Update 1: Ayala to list Philippines’ first REIT in Aug.

14, Jul. 2020

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Ayala North Exchange, Makati City as shown in a file photo taken in March 2020. (NNA)
Ayala North Exchange, Makati City as shown in a file photo taken in March 2020. (NNA)

MANILA, NNA – The real estate arm of Philippines’ oldest conglomerate Ayala Corp. has got clearance from the Securities and Exchange Commission (SEC) for its plan to list the country’s first real estate investment trust (REIT).

In a statement on Friday, the SEC announced it approved last week the first-ever REIT listing sponsored by Ayala Land Inc. (ALI) seeking to publicly sell shares worth 15.1 billion pesos ($306 million) later this month.

The commission cleared the registration statement of Ayala Land’s AREIT Inc., formerly known as One Dela Rosa Property Development Inc., for 1,092,986,504 common shares for trading on the Main Board of the Philippine Stock Exchange.

It also covers up to 47,864,000 new common shares and up to 409,019,000 existing common shares for public offering. It has an overallotment option of up to 45,688,700 secondary shares, at a maximum offer price of 30.05 pesos per share, according to the statement.

The commission said AREIT might run the public offering from July 27 to 31. It may debut on the local bourse on Aug. 7.

After listing, ALI will retain a 41.61 percent shareholding in AREIT, and its subsidiary, Ayala Land Offices Inc. will hold 9.39 percent. The remaining 49 percent will be traded on the stock exchange.

BPI Capital Corp., a wholly-owned subsidiary of the Bank of the Philippine Islands, an investment bank, will serve as the sole global coordinator for the initial share sale.

AREIT has three listed investment properties, all located in Makati City, the prime business and busy shopping district in greater Manila.

These are a 24-story commercial property called the Solaris One, the 12-story complex Ayala North Exchange, and the five-story office building McKinley Exchange.

As its fourth investment property, the local conglomerate plans to acquire a complex building Teleperformance Cebu located in Cebu City on the Visayas Island from a wholly-owned subsidiary of ALI.

In February, AREIT filed its registration statement with the SEC following the issuance of the revised rules and regulations for a law, passed in 2009, that enables investments in the REIT asset class in January 2020.

Ayala Land initially said allowing such an asset class would open up opportunities to Filipinos to own a stake in high-value real estate assets in the country since REIT helps broaden investment options for investors.

Last week, Double Dragon, another property developer, announced it is planning to file for REIT registration.

The months-long lockdowns imposed by the Philippine government to contain the further spread of the COVID-19 have hit the local property market.

Property consultant Colliers International Philippines sees high vacancies in both office and retail spaces this year. Still, it expects a rebound in demand in 2021 when the Philippine economy is expected to bounce back from a contraction to positive growth.

Rachelle Cruz, a research analyst at brokerage firm AP Securities Inc., told NNA that AREIT may prove attractive to investors, particularly institutional investors looking for reasonable yield, despite the pandemic. However, the expected decline in office lease rates may pose a risk.

Due to the lockdowns, several companies have opted for a work-from-home arrangement, while long-term demand for property remains uncertain, she explained.

“Lower-than-expected office lease rates or a sharp increase in vacancy may lead to a drop in dividends of AREIT,” she said.

Cruz also believes the country may see more REIT filings next year if those of ALI and Double Dragon Properties prove successful.