The long-awaited launch of the first real estate investment trust (Reit) in the Philippines moved a step closer with the approval by the Securities and Exchange Commission (SEC) of an offering sponsored by Ayala Land, one of the nation’s largest property developers.
The SEC, in its meeting on July 9, cleared the registration statement of the Reit, called AREIT, for over 1.09 billion common shares for listing and trading on the main board of the Philippine Stock Exchange (PSE).
The registration statement covers up to 47.864 million new common shares and up to 409.019 million existing common shares for public offering, with an overallotment option of up to 45.689 million secondary shares at a maximum offer price of 30.05 pesos (US$0.607) per share.
Based on the latest timetable submitted to the SEC, AREIT's public offering will run from July 27 to 31 and the Reit will debut on the PSE on August 7.
AREIT's primary offering could raise 1.332 billion pesos in net proceeds, which will be used to expand the company's building portfolio through the acquisition of a fourth building, Teleperformance Cebu, excluding the land. At present, AREIT’s property portfolio consists of three commercial buildings, excluding the land on which they stand, namely Solaris One and Ayala North Exchange and, as of February 1 2020, McKinley Exchange through a lease from the sponsor.
Ayala Land, meanwhile, could net about 13.309 billion pesos from the secondary offer, assuming full exercise of the overallotment option. As required under the revised implementing rules and regulations of the Republic Act No 9856, or the REIT Act of 2009, the sponsor shall re-invest the net proceeds in real estate and/or infrastructure projects in the Philippines within a year.
Assuming the full exercise of the overallotment option, the transaction would allow the public to own 49% of the issued and outstanding common shares of AREIT. Ayala Land will retain a 41.61% shareholding, while its subsidiary AyalaLand Offices will own the remaining 9.39% upon the completion of the public offering.
BPI Capital is appointed as the sole global co-ordinator of the offering, joint bookrunner along with UBS, and joint underwriter with PNB Capital and Investment, and SB Capital Investment.
AREIT Fund Managers, formerly AyalaLand Commercial REIT, will manage the assets of AREIT with a focus on generating rental income and increasing the company’s assets over time.
Second Reit on the way
Another Reit sponsor, DoubleDragon Properties, on July 10 identified its first tranche of Reit assets, comprising the leasable properties of DD Meridian Park. In a disclosure filed with the PSE, the intended DD Meridian Park Reit (DDMP Reit) will consist of seven buildings with a total area of 248,349 square metres (sq m).
The estimated value of the basket of Reit assets is about 50.90 billion pesos, and DoubleDragon expects to generate close to 17 billion pesos of proceeds from the planned Reit listing. This represents an offer of 33.33% of the selected Reit assets, which is the minimum public float requirement based on the revised Reit listing rules.
All of the proceeds from the listing will be re-invested in the Philippines. The Reit proceeds will be enough to construct about 450,000 sq m of building floor area, which will significantly increase the leasable portfolio and recurring rental revenue of the company in the near term.
In addition to the seven buildings that will form the first tranche of the DDMP Reit, two more buildings are planned to be integrated into the Reit after about two to three years. The two other buildings, also located in the DD Meridian Park complex, are still under construction.
DoubleDragon is preparing to file its Reit listing application with the SEC and the PSE in August this year and aims to list by October.
“Reits are a good way to recycle capital for expansion of the company’s portfolio and raise equity to further boost its balance sheet,” says DoubleDragon chief investment officer Hannah Yulo-Luccini. “Since the offer will only cover 33.33% of the Reit basket, DoubleDragon will retain majority of the Reit assets, so it will remain consolidated in the company’s balance sheet.”
At present, DoubleDragon has 803,000 sq m in its portfolio and plans to list via Reit about 200,000 sq m to 250,000 sq m annually from 2020 to 2025. This will enable the company to unlock the value of its prime leasable assets and significantly strengthen its equity base year-on-year going forward.