DoubleDragon 1H 2019 net income up 75% to P2.2 B, plans to hit P11 B in recurring income annually by 2021—Sia
In a recent press release, DoubleDragon Properties Corporation (DD) Chairman and Chief Executive Officer (CEO) Edgar “Injap” Sia II – the country’s youngest billionaire – announced that the company’s net income surged to P2.20 billion in the first half of 2019 – representing a 74.8% jump year on year from the P1.26 billion that the company posted in the same period of the previous year. Mr. Sia attributes the firm’s strong first half performance to the higher revenues generated by its office leasing business, which grew by more than 30% year on year (SEE: DoubleDragon income surges 74% in H1, CNN Philippines).
In the coming years, DoubleDragon’s top management team plans to take a more diversified approach with regard to the company’s growth by banking on strong operating performances from each of the company’s four key business segments – (1) Retail leasing, (2) Office leasing, (3) Industrial warehouse leasing, and (4) Hotels – in order to propel DoubleDragon to its midterm goal of reaching P11 billion in annual recurring income by the end of 2021 (SEE: DoubleDragon sees P 11 B in recurring income by ’21, The Philippine Daily Inquirer).
As for the specifics of the target, Sia forecasts recurring income to be at P4 billion by the end of the year and P5.4 billion by 2020. He then expects this figure more than double to P11 billion by the end of 2021. Once the target is achieved, Mr. Sia promised to finally begin paying dividends to the company’s shareholders at a rate of 30% of the previous year’s net income.
In order to support these lofty goals, DoubleDragon plans to at least double its portfolio of available leasable area from 600,000 square meters (sqm) in 2019 to 1,200,000 square meters (sqm) by the end of 2021. This 1.2 million square meters (sqm) will be allocated among its four business segments as follows: (1) 700,000 square meters allocated to its retail leasing business, (2) 100,000 square meters for its office leasing business, (3) 100,000 square meters allocated to its industrial warehouse leasing business, and (4) 300,000 square meters for its hotel business.
Retail Leasing Business, 700,000 square meters from 100 community malls by 2021
DoubleDragon Properties Corporation, through its 66% owned subsidiary CityMall Commercial Centers Inc., plans to build an additional 61 community malls from 2019 until the end of 2021 – bringing its total community mall count to 100 (SEE: DoubleDragon on track to have 100 malls by 2021, Business World). These new malls will be strategically located in second and third tier cities just outside of the country’s National Capital Region (NCR) in order to (1) capitalize on the rapid economic growth and development and the rising levels of disposable income in the nearby provinces and (2) avoid the stiff competition from other major and more mature mall brands – such as SM and Robinsons – in the major cities. Once these new malls become fully operational by the end of 2021, the company would be able to more than double its available leasable retail space, which in turn is expected to double its annual recurring revenue from its retail leasing business.
Office Leasing Business, 300,000 square meters from Metro Manila office projects by 2021
DoubleDragon has just completed the construction of its eight office tower property – the Jollibee Tower in Ortigas. The property is a premium world class office and commercial tower – rising over 41 floors and is strategically located in a three thousand square meter prime lot at the heart of Ortigas Center. The Jollibee Tower added approximately 60 thousand square meters to DoubleDragon’s available leasable office space (SEE: DoubleDragon scales new heights with Jollibee skyscraper, The Philippine Daily Inquirer) and is expected to generate over P600 million in recurring revenues for the company. Moving forward, DoubleDragon is expected to add another office building to its portfolio within the next two years in order to reach its 300,000 square meter target by 2021.
Interestingly, a significant portion of DoubleDragon’s office space tenants are Philippine Offshore Gaming Operators (POGOs) (SEE: POGO: A Major Drive of the PH Real Estate Market, PropertyAccess). Thus, the company faces significant and imminent regulatory risks due to the recent crackdown of China and the Philippines on the country’s online gambling industry (SEE: POGOs are in trouble. Should real estate investors be worried?, PropertyAccess). In order to mitigate this threat, DoubleDragon requires its tenants to lock in for a minimum period of two years. As a result – even if POGOs eventually do become banned in the country, the company would have more than enough time to look for new tenants to fill up any vacancies left by POGOs.
Industrial Warehouse Leasing Business, 100,000 square meters from CentralHub industrial warehouse sites by 2020
DoubleDragon Properties, in partnership with Cargill Philippines, is spending over P4 billion to create CentralHub – a provider of modern and standardized multi-use warehouses across the country (SEE: DoubleDragon to spend over P4billion for industrial hubs and hotels, Rappler). This multibillion peso investment in CentralHub will allow DoubleDragon to ride on the rapid growth of ecommerce in the country, which in turn has led to an increase in demand for warehouse spaces in the provinces (SEE: Logistics and Real Estate, PropertyAccess). Mr. Sia expects this investment to deliver over 100,000 square meters (sqm) in leasable storage space before the end of 2020 (SEE: CentralHub to develop industrial facilities, Sun Star).
Hotel Business, 100,000 square meters from 5,000 hotel rooms from Hotel 101 by 2020
DoubleDragon Properties is looking to further invest in its Hotel101 brand, with the long term goal of making it the largest and most recognized hotel chain in the country. In order to achieve this vision, the company has first setup a short term goal of increasing Hotel101’s total hotel room count to 5,000 rooms by the end of 2020.
Two of its largest projects in the pipeline include: (1) Hotel101 Davao and (2) Hotel101 Resort Boracay. Hotel101 Davao will span 519 rooms located in a 5,300 square meter lot just beside SM Davao – making it the largest hotel in Mindanao (SEE: DoubleDragon to build ‘biggest’ hotel in Mindanao, Rappler). On the other hand, Hotel101 Resort Boracay will be a 1,001 room hotel located in a two hectare lot in Boracay – making it the largest hotel in the entire country (SEE: Biggest hotel in the Philippines to rise in Boracay, Sun Star). Both projects are slated to be completed by the end of 2020.
Cover image from DailyTribune.net