Property giant Ayala Land Inc. (ALI) has filed an application to raise as much as P15.1 billion in fresh capital from what could be the first initial public offering (IPO) of a real estate investment trust (REIT) in the Philippines.
ALI spun off three highly visible revenue-generating assets in its bailiwick of Makati central business district into a new entity called AREIT Inc. and will henceforth sell down as much as 49 percent of this unit under the newly minted REIT framework.
Based on a registration statement filed at the Securities and Exchange Commission on Friday, AREIT plans to sell up to 507.57 million common shares at a maximum price of P30.05 each, allowing the group to recycle capital for other property projects.The base offer will consist of 47.864 million primary shares and 430.775 million secondary shares but there will be an option to upsize the equity deal by another 23.93 million shares. “Ayala Land’s initiative to pioneer REITs in the Philippines reflects its confidence in the local economy. Through this initial capital market transaction, ALI hopes to pave the way for the development of a REIT market in the country, bringing another milestone to the Philippine stock market,” ALI said in a press statement on Friday night.The issue manager, bookrunner and lead underwriter for the transaction is BPI Capital Corp. About 70 percent of the firm offer shares will be offered to institutional investors while 30 percent and 10 percent will be offered to trading participants and local small investors, respectively.
To date, AREIT’s portfolio consists of five buildings in three projects with a combined 153,000 square meters of gross leasable area (GLA).
The biggest of the assets infused into AREIT is Ayala North Exchange, which has two office towers that stand on top of a three-story retail podium, as well as a collection of 293 serviced apartment units branded as Seda Residences Makati. The first tower is a 12-story headquarter-type office while the second tower is a 20-story Philippine Economic Zone Authority (Peza)-accredited business process outsourcing office. This asset has a total GLA of 95,554.35 sqm.
The two other property assets infused into AREIT are Solaris One, a 24-story Grade A Peza-accredited commercial building on Dela Rosa Street, Legaspi Village, which has 46,767.96 sqm of GLA, and McKinley Exchange, a five-story Grade A, Peza-accredited mixed-use development on McKinley Road corner Edsa, Makati, that has 10,687.50 sqm of GLA, of which 9,633.32 sqm are designated for commercial office leasing.
Based on the prospectus, AREIT intends to expand its portfolio by acquiring from an affiliate a fourth property—Teleperformance Cebu in Cebu IT Park, which has 17,947.96 sqm of GLA—using proceeds from the primary shares portion of the IPO.
The REIT Act, passed by Congress in 2009, allows REIT companies to list and trade its shares of stock in the Philippine Stock Exchange as an alternative means to raise funds for property development and expansion initiatives.
“The REIT is a new asset class that provides investors with dividend-based income, inflation protection and portfolio diversification. It broadens investment options for Filipinos, opening the opportunity to own a stake in high-value real estate assets in the country,” ALI said.
In the last 11 years, however, the REIT asset class did not take off due to tax and other regulatory restrictions, which the government recently addressed by coming up with an amended REIT framework acceptable to the financial market.A REIT gives investors the option to invest directly in the finished products that are already earning money. These include residential and office rental units, hotels or shopping malls or even infrastructure ventures. This was meant to attract investors because the REIT law required the distribution of at least 90 percent of income as dividends annually. INQ