shared by Pasig City, Quezon City, and
Mandaluyong City. The business district has been a laggard as compared to the other submarkets
because of the estate’s inability to stay competitive against Makati CBD and BGC. However, Ortigas
Center is set to rebound from its lethargic state with the ongoing improvements in the estate. The
country’s top developers, Ayala Land, Inc. and SM Prime Holdings, currently controls Ortigas Center
through their joint acquisition of Ortigas and Company Limited.

BGC has ascended as a top CBD next to Makati due to its rapid development. The submarket has
been the focal point for developers because of the available land. It has already outpaced Makati
CBD with 1,152,000 sq m of office space at the end of 2016. The district is also expected to be the
next major financial hub with large financial institutions starting to relocate (i.e. Philippine Stock
Exchange).

Other submarkets that are experiencing rapid development in Metro Manila are Alabang CBD,
Quezon City, and Bay Area. Alabang CBD is shared by Las Piñas and Muntinlupa City, and consists
of around 311,000 sq m of office space. The area consists of the City Center, Civic Plaza, Spectrum
District, Westgate Alabang, Alabang Town Center, Madrigal Business Park, SM Southmall, and
Northgate Cyberzone.

Quezon City is the largest city in Metro Manila in terms of population and land area. The city has
around 463,000 sq m of office space. Its business districts are dispersed and composed of Araneta
Center, Fairview, Ayala Technohub, Eton Centris, and the newly-opened Vertis North.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 43

 Lastly, the booming Bay Area, shared by Pasay and Parañaque, has around 326,000 sq m of office
space and is expected to expand further. It is also seen to boost its stock of office space significantly
this 2017 with a record 214,000 sq m of new space. This is scheduled to be delivered with a significant
share from DoubleDragon Properties Corp. in the Meridian Park. The Bay Area has enjoyed
significant market demand from offshore gaming companies and some sectors of government.

Strong demand of office space led to continuous construction of Grade A office buildings in Metro
Manila. Around 426,400 sq m of new office space were completed in the first half of 2017. Due to the
availability of land for development, bulk of building completions in the last decade came from BGC,
accounting for more than half of the new supply with 248,400 sq m. The business district is currently
sought after as an attractive location for consolidation of operations and is considered the next prime
location. Other submarkets that saw significant developments were Bay Area and Alabang
submarkets.

4.2.1. Development Activities

Construction activities have proliferated in Metro Manila. The office market is heavily driven by the
growing BPO sector and expected to be aided by the POGO sector. Substantial efforts by developers
have been made for their respective buildings to be LEED certified. Moreover, PEZA accreditation is
noticed to have become more commonplace as BPO tenants target these buildings to enjoy tax
incentives.

Table 17. Metro Manila Pipeline for the next 12 months

Building Name Developer Class District Period GLA
Vista Hub Vista Land & Lifescapes, Inc. Grade A BGC 3Q2017 18,009
High Street South Corporate
Ayala Land, Inc. Grade A BGC 3Q2017 37,877
Plaza I
Menarco Tower Majent Group of Companies Grade A BGC 3Q2017 25,442
The PSE at One Bonifacio Ayala Land, Inc. Grade A BGC 3Q2017 28,992
Ortigas & Co. Limited Ortigas
IBP Tower Grade A 3Q2017 20,445
Partnership Center
Vertis North Corporate
Ayala Land, Inc Grade A Quezon City 3Q2017 40,694
Center Tower 1
iMet Federal Land, Inc. Grade A Bay Area 3Q2017 18,543
Gold Quest Premiere
The Biopolis Grade A Bay Area 3Q2017 18,892
Resources, Inc.
DoubleDragon Properties
DoubleDragon Plaza Tower 2 Grade A Bay Area 3Q2017 28,339
Corp.
Greater
The 30th Corporate Center Ayala Land, Inc. Grade A 3Q2017 47,000
Ortigas
Circuit Corporate Center 2 Ayala Land, Inc. Grade A Makati Fringe 3Q2017 26,645
Circuit Corporate Center 1 Ayala Land, Inc. Grade A Makati Fringe 3Q2017 47,143
One Park Drive Ayala Land, Inc. Grade A BGC 4Q2017 21,372
Megawide Construction
The Curve Grade A BGC 4Q2017 24,856
Corporation / Bench
ArthaLand Century Pacific
ArthaLand Corporation Premium BGC 4Q2017 29,935
Tower
Vertis North Corporate
Ayala Land, Inc. Grade A Quezon City 4Q2017 41,550
Center Tower 2
DoubleDragon Properties
DoubleDragon Plaza Tower 3 Grade A Bay Area 4Q2017 28,334
Corp.
DoubleDragon Properties
DoubleDragon Plaza Tower 4 Grade A Bay Area 4Q2017 27,494
Corp.
Eastfield Properties and
Eastfield Center Land Development Grade A Bay Area 4Q2017 24,746
Corporation
Rockwell Business Center Greater
Rockwell Land Corporation Grade A 4Q2017 22,000
Sheridan Tower 1 Ortigas
Greenfield Development Greater
Greenfield Tower Grade A 4Q2017 42,000
Corporation (GDC) Ortigas
CW Marketing and Greater
Ortigas Technopoint Two Grade A 4Q2017 22,314
Development Corporation Ortigas
Exxa Tower Robinsons Land Corporation Grade A C5 Corridor 4Q2017 35,880
Alphaland Corporate Tower Alphaland Corporation Grade A Makati Fringe 4Q2017 22,553

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 44

 City Gate Phase 1 BPO Ayala Land, Inc. Grade A Makati CBD 1Q2018 36,700
Megablock Tower 1 Filinvest Land, Inc. Grade A Alabang CBD 1Q2018 38,900
Vertis North Corporate
Ayala Land, Inc. Grade A Quezon City 1Q2018 36,000
Center Tower 3
Millenium Properties and
Nexgen Tower Grade A Bay Area 1Q2018 19,756
Brokerage Inc.
ThreeE-ComCenter SM Prime Holdings, Inc. Grade A Bay Area 1Q2018 62,000
Aseana Three Aseana Holdings, Inc. Grade A Bay Area 1Q2018 30,573
City Gate Phase 1 HQ Ayala Land, Inc. Grade A Makati CBD 2Q2018 19,500
High Street South Corporate
Ayala Land, Inc. Grade A BGC 2Q2018 42,000
Plaza II
Daiichi Properties and
The Finance Centre Premium BGC 2Q2018 62,000
Development, Inc.
Twenty Five Seven Mckinley SLA Prime Ventures Corp. Grade A BGC 2Q2018 22,629
Robinsons Cyberscape Ortigas
Robinsons Land Corporation Grade A 2Q2018 43,344
Gamma Center
CTP Alpha II CTP R.E.D.3 Grade A Alabang CBD 2Q2018 20,289
One Griffinstone Building Tecoma Corporation Grade A Alabang CBD 2Q2018 22,903
Rockwell Business Center Greater
Rockwell Land Corporation Grade A 2Q2018 22,000
Sheridan Tower 2 Ortigas
Zeta Tower Robinsons Land Corporation Grade A C5 Corridor 2Q2018 32,052
Source: KMC Savills Research

A significant amount of supply is expected to come in the market in the next 12 months. BGC is
expected to have the largest share of the new supply with 313,000 sq m of office space. Other areas
are Quezon City, with the introduction of Vertis North, and Bay Area with the rest of DoubleDragon
Plaza. Also, there are noticeable construction activities in the Ortigas Center, with 63,700 sq m of
new stock expected, and 155,300 sq m in the Greater Ortigas area in the coming year.

The following section highlights several notable development completions within the next 12 months.

DD Meridian Park
Figure 13. Meridian Park

Source: DoubleDragon Properties Corp.

DD Meridian Park is a 4.75-hectare prime commercial lot situated at the corner of EDSA and
Diosdado Macapagal Boulevard. This is expected to provide up to 280,000 sq m GLA by 2020. The
complex is constructed in four phases, with phase one consisting of DoubleDragon Plaza, and phase
two of Corporate Offices – DoubleDragon Center East and West. The third phase of the project is
Ascott-DD Meridian Park Manila which is expected to have 300 luxury serviced apartments, while the
fourth phase is yet to be announced.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 45

 The first phase of the project is the DoubleDragon Plaza. This is an 11-storey office complex with
over 130,000 sq m of leasable space. It is comprised of four office towers that sit atop a retail podium
each with its own private lobby and elevators. The development is now in full-swing and slated for
completion by 2018. The project is LEED pre-certified Silver and is aiming for a PEZA accreditation,
making it an ideal address for the growing BPO industry.

Vertis North
Vertis North is an ongoing development by Ayala Land, Inc. located along EDSA, North Ave., and
Agham Road. Vertis North aims to be a complete mixed-use development. As per Ayala’s master
plan, almost half of the land will be used for commercial development, followed by residential
development, taking around 38.0% of land. Other uses of the area are hospitality and institutional.

The project aims to be a green development, as it is planned to house a large garden in the middle
of the arrangement. Moreover, the buildings that are expected to be finished within the year, Vertis
North Corporate Towers 1 and 2, are LEED certified and are expected to add 82,200 sq m of leasable
area. By 2019, these office buildings are anticipated to be accompanied by six more towers in SM
North EDSA.

4.3. Office Market Demand

Graph 4.5
Grade A Office Take-up and Supply (Metro Manila)

Supply Take-Up Vacancy Rate

500 10%

400 8%

300 6%
'000 sq m

200 4%

100 2%

0 0%

Source: KMC Savills Research

Strong occupier demand held vacancies to just 4.2% of total stock in 2016, with BGC and Bay Area
performing consistently good in the past quarters. BGC maintained a low vacancy rate of 3.8%
despite the significant supply, as the CBD was an attractive location for tenants who began
consolidating their operations, easing Makati CBD’s tight vacancy rate. Among the Metro Manila
submarkets, Quezon City has a relatively high vacancy rate which started to rise late in 2015. By the
end of 2016, vacancies in the district were still elevated at 10.7% of total stock despite no additional
supply in the submarket.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 46

 Graph 4.5
Grade A Office Take-up and Supply (Bay Area)

Supply Take-up Vacancy Rate

150 5%

120 4%

90 3%
'000 sq m

60 2%

30 1%

0 0%

-30 -1%

Source: KMC Savills Research

The Bay Area is an attractive location to O&O tenants, and is considered to be the next BPO hub in
Metro Manila. Big companies like Xerox, ePerformax, Philippine EDS Techno-Service, 2GO Group,
Inc., Royal Carribean Cruises Ltd. have already set their office up in the district. Despite the influx of
new supply, the recent strong demand coming from the O&O and POGO sectors consistently drove
the vacancy rate low in the district with just 3.7% at the end of first half.

Graph 4.4
Grade A Office Take-up and Supply (Ortigas)
Supply Take-up Vacancy Rate
120 8%

90 6%

60 4%
'000 sq m

30 2%

0 0%

-30 -2%

Source: KMC Savills Research

Lastly, Ortigas Center has consistently enjoyed strong demand for both traditional and O&O locators.
However, the district has seen only few completions since 2015. The high demand for office in the

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 47

 CBD coupled with slow additions led to consistently low vacancies, currently at 1.2% of total Grade
A office stock.

4.4. Office Market Performance

4.4.1. Rents
Graph 4.7
Grade A Office Rents Index
Cebu Metro Manila Makati CBD BGC
Ortigas Center Alabang CBD Quezon City
160

140
1Q 2009 = 100

120

100

80

Source: KMC Savills Research

Declining rental growth is observed in certain submarkets in Metro Manila, indicating significant
supply pressure. However, keeping rents affordable during this massive inflow of completions should
sustain the take-up velocity in Metro Manila. A critical factor on the first half’s impressive performance
is due to landlords’ willingness to mitigate rents in order to stay competitive. As such, we should see
sustained pressure on rentals until next year as we still expect around 892,100 sq m of new office
space in the next 12 months.

Among the submarkets, the Makati CBD still commands the highest average rent at PhP1,038.1 per
sq m / month, but BGC is observed to have the strongest rental performance in the first half of 2017
due to strong demand for office space. BGC is projected as the ideal location for consolidated
business operations due to the massive pipeline. BGC is the only CBD that experienced above-
average rental growth despite the significant influx of supply. Other submarkets experienced a
decrease in rental growth, as the significant addition of supply put downward pressure on rents.
Quezon City experienced the least growth in rental rates, with only 0.6%. However, this growth may
be positive as compared to its average of -0.4% YoY growth in the second half of 2016. Ortigas
Center’s rents experienced healthy growth of 3.1% YoY with the submarket’s average rising to
PhP658.5 per sq m / month. Bay Area continues to sustain its healthy growth, with around 3.0% YoY
for the first half of 2017 and commanding an average rent of PhP712.8 by the end of the first half.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 48

4.4.2. Investments
Graph 4.8
Grade A Office Yield

Yield Spread Office Yield 10-Year Gov't Bond Yield

14%

12%

10%

8%

6%

4%

2%

0%

Source: KMC Savills

With the optimistic outlook on the Philippine economy and the booming office sector, gross office
yields in the metro have compressed significantly in recent years with the rise in transaction activity
in the office market. Much of the activities were concentrated in the main CBDs with the largest
transaction coming from the sale of the AccraLaw Tower, a Grade A office building in BGC. The asset
achieved a lot of interest, mainly from local sources, and ended up being bought by a local family.

Table 18. Recent Office Transactions

Date Property Location Price Buyer
3Q2016 Accralaw Tower BGC PhP3.7 bil/US$75.0 mil Private investor
Enterprise Center Shang Properties (17.2%)
3Q2016 Makati CBD PhP2.3 bil/US$48.9 mil
(20.1% partial interest) & A. Soriano Corp (2.9%)
PhP257.2 mil/US$5.1
2Q2017 2F Tektite Tower Ortigas Center Philippine Realty & Hldgs
mil
Source: RCA, KMC Savills Research

Another notable transaction was the sale of ING Real Estate’s 20.0% stake in the premium grade
Enterprise Center building along Ayala Avenue in Makati CBD. Shang Properties, Inc. and A. Soriano
Corporation were the buyers in this deal. Lastly, Philippine Stock Exchange’s (PSE’s) sale of its office
space in Tektite Tower, Ortigas Center, signals its move to consolidate its trading floors in its new
headquarters in BGC, thereby reinforcing the township’s appeal as a financial district.

4.5. Office Market Outlook

The Metro Manila market is expected to remain healthy especially with the diversified occupier
demand from the expanding O&O and POGO markets. In addition, occupier demand is expected to
briskly absorb the building completions in the coming quarters. Vacancies are still expected to remain
in single digits, but the influx of supply is expected to put downward pressure on the rents. Landlords
who are to remain competitive in the coming quarters should be able to facilitate the quick absorption
of new stock and keep vacancies at a reasonable level.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 49

 Graph 4.9
Grade A Supply and Vacancy (Metro Manila)
Makati CBD BGC Ortigas Center
Alabang CBD Bay Area Quezon City
Metro Manila Vacancy Rate
1,000 10%

800 8%

600 6%
'000 sq m (GLA)

400 4%

200 2%

0 0%

Source: KMC Savills Research

DoubleDragon Properties Corp. is present in submarkets that are experiencing a rise in construction
activity, such as Ortigas Center and the Bay Area.

Ortigas Center
The quiet construction activity led the Ortigas Center to become a laggard in terms of office space as
compared to the developed Makati CBD and BGC. However, several construction activities are
noticed in the area and are expected to add a significant amount of supply by 2020. High-quality
buildings are expected to rise in Ortigas Center with 254,000 sq m expected to be completed by
2020. This will come from Jollibee Tower, GLAS Tower, SM-Keppel Tower, and SM Megatower.

Table 19. Ortigas Center Development Pipeline

Building Name Developer Class Period GLA
IBP Tower Ortigas & Co. Limited Partnership Grade A 3Q2017 20,445
Robinsons Cyberscape Gamma Robinsons Land Corporation Grade A 2Q2018 43,344
Jollibee Tower DoubleDragon Properties Corp. Grade A 4Q2018 55,000
SM-Keppel Tower SM Group JV Keppel Grade A 1Q2019 89,000
GLAS Tower Green Asia Corp. Grade A 4Q2019 60,000
SM Megatower SM Prime Holdings, Inc. Grade A 4Q2020 105,570
Corporate Finance Plaza Amberland Corporation Grade A 1Q2021 88,450*
Exchange Square Center Amberland Corporation Grade A n/a n/a
Exquadra Exquadra Inc. Grade A n/a 62,000*
One Filinvest Filinvest Land, Inc. Grade A 4Q2020 39,698
*Estimate
Source: KMC Savills Research

Moreover, a significant amount of investment is being poured by Ortigas and Co. to develop Greater
Ortigas. Around P60 billion will be invested for the Greenhills redevelopment, another P60 billion for
Frontera Verde uplift, and an initial P5 billion for the first phase of the Capitol Commons expansion.
For the office space, new supply in Greater Ortigas is expected to come from the emerging
microdistricts of Greenfield District and Capitol Commons.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 50

 Jollibee Tower
Figure 14. Jollibee Tower

Source: DoubleDragon Properties Corp.

This Grade A 41-storey commercial and office tower is poised to become a prominent landmark in
the Ortigas Central Business District by 2018. Situated on a 3,002-sq m prime commercial lot located
at the corner of F. Ortigas Jr. Road and Garnet Road, Jollibee Tower will complement the thriving
business community in the Ortigas Area. Offering over 55,000 sq m of leasable space by 2018,
Jollibee Tower features ground floor food concepts and a drive-through provision as well as an events
center.

The tower will be designed as a Grade A structure and is already pre-certified LEED Gold.
Construction is in full-swing since its ground breaking last March 7, 2016 while completion is targeted
within 2018.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 51

 Graph 4.9
Grade A Stock and Vacancy (Ortigas)
Stock Vacancy Rate

900 12%

600 8%
'000 sq m

300 4%

0 0%

Source: KMC Savills Research

Ortigas Center’s vacancy rate is still expected to remain low with just 63,700 sq m of new office stock
in the coming 12 months. However, the expected massive pipeline is expected to push the vacancies
upwards. The consistent high demand in the district is expected to taper the effect of the new supply,
estimated to keep vacancies at a maximum of 10.0% of stock until 2020.

Bay Area
The Bay Area is estimated to end 2020 with 795,900 sq m of Grade A Office Stock. This will enable
it to become the 3rd largest office district in the capital. The budding district will rival BGC as the top-
of-mind outsourcing destination in Metro Manila because of its superior infrastructure improvements,
better accessibility that can tap the labor market in Parañaque and Southern Luzon, affordable rents
with ample room to expand, and more appealing entertainment and retail offerings from integrated
resorts and super regional shopping centers.

SM Group currently holds the largest office space in the district. By the end of 2020, growth within
the district should be dispersed, and DoubleDragon Properties Corp. is expected to come second in
terms of office stock, accounting for around 12.0% of leasable area.

Table 20. Bay Area Development Pipeline

Building Name Developer Class Period GLA
iMet Federal Land, Inc. Grade A 3Q2017 18,543
Gold Quest Premiere Resources,
The Biopolis Grade A 3Q2017 18,892
Inc.
DoubleDragon Plaza Tower 2 DoubleDragon Properties Corp. Grade A 3Q2017 28,339
DoubleDragon Plaza Tower 3 DoubleDragon Properties Corp. Grade A 4Q2017 28,334
DoubleDragon Plaza Tower 4 DoubleDragon Properties Corp. Grade A 4Q2017 27,494
Eastfield Properties and Land
Eastfield Center Grade A 4Q2017 24,746
Development Corporation
Millenium Properties and Brokerage
Nexgen Tower Grade A 1Q2018 19,756
Inc.
ThreeE-ComCenter SM Prime Holdings, Inc. Grade A 1Q2018 62,000
Aseana Three Aseana Holdings, Inc. Grade A 1Q2018 30,573
Filinvest Cyberzone Pasay Tower 4 Filinvest Land, Inc. Grade A 3Q2018 15,977

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 52

 DoubleDragon Center East DoubleDragon Properties Corp. Grade A 4Q2018 14,940
DoubleDragon Center West DoubleDragon Properties Corp. Grade A 4Q2018 17,574
Arvin International Arvin International Grade A 4Q2018 15,000*
Anchor Land Corporate Center Anchor Land Holdings, Inc. Grade A 1Q2019 32,430
FourE-Com Center SM Group Prime Holdings, Inc. Grade A 4Q2019 82,000
Filinvest Cyberzone Pasay Tower 1 Filinvest Land, Inc. Grade A 3Q2020 12,243
*Estimate
Source: KMC Savills Research

Graph 4.10
Grade A Stock and Vacancy (Bay Area)
Stock Vacancy Rate

800 12%

600 9%
'000 sq m

400 6%

200 3%

0 0%

Source: KMC Savills Research

The vacancy rate is expected to increase to double digits with the additional 258,700 sq m of GLA in
the next 12 months. Included in the pipeline is the rest of DoubleDragon Plaza which will add 84,100
sq m in the Bay Area by the end of the year. Moreover, the robust construction activity in the area is
expected to push vacancies up further. This is expected to lead to normalization of rents amidst the
influx of supply, but this should facilitate the quick absorption of the upcoming stock and keep
vacancies at a reasonable level.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 53

5. Hotel Market
As per the Philippine Statistics Authority (PSA), it is estimated that tourism accounts for 8.6% of GDP
in 2016, and tourism expenditure has grown steadily with the rise of foreign tourist arrivals and the
rising incomes of domestic households. Given the prioritization of the current administration to
infrastructure, the hospitality market is seen to expand briskly to capture the further rise in both foreign
and domestic tourists. Around 6,200 upscale rooms are expected to come online in Metro Manila
from 2017 to 2020, and another 11,400 rooms from major budget hotel players in the Philippines.

The largest share of existing supply in Metro Manila is in Makati, suggesting that these cater to official
businesses and Meetings, Incentives, Conventions and Exhibits (MICE) group. On the other hand, a
sizeable portion of upcoming supply in Metro Manila is expected to rise in Entertainment City and
Newport City, these are expected to tap the demand coming from the leisure segment. It is anticipated
that 10 million foreign tourists will arrive by 2020, based on Department of Tourism’s (DOT) target of
12 million foreign tourists by 2022.

5.1. Philippines Tourism Industry Overview

Figures from the Department of Tourism (DOT) indicate that domestic tourists dominate the tourism
industry in the Philippines. As much as 79.5% of tourists visiting the country’s various regions in 2016
are Filipinos while only 19.8% are foreigners. In terms of total expenditure, domestic tourism
expenditure, which includes expenditure of resident visitors within the country either as domestic trip
or part of an international trip, is expected to have grown by 19.1%, from PhP 1,770.7 billion in 2015
to PhP 2,108.2 billion in 2016. Around 21.2% of expenditures is spent staying in accommodation
facilities while only 10.0% is only for transportation.

Graph 5.1
Breakdown of Regional Travelers in the Philippines (2016E)

Foreign Travelers

19.8%

0.7%
Overseas Filipinos

Domestic Travelers

79.5%

Source: PSA, DOT, KMC Savills Research

On the other hand, inbound tourism expenditure, the expenditure of non-residents within the
economic territory of Philippines, grew by 2.3% in 2016, amounting to PhP 313.6 billion from PhP
306.6 billion in 2015.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 54

 Graph 5.2
Tourism Expenditure

Domestic Tourism Inbound Tourism

2,500.0

CAGR = 20%

2,000.0

1,500.0
PhP millions

1,000.0

500.0

0.0

Source: PSA, DOT, KMC Savills Research

5.1.1. Domestic Travelers

Table 21. Regional Travelers
Region 2009 2010 2011 2012 2013 2014 2015
NCR 1,907,816 2,296,475 2,727,457 2,442,662 2,605,706 1,871,239 1,417,075
CAR 1,173,188 1,169,480 955,133 912,508 1,114,440 1,156,463 1,491,867
1 - Ilocos Region 393,325 477,966 510,023 670,470 905,888 1,145,388 1,624,805
2 - Cagayan Valley 675,243 708,531 719,425 387,443 537,599 735,388 726,441
3 - Central Luzon 547,139 593,945 1,717,327 2,074,094 2,671,121 3,119,065 3,596,097
4A - CALABARZON 2,547,835 3,699,317 5,390,742 1,293,282 1,930,817 2,529,620 4,318,625
4B - MIMAROPA 411,572 834,356 890,253 1,132,856 1,078,997 1,231,052 1,422,580
5 - Bicol Region 2,287,365 3,122,156 3,413,610 3,684,805 3,251,764 3,724,073 4,526,007
6 - Western Visayas 2,035,905 2,099,008 2,453,691 3,099,018 3,566,222 3,953,766 4,632,331
7 - Central Visayas 2,198,849 2,366,972 2,610,757 2,928,081 3,491,886 4,033,391 4,609,718
8 - Eastern Visayas 145,515 141,865 365,469 490,472 709,498 963,911 1,052,715
9 - Zamboanga Peninsula 238,174 694,662 453,711 658,774 347,422 580,965 630,751
10 - Northern Mindanao 1,026,409 1,463,378 1,709,752 1,482,820 1,321,172 1,664,856 2,701,526
11 - Davao Region 900,966 908,558 956,864 1,575,000 1,827,086 2,524,805 2,838,489
12 - SOCCSKSARGEN 659,163 673,841 682,466 281,474 345,328 716,401 939,361
13 - CARAGA 449,218 558,147 676,337 744,647 861,888 1,016,641 1,247,512
TOTAL 17,597,682 21,808,657 26,233,017 23,858,406 26,566,834 30,967,024 37,775,900
Source: Department of Tourism

Domestic travelers comprise the bulk of the regional travelers in the Philippines. The Household
Survey on Domestic Visitors (HSDV) done by the Philippine Statistics Authority (PSA) in 2016 shows
that the main purpose of domestic tourists is to go on vacation, and to visit friends or relatives. This
comprises around 41.6% and 32.1% of the total travelers, respectively.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 55

 Graph 5.3
Distribution of Trips by Accommodation Type (2016)

Home of relatives / friends

5.6%
5.8%

Resort

13.8%

47.9% Hotel

Other tourism facilities

26.8%
Second home / Homestay

Source: PSA, DOT, KMC Savills Research

The survey also shows that 47.9% of domestic travelers who go on vacations or pleasure trips stay
at the homes of their relatives and friends. This suggests that the typical Filipino traveler is budget-
conscious with their spending on accommodation, thereby making a budget or standard tourist facility
an attractive option. On the other hand, 40.6% of total domestic tourists say they stayed in either a
hotel or resort.

5.1.2. Visitor Arrivals to the Philippines

Tourism remains one of the country’s key drivers. The Philippines is one of the proximate tropical
beach destinations to North East Asia (other than Thailand), particularly to China which is the largest
source market in the world. CITIC CLSA (formerly known as Credit Lyonnais Securities Asia, then
acquired by China International Trust Investment Corporation) remains optimistic that Chinese
tourism growth is on track and is expected to reach 200 million outbound tourists by 2020.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 56

 Graph 5.4
Visitor Arrival to the Philippines by Country of Residence
Asia America Europe Australia/Pacific
Middle East Africa Others Growth p.a.
6,000 18%

5,000 15%

4,000 12%
'000 arrival

3,000 9%

2,000 6%

1,000 3%

0 0%

Source: DOT, KMC Savills Research

Foreign visitor arrivals for 2016 reached a total of 5.8 million, posting a 9.7% increase from the
previous year. The country’s largest source markets remain to be key Asian countries; Korea (25.1%),
Japan (9.1%), and China (11.5%), as well as USA with a share of 14.8% of the total arrivals.

Graph 5.5
ASEAN Visitor Arrivals

Malaysia Thailand Indonesia Vietnam Philippines

35

30

25
in millions

20

15

10

Source: World Bank, DOT, KMC Savills Research

Among the ASEAN member countries, Malaysia and Thailand are dominating in terms of the number
of visitor arrivals. Although Malaysia may have experienced a drop in arrivals in 2015, it was able to
recover the following year. Thailand, on the other hand, managed to maintain growth from 2009 to
2013, eventually surpassing Malaysia as a top performer.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 57

 While these two ASEAN countries have significantly performed better compared to the other three
countries, namely Indonesia, Vietnam and Philippines, all the countries have exhibited a positive
trend when it comes to the number of visitor arrivals in their respective countries.

However, the Philippines still pales in comparison to its neighbors’ visitor arrivals. The infrastructure
chain—airport, access road, accommodation, and world-class attractions and activities—is the main
hindrance to the growth of tourism. This is inadequate for the estimated six million international
tourists and some 50 million domestic tourists. Given the high potential of tourism, the sector has
become one of the priority development areas of the government, with around US$23 billion budget
over the six-year term of President Duterte for tourism infrastructure, as per the National Tourism
Development Plan of DOT.

On the other hand, Philippines’ warmer ties with China and Korea provides a gateway for tourism’s
growth. Chinese tourist arrivals surged in the first half of the year as it jumped 33.4% to 455,000
visitors from 341,000 in the same period last year. Beijing’s revocation of its travel advisory against
the Philippines may have led to the surge of tourist visa applications by 250%, and is expected to
increase further with the Bureau of Immigration’s grant of Visa Upon Arrivals (VUA) to Chinese
nationals. At the current pace of Chinese tourists, the DOT estimates it will hit one million Chinese
arrivals by 2017. Along with this, the continuous support from South Korea’s tourism executives is
expected to aid the realization of seven-million arrivals target for 2017.

Graph 5.6
Chinese Tourist Arrivals

1,200

1,000

CAGR = 27%
800
'000 travellers

600

400

200

Source: DOT, KMC Savills Research

5.2. Hotel Market Supply

5.2.1. Classifications of Hotels

The Star Grading System is widely adopted by most establishments in the market and have been
consumers’ method to identify the quality of each hotel in the market. However, the rating system
established in 1992 by the DOT has been adopted for this study. To avoid ambiguity, the table below
compares the classifications between rating systems.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 58

 Table 22. Rating Comparison
Typical Average Daily
1992 Rating Star Grading System
Rate (ADR)
Deluxe Five Star > PhP7,500
First Class Four Star PhP5,001 - PhP7,500
Standard Class Three Star PhP2,501 – PhP5,000
Two Star
Economy Class < PhP2,500
One Star
Source: DOT, KMC Savills Research

Figure 15. Example of Economy Class hotel room

Source: Free Images

Hotel establishments under the Economy classification are expected to cater the budget-minded
traveler. The bedrooms are basic, and these have a limited range of facilities and services, but are
ample to provide a safe lodging environment.

Figure 16. Example of Standard Class hotel room

Source: Public Domain Pictures

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 59

 On the other hand, full-service hotels fall under the Standard Class. These hotels provide more
convenience to customers as these are required to have porter services, telephones in each room
with direct dial, and a full-service restaurant that is open seven days a week that serves breakfast.

Figure 17. Example of First-Class hotel room

Source: Public Domain Pictures

Figure 18. Example of Deluxe hotel suite

Source: All Free Download

Hotels classified as First Class and Deluxe are exceptionally maintained and have at least one suite
per thirty guest rooms. These hotels are differentiated from other hotels by the accommodation of
highly qualified, trained, and experienced staff; and these hotels pride themselves on complete,
excellent recreational and functional facilities (i.e. high-end retail components and amenities like
swimming pools, conference rooms, valet parking and open-air courtyard).

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 60

 For this study, hotels are grouped into their brands and are evaluated with their brand’s current market
positioning, regardless of their price points.

5.2.2. Current Stock

Based on the current stock nationwide, over a third of total rooms is classified as Standard. Although
domestic tourists outnumber foreign tourists and are more budget conscious, the nationwide hotel
stock is seen to cater to mostly foreigners and more affluent Filipinos. This is reflected by the ratio of
Economy classified rooms which are just 22.9% of total stock. A similar number of First Class and
Deluxe rooms are present in the market as well. However, we still foresee a growing market for hotels
under the Economy classification. Given the bright prospects of the Philippine economy, we expect
household disposable incomes to rise in the long run. This should create enough purchasing power
for a growing number of Filipinos to stay in affordable hotel accommodations.

The average daily rate (ADR) is computed using a simple average of its rates on Standard rooms,
Deluxe rooms, and Suites. The ADRs collected in this study are observed to have significant
variations. The data indicate that rates in Metro Manila are higher compared to other locations.

Graph 5.7
Nationwide Hotel Stock by Classification

20.4%
Deluxe
22.9%

First Class

22.0% Standard Class

34.7% Economy Class

Source: DOT, KMC Savills Research

Metro Manila
As of 2016, there were about 19,000 rooms in Metro Manila and is dominated by Deluxe rooms from
upscale hotels in Makati CBD, BGC and the Bay Area. It is observed that majority of the demand for
the more upscale hotels is derived mainly from business and the MICE segments. Much of the hotel
stock is located in the cities of Makati, Pasay, Mandaluyong, Manila, and Taguig where the various
CBDs of Metro Manila are located (Makati CBD, BGC, Ortigas Center and Downtown Manila).

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 61

 Graph 5.8
Metro Manila Hotel Stock by Classification

8.0%
Deluxe

39.5%
First Class

29.7%

Standard Class

22.8% Economy Class

Source: DOT, KMC Savills Research

The new supply is forecasted to come mainly from the cities of Pasay and Parañaque where
Entertainment City and the upcoming office submarket, the Bay Area, are located. The pipeline
suggests that the market is expected to tap and cater more to the leisure segment. The Bay Area is
seen to become more active in the coming years, as some 6,200 rooms are expected to enter the
market from 2017 to 2020. We expect much of the new supply to be focused on the First Class and
Deluxe hotel segment to catch a larger share of the gaming market.

Graph 5.9
Metro Manila Hotel Room Stock
Existing Supply New Supply

25,000

20,000

15,000
No. of Rooms

10,000

5,000

Source: DOT, KMC Savills Research

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 62

 Outside Metro Manila
New hotel room supply outside of the capital will likely focus on the more affluent Filipino traveler and
the rising number of foreign visitors. Economy hotel establishments should benefit from the rising
household disposable incomes while Standard and First-Class hotels should gain from rising foreign
arrivals. Hotel chains, such as GO Hotels and Red Planet, have already begun expanding their
portfolio outside of Metro Manila. These chains benefit from their relationship with their respective
budget airlines (Cebu Pacific for GO Hotels and Air Asia for Red Planet), however other affordable
chains like Hop Inn have joined the fray.

Large local developers have also begun growing their hotel portfolio. Other than Robinsons Land
increasing its GO Hotels chain, Ayala Land has aggressively launched their Seda hotels in several
of its townships such as its eco-tourism estate, Lio. SM Prime Holdings, on the other hand, has
focused on expanding its Radisson Blu franchise in areas where its regional malls are located, such
as in Cebu and Davao.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 63

 Figure 19. Locations of Economy Class Hotel Chains

Source: Robinsons Land, Red Planet Hotels, Hop Inn Hotels, KMC Savills Research

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 64

 Table 23. Economy Class Hotel Chains
Name Region City/Municipality Keys ADR
Red Planet Hotels 3 - Central Luzon Angeles City 165 2,039
Red Planet Hotels NCR Paranaque City 200 3,398
Red Planet Hotels -
NCR Manila 167 4,532
Mabini
Red Planet Hotels NCR Pasig 182 2,165
Red Planet Hotels NCR Quezon City 140 2,212
Red Planet Hotels NCR Makati City 213 2,048
Red Planet Hotels
NCR Makati City 189 2,073
(Amorsolo)
Red Planet Hotels 7 - Central Visayas Cebu City 150 2,655
10 - Northern Cagayan De Oro
Red Planet Hotels 159 2,709
Mindanao City
Red Planet Hotels 11 - Davao Region Davao 155 3,906
GO Hotels – Timog NCR Quezon City n/a 1,088
GO Hotels NCR Manila 219 1,488
GO Hotels NCR Mandaluyong City 223 1,288
GO Hotels NCR Pasay City 199 1,288
GO Hotels NCR Quezon City 159 1,388
GO Hotels NCR Pasig City 198 1,388
GO Hotels NCR Manila 118 1,388
GO Hotels NCR Quezon City 167 1,288
GO Hotels 4B - MIMAROPA Puerto Prinsesa 108 1,088
GO Hotels 6 - Western Visayas Iloilo City 167 1,088
GO Hotels 8 - Eastern Visayas Tacloban City 98 1,588
GO Hotels 6 - Western Visayas Bacolod City 108 1,088
GO Hotels 7 - Central Visayas Dumaguete City 102 1,088
GO Hotels 13 - CARAGA Butuan City 104 1,088
GO Hotels 11 - Davao Region Davao City 183 1,588
Hop Inn Hotels NCR Manila 168 2,000
Hop Inn Hotels NCR Makati City 144 1,839
Source: DoubleDragon Properties, Robinsons Land, Red Planet Hotels, Hop Inn Hotels

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 65

 Figure 20. Locations of Standard Hotel Chains

Source: DoubleDragon Properties, Wyndham Hotels, Legend Hotels, Best Western, KMC Savills Research

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 66

 Table 24. Standard Hotel Chains
Name Region City/Municipality Keys ADR
Hotel 101 NCR Pasay City 518 3,800
Injap Tower Hotel by Hotel 101 6 - Western Visayas Iloilo City 194 1,900
Jinjiang Inn NCR Makati City 94 4,814
Jinjiang Inn NCR Pasig 59 2,556
Microtel CAR Baguio City 60 2,917
Microtel 3 - Central Luzon Cabanatuan City 50 2,778
Microtel 3 - Central Luzon Tarlac City 50 2,521
Microtel - Acropolis NCR Quezon City 84 3,419
Microtel - UP Technohub NCR Quezon CIty 120 2,917
Microtel NCR Pasay City 150 5,513
Microtel - Eagle Ridge 4A - CALABARZON General Trias 57 2,906
Microtel 4A - CALABARZON Silang 61 3,795
Microtel 4A - CALABARZON Batangas City 78 2,991
Microtel 6 - Western Visayas Malay 50 4,701
Microtel 4A - CALABARZON Puerto Prinsesa 50 2,137
Microtel 11 - Davao Region Davao City 51 3,184
Microtel 12 - SOCCSKSARGEN General Santos City 65 3,269
Best Western Boracay Tropics Resort 6 - Western Visayas Malay 50 6,467
Best Western Cebu Sand Bar Resort 7 - Central Visayas Cordova 63 8,488
Best Western Hotel La Corona Manila NCR Manila 50 3,850
Best Western Oxford Suites Makati NCR Makati City 140 6,122
Best Western Plus Lex Cebu 7 - Central Visayas Cebu City 83 7,000
Best Western Bendix Hotel 3 - Central Luzon San Fernando 46 7,500
Best Western Plus Hotel Subic 3 - Central Luzon Subic 77 7,333
Best Western Plus The Ivywall Hotel 4A - CALABARZON Puerto Prinsesa 120 7,198
Kabayan Hotel Pasay NCR Pasay City 276 3,373
Legend Palawan 4A - CALABARZON Puerto Prinsesa 158 3,497
Legend Villas NCR Mandaluyong 130 5,183
Mabuhay Manor NCR Pasay City 113 3,482
Pinoy Pamilya Hotel NCR Pasay City 52 2,121
Source: DoubleDragon Properties, Wyndham Hotels, Legend Hotels, Best Western, KMC Savills Research

For this segment, Best Western is observed to be an outlier, with ADRs much higher compared to
the typical room rate in its class. Despite the above-average ADRs, the brand is still considered to
fall under the Standard Class because of the qualities of its amenities, rooms and other offerings.
Moreover, Best Western Hotels and Resorts still positions their brands (i.e. Best Western and Best
Western Plus) to the midscale and upper midscale markets. The high ADRs may indicate a unique
strategy of targeting business travelers and more discerning tourists which may result to lower
occupancies compared to its peers.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 67

 Figure 21. Locations of First-Class Hotel Chains

Source: Wyndham Hotels, SM Prime Holdings, Ayala Land, KMC Savills Research

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 68

 Table 25. First-Class Hotel Chains
Name Region City/Municipality Keys ADR
Radisson Blu 3 - Central Luzon Angeles City 154 4,850
Radisson Blu 7 - Central Visayas Cebu City 396 8,707
Radisson Blu 11 - Davao Region Davao City 202 5,200
Seda NCR Taguig City 179 7,310
Seda NCR Quezon City 438 7,767
Seda 4A - CALABARZON Santa Rosa 150 5,270
Seda 6 - Western Visayas Iloilo City 150 3,414
Seda 6 - Western Visayas Bacolod City 154 5,500
Seda 10 - Northern Mindanao Cagayan De Oro City 150 4,161
Seda 11 - Davao Region Davao City 186 4,900
TRYP NCR Pasay City 195 7,730
Source: Wyndham Hotels, SM Prime Holdings, Ayala Land, KMC Savills Research

Hotel Chain Expansion

In the Economy segment, hotel chains are expected to have around 7,570 rooms by 2020, with GO
Hotels and Red Planet forecasted to corner much of the market. We expect that the success of these
chains is likely to stem from their relationship with their respective airlines which offer a wide array of
domestic flights. Most travelers may likely opt to stay in one of their hotels as a pit stop before they
proceed to their intended destination. With a strategy centered on affordability, these hotels may be
able to capitalize the lack of accessibility to some tourist destinations.

Graph 5.10
Market Share of Economy Hotel Chains, by number of rooms (2016)

Go Hotels
7.5%

Red Planet Hotels

41.1% 51.4%

Hop Inn Hotels

Source: DOT, KMC Savills Research

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 69

 Graph 5.11
Market Share of Economy Hotel Chains, by number of rooms (2020F)

Go Hotels
10.3%

44.3%
Red Planet Hotels

45.4%

Hop Inn Hotels

Source: DOT, KMC Savills Research

For Standard hotels, we see DoubleDragon Properties to take the lead by 2020 which plans to
complete around 5,000 hotel rooms, a significant share of the expected total of 9,000 rooms by 2020.
Although one of its hotels will be located in BGC, the company also has plans to expand to Boracay,
Bohol and Davao – prominent tourist destinations.
Graph 5.12
Market Share of Standard Hotel Chains, by number of rooms (2016)

Hotel 101

23.1% 22.6%
Jinjiang Inn

Microtel
4.9%

20.0%
Best Western

29.4%

Legend Hotels

Source: DOT, KMC Savills Research

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 70

 Graph 5.13
Market Share of Standard Hotel Chains, by number of rooms (2020F)

Hotel 101

8.1%

8.6% Jinjiang Inn

52.2% Microtel
18.2%

Best Western

12.8%

Legend Hotels

Source: DOT, KMC Savills Research

5.2.3. Development Activity

The Philippines’ booming gaming sector paved the way for the large-scale developments observed
in Metro Manila, predominantly coming from the developments of Newport city and Entertainment
City. The pipeline is expected to increase the number of Luxury and Upscale rooms significantly.

Entertainment City
Entertainment City is an 800-hectare gaming and entertainment complex in the Bay Area. It lies at
the western side of Roxas Boulevard and south of SM Central Business Park (SM Mall of Asia), part
of Parañaque. The area houses four integrated resorts: Solaire Manila, Westside City Resorts, Okada
Manila, and City of Dreams Manila. Solaire Manila currently houses 800 Deluxe rooms, with City of
Dreams currently having 362 rooms and Okada Manila with 993 rooms.

Figure 22. Solaire Casino and Hotel in Entertainment City

Source: Wikimedia Commons

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 71

 Lastly, Westside City is expected to add at least 1,500 hotel rooms by 2020, operated by international
brands that include Westin Hotel Manila Bayshore of the Starwood Asia Pacific Hotel & Resorts
Group, Hotel Okura Manila of the Okura Hotels & Resorts, and the Genting Grand & Crockfords
Tower of the Genting Group.

Newport City
Newport City is a 25-hectare residential and commercial area situated next to the Villamor Golf
Course and Terminal 3 of the Ninoy Aquino International Airport (NAIA) in Metro Manila. It was
developed by Megaworld Corporation under its subsidiary Megaworld Newport Property Holdings,
Inc. Newport City currently houses one of the operational integrated resorts in the country – Resorts
World Manila.

The township is expected to add around 1,300 First Class and Deluxe rooms by 2018 coming from
Hilton Manila, Sheraton Manila, and Savoy Hotel Manila.

5.3. Hotel Market Demand

5.3.1. Segments of Demand
Graph 5.14
Tourism Demand Segments (2016)
2.2%

Holiday

10.4%

Visit Friends/Relatives
11.4%

Business/MICE

76.0%

Others

Source: DOT, KMC Savills Research

The processed data by the Department of Tourism show that among those who specified their
purpose of travel, hospitality demand mainly comes from businesses (e.g., business demand and the
MICE group), and leisure tourists. The country’s growth momentum has continuously attracted
business demand while the existing and discovery of new tourist attractions has led to an increased
demand from leisure tourists.

Business demand is propelled by individuals who stay in accommodation establishments due to

official business. This group is typically the least price sensitive of all the demand drivers for the cost
burden is absorbed by the corresponding organizations that send them. This segment includes
foreign businessmen, business representatives, corporate trainees, sales representatives,
contractors and any other business-associated traveler.

On the other hand, demand from the MICE segment is expected to be propelled by associations,
government and non-government organizations, and business groups, which hold meetings,

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 72

 corporate seminars and conferences. Live seminars organized by these groups have corresponding
room requirements usually proportional to the number of participants in their events.

Lastly, tourists can be felt the entire year with a significant influx of tourists during July, August, and
December to March. During these months, several tourists, especially from Korea and China, travel
for vacation to either escape the winter cold or explore beach destinations in the summer. Moreover,
the casino industry’s continuous growth along with the Philippines’ stronger ties with China are
expected to benefit the industry mainly through gaming companies, especially casinos.

5.4. Hotel Market Performance

5.4.1. Occupancy
Based on the latest figures from the DOT, the average occupancy rate across all hotel segments in
Metro Manila ranges from 65% to 70%. Among the hotel categories, the Deluxe segment has the
highest average occupancies while the Economy segment has the lowest occupancy rates.

Table 26. Metro Manila Average Occupancy Rates

Year 2010 2011 2012 2013 2014 2015 2016E
Deluxe 70.3% 72.4% 71.5% 70.7% 70.4% 70.4% 71.3%
First Class 62.4% 61.0% 58.1% 59.9% 58.8% 60.0% 60.2%
Standard 65.1% 66.9% 64.0% 64.9% 64.1% 64.3% 65.7%
Economy 58.8% 59.2% 54.6% 51.3% 60.3% 59.3% 57.8%
Overall Average 67.6% 69.3% 66.9% 66.9% 65.4% 67.0% 67.0%
Source: Department of Tourism

Outside of Metro Manila, we estimate affordable hotels in the Economy segment are likely to perform
better. Robinsons Land’s GO Hotels have fared well in the provincial cities they operate in and have
managed occupancy rates hovering above 70% in the past. For First Class establishments, the
Marriott Hotel in Cebu City has also maintained similar average occupancy rates, but the prominent
hotel in the south has lower average daily rates compared to its peers in Metro Manila. On the other
hand, Summit Circle Cebu has fared lower occupancy rates of above 50% in the past.

5.5. Hotel Market Outlook

Graph 5.15
Forecasted Regional Travelers
Domestic Travellers Foreign Travellers

70,000

60,000

50,000

40,000
'000 travellers

30,000

20,000

10,000

Source: KMC Savills Research

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 73

 The hospitality market is seen to expand aggressively with around 6,200 upscale rooms expected to
come in Metro Manila from 2017 to 2020, and around 11,400 rooms from major players of budget
hotels in the Philippines. However, this supply is expected to cater to the expected 10 million foreign
tourists coming in by 2020. Moreover, estimates done by DOT suggests domestic tourists are
expected to grow to around 65 million travelers by 2020.

The Philippines’ improving macroeconomic fundamentals signal robust growth for the hotel sector.
The efforts of the Philippine government to relax foreign ownership rules are expected to aid FDI
growth. Even with the impediment of foreign ownership, the improved economic outlook of the country
should warrant a rise in business visits to the country. This should create a rise in hospitality demand
from foreign investors through business trips and MICE.

Furthermore, the country’s favorable ties with China is expected to boost demand in the leisure
segment. The grant of VUA to Chinese gaming tourists is expected to fuel growth of the casino
market, and may further boost the prospects of visa-free access for Chinese visitors and junket-based
proxy betting.

Lastly, we do not see a significant threat from other forms of hospitality establishment, such as
AirBNB as these platforms serve a specific niche in the market. It is likely the more budget conscious
travelers are, the more likely they would utilize newer and affordable options. As such, Economy
hotels are highly at risk and to a lesser extent, Standard hotels. As such, we do not see any significant
competition in the First Class and Deluxe segments.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 74

6. Industrial Market Overview
6.1. Philippine Industrial Sector Overview
The industrial sector in the Philippines has grown rapidly in the recent years. Despite the services
sector being the mainstay of the economy, the industrial sector has historically accounted for around
one third of the production, also playing an important role in the economy. Over the past 10 years,
the sector has grown at 5.1% per annum, mainly fueled by the manufacturing and construction
industries.
Graph 6.1
Industrial Sector, at constant prices
Manufacturing Construction
Electricity, Gas and Water Supply Mining & Quarrying
Growth
3,000,000 25.0%

2,500,000 20.0%

2,000,000 15.0%
PhP billions

1,500,000 10.0%

1,000,000 5.0%

500,000 0.0%

0 -5.0%

Source: KMC Savills Research

Graph 6.2
Composition of Industrial Sector

3.0%

9.8%

Manufacturing

Construction

18.8%
Electricity, Gas and Water Supply

Mining & Quarrying

68.3%

Source: KMC Savills Research

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 75

 Despite the industrial sector, particularly manufacturing's, already rapid growth, the sector still has
great potential to contribute to the economy. Currently, the weak level of infrastructure and the low
level of capital formation continue to hinder the industrial production from reaching its full capacity.
Unless these issues are tackled, growth will be limited, as the currently low labor cost is being
cancelled out by the high logistics cost in moving the production.

Moving forward, however, the industrial outlook looks rather promising. The infrastructure
improvements are expected to ease the current situation and logistics bottlenecks. Enhancements in
road network quality and in ports capacity, should ease the movement of goods and increase
reliability of the logistics network. Currently, the lack of proper maintenance has plagued road
networks in the provinces – affecting the prompt delivery of goods. In addition, reviving a national
railway system should diversify the logistics network and improve dependability. Lastly, higher foreign
participation through the proposed cabotage law should improve inter-island throughput.

6.1.1. Manufacturing sector

In the Philippines, manufacturing accounted for 23.2% of the total gross domestic product in 2016,
and around 68.3% of the industrial output. The most industrialized regions in the country are Metro
Manila, CALABARZON and Central Luzon, where the manufacturers are mainly concentrated.
Graph 6.3
Gross Value Added in Manufacturing, at constant prices

Others Food manufactures Consumer electronics Chem icals

2,000

1,600

1,200
PhP billions

800

400

Source: KMC Savills Research

In recent years, the sector has been fueled by fast-growing demand for consumer goods such as
food and beverage (e.g. Monde Nissin, Nestle, Procter & Gamble, Universal Robina), consumer
electronics (e.g. Panasonic), fuel, chemicals (e.g. D&L Industries), and other non-discretionary items.
Food and beverage products alone take up a half of the total manufacturing production, growing
rapidly at 4.8% per annum. Meanwhile, the strong consumer spending also supports the production
of consumer electronics and chemicals, which have a share of 16.2% and 12.9% respectively of the
total manufacturing output.

The manufacturing sector is also the highest recipient of new foreign investments. Over the past five
years, the sector has attracted net flow of investments -- looking at the approved investments, foreign
investors are seemingly targeting the Philippine manufacturing sector, and a steady inflow of
investments is expected to continue.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 76

 Table 27 Investments in manufacturing sector
Million US$ 2010 2011 2012 2013 2014 2015 2016 Total
Net Foreign Direct Investments -1,275 119 1,770 216 209 773 153 1,965
Total Approved Foreign Investments 4,771 5,908 4,824 2,531 4,193 3,757 2,876 28,860
Source: PSA, BSP

Due to the dominance of private consumption in the local economy and the underlying demographics,
we expect further growth in the manufacturing sector driven by the food and beverages production.
However, despite growth being led by domestic factors, the shifts in external demand and increased
risks in global economy may temporarily cause some volatility in the manufacturing sector.

6.1.2. Logistics Network

The Philippine logistics network is fairly established in Luzon where industrial parks are
interconnected with the county’s largest ports mainly through expressways. More than 80.0% of all
imports arrive through Manila. Although value of total imports is dominated by electronic components,
raw materials and finished goods for other industries dominate imports in terms of volume.

Graph 6.4
Container Traffic, Imports
Luzon Visayas Mindanao

600

500

400
'000 TEUs

300

200

100

Source: PPA, KMC Savills Research

Most of these imports are then either distributed from Manila to distribution centers or either shipped
to the various manufacturing plants in the industrial belts of Central Luzon and CALABARZON.
Factories of the country’s largest manufacturing companies are situated in these areas and closely
tap the large domestic market in Luzon.

Table 28. Location of Manufacturing Facilities

Manufacturer Luzon Visayas Mindanao
Century Pacific Food, Inc. 2 0 2
D&L Industries, Inc 2 0 0
Monde-Nissin Philippines 4 1 0
Nestle 3 0 1
Procter & Gamble 1 0 0
Unilever 3 0 0
Universal Robina Corporation 11 1 1
San Miguel Brewery, Inc. 4 1 1
Source: KMC Savills Research

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 77

 Figure 23. Logistics Network in Luzon

Source: KMC Savills Research

*For map numbers in grey, refer to Table 29

As seen in the map, the highest concentration of industrial estates is in CALABARZON which is due
to its strategic proximity to the Batangas port. Although it is estimated that much of the finished goods
are transported within Luzon because of the size of the domestic market, a significant portion of
goods are shipped to cities in the Visayas and Mindanao.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 78

 Table 29. List of Industrial Parks in Region 4A and 3
Map # Development Name Province Land Area
1 Luisita Industrial Park Tarlac 29.4 ha.
2 TECO Industrial Park Pampanga 200.0 ha.
3 Clark Freeport Zone Pampanga 29,365.0 ha.
4 Pampanga Economic Zone Pampanga 34.8 ha.
5 Angeles Industrial Park Pampanga 32.0 ha.
6 Alviera Industrial Park Pampanga 30.4 ha.
7 Clark TI Special Economic Zone Pampanga 32.0 ha.
8 Subic Bay Freeport Zone Zambales-Bataan 67,000.0 ha.
9 Hermosa Ecozone Industrial Park Bataan 142.0 ha.
10 Plastic Processing Center SEZ Bataan 26.0 ha.
11 Sta. Maria Industrial Park Bulacan 62.8 ha.
12 Victoria Wave SEZ Caloocan 50.0 ha.
13 Manila Harbour Center Metro Manila 79.1 ha.
14 Asahi Special Economic Zone Metro Manila 28.0 ha.
15 Macroasia Ecozone Metro Manila 22.7 ha.
16 Amkor Technology SEZ Metro Manila 14.1 ha.
17 Cavite Economic Zone I&II Cavite 347.6 ha.
18 EMI Special Economic Zone Cavite 12.2 ha.
19 Cavite Technopark SEZ Cavite 109.9 ha.
20 Suntrust Ecotown Tanza Cavite 116.2 ha.
21 Golden Gate Business Park Cavite 46.7 ha.
22 Golden Mile Business Park Cavite 45.1 ha.
23 First Cavite Industrial Park Cavite 71.8 ha.
24 Gateway Business Park Cavite 113.1 ha.
25 Daiichi Industrial Park Cavite 55.0 ha.
26 People's Technology Complex Cavite 59.0 ha.
27 Laguna Technopark Laguna 337.22 ha.
28 Laguna International Industrial Park Laguna 34.9 ha.
29 Laguna Technopark Annex Laguna 29.0 ha.
30 Toyota Sta. Rosa Laguna SEZ Laguna 81.7 ha.
31 Greenfield Automotive Park Laguna 65.9 ha.
32 Light Industry & Science Park I Laguna 71.7 ha.
33 SMPIC Special Economic Zone Laguna 3.3 ha.
34 Calamba Premiere International Park Laguna 65.6 ha.
35 Light Industry & Science Park II Laguna 71.4 ha.
36 Carmelray International Business Park Laguna 40.0 ha.
37 Carmelray Industrial Park II Laguna 143.0 ha.
38 Filinvest Technology Park - Calamba Laguna 51.1 ha.
39 First Philippine Industrial Park Batangas 343.8 ha.
40 YTMI Realty Special Economic Zone Laguna 22.8 ha.
41 Light Industry & Science Park III Batangas 110.5 ha.
42 Light Industry & Science Park IV Batangas 64.6 ha.
43 AG&P Special Economic Zone Batangas 39.1 ha.
44 Cocochem Agro-Industrial Park Batangas 42.0 ha.
45 Keppel Philippines Marine SEZ Batangas 22.0 ha.
46 Lima Technology Center Batangas 430.0 ha.
47 Tabango Special Economic Zone Batangas 86.0 ha.
Source: KMC Savills Research

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 79

 Figure 24. Map of RORO Route

Source: KMC Savills Research

*For map numbers in dark blue, refer to Table 30

Distributors and third party logistics (3PL) firms then move these goods through the Roll-on/Roll-off
(RORO) System – an integrated network of roads and ferry ports that form the backbone of the
nationwide vehicle transport system. There are three major RORO routes utilized: 1) Western
Nautical Highway which passes the islands of Mindoro, Panay, and Negros; 2) Central Nautical
Highway which passes the islands of Masbate, Cebu, and Bohol; and 3) Eastern Nautical Highway
which passes the islands of Samar and Leyte.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 80

 Table 30. Domestic Ports along RORO Routes
Map # Name of Seaport Province Route
1 Port of Manila Metro Manila Western Nautical Highway
2 Port Of Batangas Batangas Western Nautical Highway
3 Port of Calapan Oriental Mindoro Western Nautical Highway
4 Port of Roxas Oriental Mindoro Western Nautical Highway
5 Port of Caticlan Aklan Western Nautical Highway
6 Port of Iloilo Iloilo Western Nautical Highway
7 Port of Bacolod Bacolod Western Nautical Highway
8 Port of San Carlos Negros Occidental Western Nautical Highway
9 Port of Toledo Cebu Western Nautical Highway
10 Port of Dumaguete Negros Oriental Western Nautical Highway
11 Port of Dapitan Zamboanga del Norte Western Nautical Highway
12 Port of Dipolog Zamboanga del Norte Western Nautical Highway
13 Port of Pilar Sorsogon Central Nautical Highway
14 Port of Aroroy Masbate Central Nautical Highway
15 Port of Masbate Masbate Central Nautical Highway
16 Port of Cawayan Masbate Central Nautical Highway
17 Port of Daanbantayan Cebu Central Nautical Highway
18 Port of Cebu Cebu Central Nautical Highway
19 Port of Tubigon Bohol Central Nautical Highway
20 Port of Jagna Bohol Central Nautical Highway
21 Port of Cagayan de Oro Misamis Oriental Central Nautical Highway
22 Port of Davao Davao Del Sur Central Nautical Highway
23 Port of General Santos South Cotabato Central Nautical Highway
24 Port of Allen Northern Samar Eastern Nautical Highway
25 Port of Liloan Southern Leyte Eastern Nautical Highway
26 Port of Lipata Surigao del Norte Eastern Nautical Highway
27 Port of Butuan Agusan del Norte Eastern Nautical Highway
Source: KMC Savills Research

With a wide logistics network, certain cities in the Visayas and Mindanao have become distribution
centers which have displayed above-average household incomes and high levels of urbanization. In
the Visayas, the cities of Iloilo, Bacolod and Cebu are typical hubs while the the cities of Cagayan de
Oro and Davao are preferred in Mindanao.

6.2. Industrial Leasing Market Overview

The warehousing market in the Philippines is comparatively fragmented from other countries as there
is no clear player dominating a significant share. This may be due to most manufacturers taking more
control over its distribution network which may own their warehousing facilities. 3PL involvement has
been limited towards delivering goods directly from factory to distribution center to customer. In some
instances, a 3PL manages the distribution hub of the manufacturer which reduces the need for their
own storage facilities (i.e. Monde Nissin’s large distribution facilities).

However, manufacturers have only limited their involvement in the warehousing segment in the
distribution network. The Consultant has yet to observe large manufacturing companies fully engaged
in the delivery of their goods. This is because it is a non-core function which entails high operating
costs. In the medium term, it is sufficient for large manufacturers to further obtain assistance from
3PLs to manage their distribution facilities.

A significant number of goods is transported by distributors in the provinces. Distributors tend to ship
goods to traditional retail formats or to informal retailers (sari-sari stores) while leveraging on their
local network. Most operate in more distant areas of the country and handle a relatively large
catchment of two to three provinces. These players may lease warehousing for their storage needs,
but are limited to the local area they are servicing.

Currently, internet sales have yet to make a dent on the total retail sales in the Philippines. Although
growth in this segment has been very quick, we estimate growth to be limited in the typical hubs (i.e.

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 81

 Metro Manila or Cebu) where logistics networks are supported by: above-average public
infrastructure; little monopoly power from logistics firms; and sufficient warehouse supply. Given how
online platforms utilize warehouse facilities, we should expect demand to concentrate in these hubs
or in nearby regions.

6.3. Industrial Leasing Market Performance

6.3.1. Rents
Average lease rates for warehouses have hovered above PhP220 per sq m / month. Lease rates in
the north of Metro Manila (e.g. Caloocan City and Pampanga) have relatively lower lease rates
compared to hubs in Cebu and Davao. This suggests that demand for storage in the north may be
restrained due to lower agglomeration of industrial estates and that most goods are delivered south
towards distribution hubs in the Visayas and Mindanao.

Table 31. Average Warehouse Rents by Location

Building Lease Rates
Province / City Region Island
(PhP per sq m / month)
Caloocan City NCR Luzon 144
Las Piñas City NCR Luzon 310
Makati City NCR Luzon 786
Mandaluyong City NCR Luzon 240
Manila City NCR Luzon 300
Muntinlupa City NCR Luzon 180
Parañaque City NCR Luzon 275
Pasay City NCR Luzon 250
Pasig City NCR Luzon 227
Quezon City NCR Luzon 216
Taguig City NCR Luzon 200
Batangas 4A Luzon 211
Cavite 4A Luzon 185
Laguna 4A Luzon 212
Rizal 4A Luzon 208
Pampanga 3 Luzon 148
Cebu 7 Visayas 184
Davao 11 Mindanao 170
Source: KMC Savills Research

6.4. Industrial Market Outlook

Industrial property demand is likely to increase with the expansion of the modern retailing format in
the Philippines. These retailers may demand more prompt deliveries with a higher emphasis on
quality. The current distribution system in most parts of the provinces may not be up to par to their
standards. As such, we should expect a more modern logistics network to take hold in these areas.
We believe that with rising urbanization in the provinces coupled with increasing household incomes,
this transformation in the market is highly possible. Plans of expanding smaller-format community
malls in the provinces have already begun.

In addition, demand for logistics facilities should increase with the growing manufacturing sector. The
manufacturing sector is still seen to accommodate the burgeoning domestic market. In the long run
though, the industrial sector has great potential as the government may be starting reforms to boost
the sector’s growth, mainly through opening up the sector for more foreign investments. As such, this
is expected to further drive demand for warehousing in the coming years. Warehousing facilities are
a key component in manufacturers’ supply chain.

While the level of infrastructure in the region may still pose as a hindrance to the industrial sector’s
growth, the current administration has committed to increase infrastructure spending to over 5.0% of
GDP by 2017. Given this thrust, it is then highly likely that the region’s massive infrastructure pipeline

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 82

 will push through. With an improved level of infrastructure, the logistics for the industrial sector should
improve and support the sector’s growth as well as the influx of new entrants.

Furthermore, the Philippines has the potential to be a key component in the ASEAN supply chain
once it upgrades its local infrastructure to accommodate a larger industrial sector. This is highly likely
upon the full implementation of the ASEAN Economic Community (AEC), taking down trade barriers
and easing the movement of goods. In the coming years, the region’s growing population, ideal
demographic profile, and rising incomes are expected to support the consumption further and
increase the trade activity. This creates a need to increase the supply of industrial property, which
will support the rise in the free movement of goods between ASEAN members.

Figure 25. Big-Ticket Infrastructure Projects

Source: KMC Savills Research

*For all map numbers, refer to Table 32

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 83

 Table 32. Upcoming Major Infrastructure Projects
Map # Development Name Type Province Cost
1 Tarlac-Pangasinan-La Union Expressway Road Pangasinan PhP2.8 billion
2 Central Luzon Link Expressway - Tarlac Road Tarlac PhP1.6 billion
3 Central Luzon Link Expressway - Nueva Ecija Road Nueva Ecija PhP8.9 billion
4 New Clark International Airport Facility Pampanga PhP12.6 billion
4 Tutuban-Clark Railway Extension Rail Pampanga PhP225.0 billion
5 NLEX-SLEX Connector Road Road Metro Manila PhP23.3 billion
6 Southwest Integrated Transport Terminal Facility Cavite PhP2.5 billion
6 LRT Line-1 Cavite Extension Rail Cavite PhP64.9 billion
7 Cavite-Laguna Expressway Road Laguna PhP35.7 billion
7 South Luzon Expressway - Laguna Section Road Laguna PhP536.3 million
8 Aklan West Road Road Aklan PhP51.6 million
9 Tayud-Consolacion-Liloan Road Expansion Road Cebu PhP54.4 million
9 Mactan-Cebu International Airport Passenger Terminal Facility Cebu PhP17.5 billion
9 Cebu Bus Rapid Transit Road Cebu PhP16.9 billion
10 Ormoc Diversion Road Road Leyte PhP324.9 million
11 New Bohol International Airport Facility Bohol PhP7.4 billion
12 Metro Dumaguete Diversion Road Road Negros Oriental PhP50.0 million
13 Surigao-Davao Road - Agusan del Norte Section Road Agusan del Norte PhP2.8 billion
14 Dipolog-Oroquita National Road Road Zamboanga del Norte PhP55.2 million
15 Iligan City Circumferential Road Road Lanao del Norte PhP55.6 million
16 Opol Diversion Road Road Misamis Oriental PhP53.8 million
17 Cotabato City East Diversion Road Road Maguindanao PhP745.9 million
18 Mindanao Railway Rail Davao PhP35.3 billion
Source: PPP, DPWH, KMC Savills Research

Market Study – MS-05-06-1723 – DoubleDragon Properties Corp. 84

 Fredrick Rara
Manager, Research & Consultancy
KMC Savills, Inc.
11th Floor, Sun Life Centre
5th Avenue, Bonifacio Global City 1634
(+632) 403-5519
fredrick.rara@kmcmaggroup.com

This document is copyright material owned by KMC Savills, Inc. (KMC-Savills) and related entities. Permission
to use any part of this document must be sought directly from KMC-Savills and its related entities. If permission
is given, it will be subject to a requirement that the copyright owners name and interest is acknowledged when
reproducing the whole or part of any copyright material.
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