Air Residences Investment Report 1Q2018

Property Investment Report The AIR Residences

PROPERTY RESEARCHED BY: Ramon Fernando Balbin, RFP, CIPS +63 915 943 7331 ramon.balbin@gmail.com

Table of Content Introduction .......................................................................................... 2

The information contained within this document has been compiled from various sources. While we believe the information to be correct we take no responsibility for errors of omissions. Please ensure you validate all information.

Developer ............................................................................................. 2 The Project ............................................................................................ 3 Development Component .................................................................. 3 Property Pictures .................................................................................. 4 Video Presentation ................................................................................ 8 Greater Area Growth ............................................................................ 9 Economic Indicator............................................................................ 9 Market Growth .................................................................................. 9 DEMOGRAPHICS ............................................................................... 9

A rental analysis has been provided as an example only. It includes a number of assumptions that have a material impact. It should be assessed carefully and a rental analysis specific to your circumstances and objectives should be undertaken.

We recommend you obtain appropriate legal and technical advice before buying property.

Other Additional Info ....................................................................... 10 Average Income .............................................................................. 10 Demand Drivers .............................................................................. 11 Area maps........................................................................................... 12 Location Map ................................................................................... 12 Satellite View................................................................................... 13 Street View ...................................................................................... 13 AREA PROFILE .................................................................................... 14 Greater Area Profile ........................................................................ 14 Infrastructure Development ............................................................. 15 Investment Check Up .......................................................................... 16 Financial Summary .............................................................................. 17 15 Years Forecast ............................................................................ 18 Rent Comparabales............................................................................. 19 Sale Comparabales ............................................................................. 20 Glossary ............................................................................................. 21

PROPERTY RESEARCHED BY:

1

Ramon Fernando Balbin, RFP, CIPS +63 915 943 7331 ramon.balbin@gmail.com

Introduction The AIR Residences is the FIRST development of SM Development Corporation under PREMIERE BRAND located at two main road of MAKATI CENTRAL BUSINES DISTRICT Ayala Ave and Buendia.

Developer SM Development Corporation (SMDC) is a trailblazer in the middle market residential condominiums. SMDC develops primary homes that attract customers looking for conveniently located, aspirational, yet affordable residences. Its customer focus helped SMDC develop a business model that aims to turnover units at the fastest rate in the sector, without compromising quality. The projects offer five-star amenities such as grand lobbies, Olympic-sized swimming pools, function rooms, jogging paths and libraries, among others, that address the customers' needs and aspirations for a convenient and healthier lifestyle.

2

The Project Nothing says you’ve made it quite like a Makati Address. Air Residences gives you a privileged lifestyle combining a convenient location with the luxurious comfort of its signature amenities. Located within the Philippines’ premier business and financial district, Air Residences brings you to the doorstep of success.

7th Floor Amenities: • Reflective Pool • Function Terrace • Seating Alcoves • Pool Table / Billiards Table

Ayala Avenue

• Table Tennis • Game Alley

Home to the headquarters of multinationals and the country’s top corporations, Air Residences is strategically located right off Ayala Avenue, bringing you to the doorstep of success.

Development Component

• Children's Play Area • Sports / Yoga Terrace

8th Floor Amenities: • Leisure & Lap Pool

FEATURES AND AMENITIES • Front Desk • 12 Elevators • 24-hour Security • Fire Protection and Alarm System • Generator Set for Common Areas and select residential outlets • Centralized Cistern Tank • Provision for Telecom and Cable Providers • Intercom System

• Pool Island • Pool Pavilion • Sun Deck • Barbecue Terrace • Lush Landscapes • Function Room • Function Terrace • Yoga & Exercise Lawn • Kids Play Pool • Children's Play Area • Outdoor Lounge • Jogging / Walking Trail

Unit Deliverables: • Overhead and undercounter kitchen cabinets • Rangehood • Electric cooktop • Refrigerator • Intercom • Air conditioning unit • Microwave oven

3

Property Pictures

4

5

6

7

Video Presentation

8

Greater Area Growth Economic Indicator (Philippiness)

Source: Leechiu Property Consultant/ / Trading Economics

Market Growth Makati is a city in the Philippines’ Metro Manila region and the country’s financial hub. It’s known for the skyscrapers and shopping malls of Makati Central Business District, and for Ayala Triangle Gardens, an area dotted with trees and sculptures. Ayala Museum houses the Filipinas Heritage Library and craft collections documenting the country’s history. The Rizal Monument is a memorial to national hero José Rizal.

DEMOGRAPHICS

9

Other Additional Info Doing Business in Makati Makati Basic Facts and Figures Cost of Living (Comparison)

Average Income PAYSCALE

10

Why MAKATI 1. Central Business District 2. Home of Embassies and High End Shopping Centre 3. Proximity to International Airport 4. Urban and Master planned. City Council offers individuals benefits from womb to tomb. (free school supplies, health card, etc.)

5. City Hall is business friendly

Demand Drivers

Target 12M tourist by 2022. 103% from 5.9M tourist arrivals last 2016

University Students and BPO Sectors still creates demand on the area

New Demand coming from offshore Online Gaming Offices and start-up companies

According to reports International Chinese Property Investors pushes the property prices in Makati, Pasay and Cebu.

11

Area maps (Click Image)

Location Map

12

Satellite View

Street View

13

AREA PROFILE Greater Area Profile iAcademy (750m) De La Salle Professional Schools (550m) CEU Makati (550m) FEU Makati (450m) Mapua Makati (950m) Ateneo Business School (3km)

National Shrine of the Sacred Heart (550m) St. Andrew The Apostle Parish (1.4km) Sto Niño de Paz Greenbelt (1.8km)

SM Jzz Mall (1.2km) Century City Mall (1.9km) Cash & Carry (1.3km) Greenbelt Mall (1.7km)

Ayala Triangle (1.6km) Legaspi Active Park (1.3km) Jaime Velasquez Park (1.2km)

Buenidia PNR (1.2km) Ayala MRT Station (2.3km) Buendia MRT STation (2.7km)

Makati Medical Centre (600m) Centuria Medical Centre (2km)

14

Infrastructure Development NAIA Expressway The NAIA Expressway is an 11.6-kilometer elevated expressway system in Metro Manila, Philippines, which links the Metro Manila Skyway to the Ninoy Aquino International Airport and Entertainment City NLEX – SLEX Connector An 8 – kilometer all elevated 2X2 highway extending the NLEX southward from the end of Segment 10 in C3 Road Caloocan City to PUP Sta. Mesa, Manila and connect to the Skyway Stage 3, and traversing mostly along the PNR rail track.

Mega Manila Subway A 25-kilometer underground mass transportation system connecting major business districts and government centers. It is expected to serve around 370,000 passengers per day in its opening year.

15

Investment Check Up Property Details Project Location Unit Number Property Attributes Property Size PURCHASE PRICE Total List Price Other Charges Total Contract Price Total Payment Improvements Mortgage Fee TOTAL PURCHASING COST Loanable Amount CAPITAL GROWTH

Air Residences Makati 3617 studio with balcony 22.95 sqm 2,876,940.00 114,950.00 ₱ 2,991,890.00 747,972.50 150,000.00 3% 42,059.29 ₱ 940,031.79 ₱ 1,929,346.88 as of March 2018

Market Price Equity Gain Secondary ₱ 4,368,000.00 ₱ 1,376,110.00 Developer ₱ 6,209,400.00 ₱ 3,217,510.00 *above price inclusive of trasfer fees, tax and commission

% 46% 108%

RENTAL ANALYSIS Monthly Rental Rate Expenses

Annual 27,000.00

324,000.00 27,000.00 25,920.00 27,540.00

Letti ng Fee

2,160.00 2,295.00 0

Property Ma na gement As s oci a ti on Dues Ins ura nce

Net Income before (P&I) Cash Flow after (P&I) Gross Yield Net Yield ROI on Rental Property Cash on Cash (COC) Net Income Multiplier (NIM) Expense Ratio (ER) Gross Rent Multiplier (GRM) Debt Coverage Ratio (DCR)

₱

4,455.00 22,545.00 407.76

0 ₱ 10.83% 8.14% 10% 1% 12.29 25% 9.23 1.02

80,460.00 243,540.00 4,893.13

16

Financial Summary

Name: Air Residences Address:Malugay Street City: Makati Country Philippines PURCHASE EXPENSES Property Purchase Price Other Charges Net List Price TOTAL CONTRACT PRICE PROPERTY PURCHASE EXPENSES Equity Deposit Fit Out Miscelaneous

TOTAL

2,876,940.00 114,950.00 ₱ 2,991,890.00 ₱ 2,991,890.00

Type: Unit Size (sqm) View

ANNUAL PROPERTY TAX

25% ₱ 747,972.50 ANNUAL PROPERTY Expenses ₱ 150,000.00 Letting Fee Association Due Property Management Insurance TOTAL ₱ 897,972.50 TOTAL ANNUAL EXPENSE

Loan Expense Loan Processing Fee 42,059.29 Loan Type Includes Reg Fee, Notarial, Appraisal Title, Investigation and MRI Loan Interest Loan Amount ₱ 42,059.29 Loan Term (Years) ₱ 940,031.79 LVR Loan to Value Ratio TOTAL TOTAL PURCHASE EXPENSES

studio with balcony 3617 22.95

ANNUAL EXPENSES

Loan Details

100.00 8%

-

ANNUAL RENTAL INCOME

Vacancy

Vacancy

Vacancy

Vacancy

Standard Residential Months Rent/Month Vacancy 27,000.00 12

Holiday Rental Peak Season Months Rent/Month 27,000.00 27,540.00 Mid Season 25,920.00 Months Rent/Month 80,460.00 80,460.00 Low Season Months Rent/Month Interest Only 6.5% Holiday Rental Total 75.0% ₱ 2,243,917.50 Days Rent/Month 15 75% TOTAL ANNUAL INCOME

-

TAX AND MARKET FACTORS

MARKET FACTORS Consumer Price Index(CPI) 10 Year Average Capital Growth

TAXABLE INCOME Rent/Year Personal Annual Income 324,000.00 Personal Annual Income Tax Rate

Rent/Year

Depreciation Estimator Rent/Year Property Specifics Year 1 Property Type Year 2 Year 3 Nearest Capital City Year 4 Rent/Year Year 5 Building Quality Year 6 Year 7 Size Year 8 Rent/Year Purchased Year 9 - Built Year 10 324,000.00 TOTAL DEPRECIATION

Disclaimer: The figures in this report above are an estimation based on a complex range of factors and cannot be relied on for exactness. Always use a qualified accounting specialist before making financial investment decisions

Disclaimer: The figures in this report above are an estimation based on a complex range of factors and cannot be relied on for exactness. Always use a qualified accounting specialist before making financial investment decisions

17

3% 6%

0

15 Years Forecast

Property Growth Capital Growth Fit Out Property Market Value TOTAL Property MARKET VALUE

2 6%

3 6%

4 6%

5 6%

15 YEARS FORCAST 6 7 6% 6% 8 6%

9 6%

10 6%

11 6%

12

6%

13

6%

14

6%

18

15

6%

1 6%

Settlement

490,079 16.4% 12.31%

14,038,857 14,038,857

475,805 15.9% 11.95%

6.5% 14,565 224,082 121,703 129,729 10,811

13,244,205 13,244,205

461,947 15.4% 11.61%

6.5% 28,242 210,405 118,158 119,000 9,917

38% 14% 8.12 25% 6.10 1.54

12,494,533 12,494,533

448,492 15.0% 11.27%

6.5% 41,083 197,564 114,717 108,583 9,049

35% 13% 8.37 25% 6.29 1.50

11,787,295 11,787,295

435,429 14.6% 10.94%

6.5% 53,141 185,506 111,375 98,469 8,206

33% 12% 8.62 25% 6.48 1.45

11,120,090 11,120,090

422,747 14.1% 10.62%

6.5% 64,463 174,184 108,132 88,651 7,388

30% 10% 8.87 25% 6.67 1.41

10,490,651 10,490,651

410,434 13.7% 10.31%

6.5% 75,094 163,553 104,982 79,118 6,593

28% 9% 9.14 25% 6.87 1.37

9,896,840 9,896,840

398,479 13.3% 10.01%

6.5% 85,076 153,571 101,924 69,862 5,822

26% 8% 9.42 25% 7.08 1.33

9,336,642 9,336,642

386,873 12.9% 9.72%

6.5% 94,449 144,198 98,956 60,877 5,073

24% 7.4% 9.70 25% 7.29 1.29

8,808,153 8,808,153

375,605 12.6% 9.44%

6.5% 103,250 135,397 96,073 52,153 4,346

22% 6.5% 9.99 25% 7.51 1.26

8,309,578 8,309,578

364,665 12.2% 9.16%

6.5% 111,513 127,133 93,275 43,683 3,640

20% 5.5% 10.29 25% 7.73 1.22

7,839,224 7,839,224

354,044 11.8% 8.89%

6.5% 119,273 119,374 90,558 35,460 2,955

18% 4.6% 10.60 25% 7.97 1.18

7,395,495 7,395,495

343,732 11.5% 8.64%

6.5% 126,559 112,088 87,921 27,476 2,290

16% 3.8% 10.92 25% 8.20 1.15

6,976,882 6,976,882

6,209,400 6,209,400

333,720 11.2% 8.38% 6.5% 133,400 105,247 85,360 19,725 1,644

15% 2.9% 11.24 25% 8.45 1.12

6,581,964 6,581,964

2,991,890 2,991,890

2,243,918 2,243,918 2,243,918 2,243,918 2,243,918 2,243,918 2,243,918 2,243,918 2,243,918 2,243,918 2,243,918 2,243,918 2,243,918 2,243,918 2,243,918 3,965,483 4,338,047 4,732,964 5,151,577 5,595,307 6,065,660 6,564,235 7,092,724 7,652,923 8,246,733 8,876,172 9,543,378 10,250,615 11,000,287 11,794,940 36% 34% 32% 30% 29% 27% 25% 24% 23% 21% 20% 19% 18% 17% 16% 2,413,133 2,692,556 2,988,744 3,302,704 3,635,501 3,988,266 4,362,197 4,758,564 5,178,713 5,624,070 6,096,150 6,596,554 7,126,982 7,689,236 8,285,225 9,652,530 10,770,222 11,954,976 13,210,814 14,542,003 15,953,064 17,448,788 19,034,255 20,714,851 22,496,282 24,384,599 26,386,215 28,507,928 30,756,944 33,140,901 324,000 10.8% 8.14% 6.5% 139,823 98,824 82,874 12,199 1,017

13% 2.1% 11.58 25% 8.70 1.08

75% 2,243,918 747,973 75% -

Rental Income Annual Rent Gross Yield Net Yield 6.5% 145,855 92,792 80,460 4,893 408 12% 1.3% 11.93 25% 8.97 1.05

Loan and Equity Loan Amount Equity in Property LVR (Loan to Value Ratio) LVR for Finance Buying Power

Cash Deduction Loan Interest Rates Interest Only Principal Repayment Annual Property Expense Before-tax Cash Flow per Annum Before-tax Cash Flow per Month 10.4% 0.5% 12.29 25% 9.23 1.02

Investment Analysis ROI on Rental Property Cash on Cash (COC) Net Income Multiplier (NIM) Expense Ratio (ER) Gross Rent Multiplier (GRM) Debt Coverage Ratio (DCR)

Disclaimer: The figures in this report above are an estimation based on a complex range of factors and cannot be relied on for exactness. Always use a qualified accounting specialist before making financial investment decisions

Rent Comparabales

19

Sale Comparabales

20

Glossary Cash on Cash (COC) is a rate of return often used in real estate transactions that calculates the cash income earned on the cash invested in a property. It is equal to the Before Tax Cash Flow (BTCF) divided by the sum of all out-ofpocket aquisition costs (down payment, closings costs, etc.).

Gross Rent Multiplier (GRM) Purchase price divided by the Gross Income. The lower the number the better. it is the number of years the property would take to pay for itself in gross received rent. For the investor looking to purchase, a higher GRM (perhaps over 12) is a poorer opportunity, whereas a lower one (perhaps under 8) is better.

Debt Coverage Ratio (DCR) The Net Income divided by the Annual Debt Service. The higher the DCR the better. A DCR below 1.0 means the property is generating a negative cash flow. A DCR above 1.2 is considered to be a good cash flowing property.

Net Income Multiplier (NIM) The purchase price divided by the Net Income. The lower the NIM the better. The Multiplier tells you how effective the apartment building is at generating income compared to its market price. Using the Net Income Multiplier in this way gives you some valuable information when you are comparing apartments prior to a purchase.

Expense Ratio (ER) Total Operating Expense divided by Gross Income, expressed as a percentage. A percentage below 35 is considered good. Lower ER typically means the property is being managed efficiently and is more profitable for investors, and that less of the property’s income is covering operational and maintenance costs. If the business is scalable, the owner may increase the rent on each unit without greatly increasing operating expenses. In addition, the ER can show where potential issues may occur, such as utility bills increasing substantially, so investors can solve problems more quickly and protect their profit levels.

21