The Ayala Group took that first bold step in the country’s REIT journey and the rest, as they say, is history.
Now, other property companies are taking the same path, jumpstarting a landmark and historic REIT landscape in the Philippines.
Over a decade ago, in July 2009, the REIT or the Philippine Real Estate Investment Trust Law was enacted, promoting the development of the capital markets, broadening the participation of Filipinos in the ownership of real estate in the country, and in the process, spurring overall economic development.
AREIT Inc., the first Philippine REIT established under that law, braved the market at an extremely difficult time when the world was facing a global health pandemic and the worst economic recession since World War II.
The company, sponsored by Ayala Land Inc., was offered to the public last August 2020 and performed ahead of target.
Share price
Less than a year after, AREIT’s share price has already soared by at least 35 percent from its initial public offering price of P27 per share.
As of this writing, AREIT’s share price is at P36.65.
This is a testament to investors’ underlying confidence in the Ayala brand and AREIT’s portfolio.
AREIT Inc. president Carol Mills said during the company’s recent annual stockholders’ meeting, “AREIT demonstrated how a commercial real estate investment trust could continue driving the gears of the Philippine economy even under very dire circumstances.”
“Despite widespread community lockdowns, we recorded a full-year net income of P1.23 billion on revenue of P1.95 billion and EBITDA (earnings before interest, taxes, depreciation, and amortization) of P1.58 billion, three percent and four percent higher, respectively, than originally planned,” she said.
Dividends
As REITs are required to declare dividends comprising 90 percent of the REITs distributable income , AREIT investors can expect this added benefit of investing in the company.
“This allowed us to distribute quarterly cash dividends to our shareholders, higher than projected during our IPO,” Mills said.
Portfolio
AREIT’s portfolio consists of carefully selected properties that are best performing and hinged on quality tenancy with large global corporate locators which bring many jobs to Filipinos.
This will create sustainable value for AREIT’s shareholders, Mills said.
In January, AREIT purchased four parcels of land at the Laguna Technopark from Technopark Land Inc. for P1.1 billion.
Leased by Integrated Micro-Electronics, Inc. (IMI) until December 2027, this 9.8-hectare property supports local employment and will provide sustained value for investors over the medium term. IMI is a leading global manufacturing and technology solutions company, a subsidiary of Ayala Corp.
AREIT also acquired The 30th, a commercial development in Pasig City for P5.1 billion. Located along Meralco Avenue, it hosts a 19-storey office tower on top of a retail podium with a combined gross leasable area (GLA) of 75,000 square meters.
These two properties immediately doubled AREIT’s portfolio of prime assets to 344,000 sqm from 171 sqm and brought its deposited property value higher from P30 billion after its IPO, with Solaris One, Ayala North Exchange, McKinley Exchange in Makati City, and Teleperformance Cebu in Cebu City.
“Altogether, our properties to date are valued at P37 billion. This year, we are embarking on the infusion of additional assets in AREIT potentially bringing the company’s total assets under management to 549,000 sqm valued at P52 billion,” Mills said.
Moving forward, the company envisions having multiple presence nationwide, with its potential for geographical growth analogous to that of Ayala Land, starting with Makati and expanding to various key urban cities throughout the country.
AREIT’s journey
The narration of AREIT’s journey would not be complete without recounting the preparatory work since 2018 leading up to its IPO.
“Launching a REIT has always been our intent even prior to the pandemic, as we recognize the benefits of a properly executed REIT in fueling the growth of commercial real estate in the country,” Mills said.
The various lockdowns to stem the spread of COVID-19 and the economic contraction—the country’s GDP at negative 9.5 percent did not deter AREIT.
“We moved with caution, and we did not shelve our plans. Watching the industry closely, we kept our locators engaged and all our buildings open and safe throughout,” Mills said.
Thus, the company went ahead and completed its P13.6-billion IPO in August.
“With two times oversubscription, we did not back down. We believed we had a compelling opportunity amidst the pandemic to democratize commercial real estate for Filipinos and reinvest income in the Philippines,” Mills said.
But AREIT sees beyond itself. It aims to bring a positive ripple effect and promote greater inclusiveness in the Philippines as it strives to become a best-in-class REIT.
It is backed by the track record of Ayala Land as the largest mixed-use developer in the country; prime location and quality of assets; stable, long-term occupancy by top global and local companies; inflation-hedged growth though contracted escalations; and an experienced professional management team.
Right time, REIT investment
Now, more than a year after its listing, the path that AREIT has started has now become more vibrant, dynamic and exciting with other REIT companies taking the same path, boosting the Philippine economy and providing more options for investors.
AREIT indeed came at the REIT time.