AREIT seeks to raise P15 billion for property buyouts

Fresh from its listing last Friday, Ayala-backed AREIT Inc. unveiled plans to borrow P15 billion over the next three years to acquire more properties over which company shareholders stand to earn the bulk of income.

In a disclosure to the stock exchange on Monday, the country’s first ever real estate investment trust (REIT) firm, said the amount will be raised through bond offerings, authority on which will be secured through a shelf registration filing before corporate regulators.

“This will provide AREIT the ability to leverage for future acquisitions while preserving cash for dividend distributions,” the company said.

Indeed, also on Tuesday, AREIT announced quarterly dividend payouts would begin, with the first round of distribution set on September 15 at a price of P0.59 per share based on the company’s rental income in the first half.

Under a REIT, earnings from acquired properties are distributed among shareholders, 33% of whom are public investors. Investors are entitled to receive at least 90% of the company’s income in the form of dividends.

“AREIT provides investors regular dividend income derived from prime commercial properties, higher than most fixed-income instruments,” Carol Mills, company president, said.

AREIT’s portfolio currently consists of three office buildings in Makati City namely the 24-storey commercial building Solaris One, two-tower mixed-use development Ayala North Exchange and five-storey commercial office McKinley Exchange.

The company, the first of its kind since the REIT law was enacted in 2009, is also moving to acquire the office hosting Teleperformance Cebu, a business process firm, to bring AREIT’s real estate portfolio to over 170,000 square meters by yearend.

As the coronavirus pandemic cools down the Philippines’ once hot property market, Anna Corenne Agravio, property stocks analyst at Regina Capital, said it is “highly likely” that AREIT will continue acquiring prime office buildings in major business districts and avoid properties like malls and hotels. “The office sector was proven to be the least affected segment during the pandemic,” she said.

“If you look at it in a post-pandemic standpoint, office buildings are still the most attractive out of all the choices, since softening rental income would be offset by continued strong demand," Agravio said in a Viber message.

“On the flipside, hospitality and retail will take longer to recover,” she added.

On Monday, shares in AREIT bounced back from its dismal maiden offer to close 7.68% up at P25.95 each, defying a 0.13-percent decline in the main index.

Over the weekend, the Securities and Exchange Commission said a probe was started into complaints by retail investors holding AREIT shares against some brokerages, which failed to execute trade orders last week.

In separate statements, some of those brokerages namely COL Financial Inc. and Abacus Securities Corp., promised to absorb losses by clients who failed to make the trades. Abacus said the incident was a result of “miscoordination involving us, our platform provider and regulators.”

Courtesy of Ian Nicolas Cigaral (Philstar.com)

Source: Peso Economics