The Philippines’ first-ever real estate investment trust (Reit), AREIT, made its trading debut on the Philippine Stock Exchange (PSE) on August 13, introducing a new asset class that will contribute to the development of the domestic capital markets. It was not an inspiring debut, however, as it closed lower than its offer price.
Finance Secretary Carlos Dominguez III hailed the listing, saying it signals the domestic market is ready to resume business amid the challenges arising from the coronavirus-induced health and economic crisis.
He adds the Reit will deliver the economy a “powerful financial concept” that aims to promote greater inclusiveness in the financial system among Filipinos as it will democratize wealth by opening for thousands of small investors the opportunity to invest in secure and profitable real estate projects.
AREIT officially completed the offer period on August 3 for up to 456.883 million common shares at 27 pesos (US$0.55) apiece, comprising of 47.864 million common shares issued by AREIT on a primary basis and 409.019 million existing common shares offered by the sponsor Ayala Land. There is an over-allot option of up 45.689 million shares, which should bring total proceeds to an estimated 13.57 billion pesos.
Of the firm offer, which was 2 times oversubscribed, about 70% was allocated to both domestic and international qualified institutional buyers, while the remaining 30% was offered to all Reit-eligible trading participants of the PSE (20%) and to small local investors (10%).
AREIT, though, had a lacklustre debut as it closed 7.78% down from its offer price to 24.90 pesos, failing to match the broader benchmark PSE index, which rpse1.71% to 6.097.78 points. It was the most actively traded stock in the market with a little over 31.70 million shares changing hands worth 832.48 million pesos.
Dominguez says he is optimistic that AREIT’s public offering and listing will encourage more companies to form Reits that would “provide attractive and dependable investment opportunities for the average Filipino”.
On top of being a secure investment vehicle for small investors, Reits also provide multiplier effects on the economy, considering that the capital and profits to be raised by Reit sponsors will be reinvested exclusively in the domestic real estate and infrastructure sectors, Dominguez notes.
“A Reit public offering not only signals that there is strong confidence in existing real properties, but that the company sees new opportunities for expansion with the proceeds of the offering,” adds Dominguez, who had strongly pushed the implementation of the 11-year-old Reit Law ever since he assumed the finance portfolio in 2016.
BPI Capital Corporation was the sole global coordinator and a joint bookrunner for the AREIT IPO, while UBS was the sole international bookrunner for the international tranche. BPI Capital, PNB Capital and Investment Corporation, and SB Capital Investment Corporation acted as the underwriters for the domestic tranche.