Reaping the fruits of a REIT investment

Investors who put their money in real estate investment trusts (REITs) are now seeing the value of the investments they made.

At the height of the pandemic, the Philippines was able to see the successful launch of the first REIT in August 2020, AREIT Inc., sponsored by the Ayala group. Several other REITs followed.

“Now that the market is recovering, definitely, they [early REIT investors} will be able to gain from number one, the first mover advantage,” Colliers Philippines Associate director and head of Research Joey Roi Bondoc said in a phone interview.

“They invested when the market was down and now they can capture the gains of the property market now that is starting to recover,” Bondoc added.

One attractive reason to invest in REITs is the benefit of assured dividends as mandated by law and the ease in buying the REIT stocks as the companies are publicly listed.

Under the REIT law, shareholders of a REIT company are entitled to at least 90 percent of the annual distributable income for the current year.

Most REITs in the local market have already posted increases in their dividends.

Dividends

An example of this is AREIT Inc., which reported earlier a 34 percent increase in full-year dividends in 2021 to P1.77 per share from P1.32 per share the year before or 12 percent higher than its REIT plan projection during the initial public offering (IPO).

Based on the company’s annual report, it paid total dividends of P2.0425 billion in 2021.

Other launched REITs have regularly declared cash dividends such as RL Commercial REIT Inc. which declared dividends of P0.154 per share in 2021 and Filinvest REIT Corp. (FILRT) which has already paid P0.452 per share for 2021.

Double Dragon’s DDMP REIT’s dividends amounted to P2.21 billion at P0.124 per share.

MREIT Inc. of Megaworld Corp. paid total dividends of P0.48 per share in 2021. For this year, the company aims to declare dividends of P1 per share. Citicore Energy REIT Corp., earlier paid a cash dividend of P0.035 per share for its 2021 earnings.

A good time to invest in REITs

With the improving performance of the real estate market, Colliers’ Bondoc said REITs are wise investments especially now.

“Definitely it’s a good investment at this point because number one, the property market is recovering, and not only that, the property segments that are generating recurring income are stable,” Bondoc said, referring to segments such as office and retail.

Luis Limlingan of Regina Capital echoed the same view.

“In general, all the REITs are attractive enough since they provide regular dividends at significant yields. They are also typically less volatile compared to other equity issues,” Limlingan said.

“The different PH REITs have different portfolios. They have their own unique selling points that could draw in different types of investors,” he added.

“For example, MREIT’s AUM (assets under management) is predominantly office-oriented, while (Villar-owned) VREIT is retail-oriented. On the other hand, CREIT’s portfolio is made up of industrial land,” he said.

Christopher Mangun, head of research at AAA Securities also affirmed that REITs are reliable investment options.

“REITs have consistently achieved the dividend yield that was expected which makes them a reliable investment option,” Mangun said.

Choosing your REIT

For those considering investing in REITs, Bondoc said they should look at the stability of the income stream of REIT assets as well as the diversification of their portfolios.

“For example, if the REIT company is into office, are the tenants of these office buildings stable? Are the buildings used as REIT assets housing the business process outsourcing (BPO) firms or the multinational companies that will likely stay here in the Philippines for a long time and will continue to occupy those office spaces? Look at the stability of the income stream for these asset classes,” Bondoc said.

Bondoc also stressed the importance of having a diversified portfolio.

“Look at how the REIT players are diversifying their assets that they will divest into REITs. Are they focused on a single asset class or are they looking at multiple asset classes?”

Moving forward, Bondoc said the local market can expect the launch of more REITs as the viability of this asset class is already spreading to other property sectors aside from the office.

“The viability is spilling over to other sectors. Initially the office was the most stable and the most feasible. But right now as you can see, they are using malls, retail assets,” Bondoc said.

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