Real estate investment trust (REIT) pioneer AREIT Inc. has diversified its leasing portfolio with the P5.1-billion acquisition of The 30th commercial hub in Pasig from its sponsor, Ayala Land Inc.
The acquisition of this shopping mall along Meralco Avenue will allow AREIT to increase its total portfolio of assets from 170,000 to 246,000 square meters of gross leasable area, the company disclosed to the Philippine Stock Exchange on Friday.
The 30th is a commercial development that was completed in 2017 by Ayala Land, which owns 54 percent of AREIT. The office building is fully occupied predominantly by business process outsourcing companies.
The deal was signed just when the Philippines started easing some of the lockdown protocols that have been put in place since mid-March to prevent the spread of COVID-19.
The 30th includes an amenity retail podium, which will be operated and leased by Ayala Land from AREIT. The transaction has been approved by AREIT’s board as endorsed by a committee tasked with reviewing related party transactions.
The P5.1-billion consideration gives AREIT control of 76,000 sqm of leasable space, full ownership of building and leasehold over the land on which The 30th stood.
Simultaneous to the acquisition of the building, Ayala Land will assign the long-term land lease to AREIT, which in turn will lease office spaces to tenants, and the retail podium to Ayala Land under a fixed lease as operator of the retail spaces.
Based on the disclosure, the acquisition will be funded through debt. Currently, AREIT has no debt, thereby allowing it to acquire assets that will boost its yield even if funded by borrowings.
“This demonstrates AREIT’s ability to grow its portfolio and add value to its shareholders while its sponsor, Ayala Land, Inc. can recycle the capital for its real estate projects in the Philippines,” the disclosure said.
AREIT also obtained board approval for a debt pipeline summing up to P18.4 billion. Of these, P6.4 billion will be raised through an offering of retail bonds with a tenor of 10 years, preferred shares or bilateral loans. Another P12 billion will be raised through credit facilities with banks.
REIT or real estate investment trust is a corporation that invests in income-generating real estate such as office space, shopping malls, service apartments, hotels, hospitals and warehouses. It gives investors an opportunity to invest directly in the finished projects rather than the developer itself. This is meant to attract dividend-seeking investors because the REIT law requires the distribution of at least 90 percent of income as dividends yearly. —DORIS DUMLAO-ABADILLA