Property developer DoubleDragon Properties Corp. may raise funds from a maiden offering of real estate investment trust (REIT) as early as next year, thus recycling capital from assets with recurring revenues.
DoubleDragon chair Edgar Sia II said REITs might give the company additional funding option in the coming years.
By 2021, the company may have built up free cash flow of P8.2 billion.
This represents two-thirds of the company’s projected cash flow by this year, the same period when it expects to start paying out cash dividends to stockholders.
The remaining third of cash flow will be used for interest payments.
Sia noted that the first principal maturity of DoubleDragon’s corporate notes would be in October 2021 amounting to P7.4 billion.
“Just like all the other large listed property companies, the plan is to raise new corporate notes to refinance that on the same year in 2021,” Sia said.
“Please also note that the company expects to raise funds next year, in 2020 or 2021, from a REIT listing and may also allocate portion of the amount raised to pay it (maturing corporate bonds) off depending on what would be the best option at that point in time next year or 2021 and it depends if the REIT new rules are in place by that time,” he said in an email to the Inquirer.
REIT gives investors the option to invest directly in the finished products that are already earning money—such as office units, hotels or shopping malls or even infrastructure ventures like toll roads and power plants—and not just the property developer itself. This is meant to attract investors because the Philippine REIT law of 2009 requires the distribution of 90 percent of income annually.
The Securities and Exchange Commission is still fine-tuning amendments to the implementing rules that will allow REITs to take off as a new asset class.
Sia noted that DoubleDragon would thus be like other larger listed property companies that were distributing dividends equivalent to 30 percent of annual net income and raising funds to refinance every time they had principal debt maturities.
Previously, Sia projected that DoubleDragon could generate P4 billion in recurring income this year, rising to P5.4 billion by 2020 and further to P10.8 billion by 2021, the year that the company aimed to start paying dividends.
The company aims to complete a leasable portfolio of 1.2 million square meters by 2020 comprising of 700,000 sqm from 100 community malls under the CityMalls brand, 300,000 sqm from its Metro Manila office projects DD Meridian Park and Jollibee Tower, 100,000 sqm from the pipeline 5,000 hotel rooms of Hotel101 and Jinjiang Inn Philippines, and another 100,000 sqm of industrial space from various CentralHub sites across Luzon, Visayas and Mindanao.