ALI set to hold REIT offering to raise $500M

The Real Estate Investment Trust (REIT) law, shunned by once-keen property giants due to restrictive public ownership and taxation rules, is getting its first taker.

Property giant Ayala Land Inc. (ALI) said it planned to raise about $500 million by listing certain office buildings in Makati City through the REIT framework. This would allow companies to spin off recurring income assets as traded vehicles on the Philippine Stock Exchange.

“We hope to list within the year,” Jose Emmanuel Jalandoni, Ayala Land head of commercial business, said in a briefing after the company’s annual meeting on Wednesday.

“We are testing the framework so we will start with a few assets primarily in Makati CBD (central business district),” he added, referring to Manila’s financial center that was largely developed by Ayala Land.

The REIT Act was passed by Congress in 2009. However, developers stayed away after the Aquino administration imposed restrictive rules as it feared revenue losses from the tax perks.

The current administration had succeeded in removing the taxation on property transfers to a REIT vehicle.

Securities and Exchange Commission Commissioner Ephyro Luis Amatong said earlier this month they were working stakeholders to lift a rule that required the REIT owner to eventually give up control of the company.

The current guidelines require a REIT company to have an initial minimum public ownership level of 40 percent which should be increased to 67 percent in three years. Amatong said the target was to come up with a more relaxed set of rules by the second quarter of 2019.

Ayala Land CEO Bernard Dy said on Wednesday they would launch a REIT offer based on the current regulations.

“We feel it is a very good vehicle for us to be able to recycle capital. We are also looking at it as a new business model,” Dy said. “We can use this vehicle to acquire third-party assets. It doesn’t mean the only assets we will put in this vehicle are Ayala assets.”

Another company that had expressed interest in REITs was SM Prime Holdings Inc., the country’s biggest mall operator.

Its president, Jeffrey Lim, however, said on Wednesday they would wait and see until the new guidelines are clear.

“I think we will just let them go first,” Lim said when asked about Ayala Land’s plan.