PNB to generate P34B from monetization of real estate

Tycoon Lucio Tan-led Philippine National Bank (PNB) is set to unlock P34 billion in extraordinary gains from the spinoff of its three most valuable property assets into a real estate unit that will monetize these assets.

In a disclosure to the Philippine Stock Exchange on Monday, PNB announced this transaction would thereafter raise P10 billion in fresh capital after the issuance of property dividends to stockholders.

PNB earlier announced a plan to exchange three prime properties for an equivalent value in shares of stock of PNB Holdings Corp. (PHC), a wholly owned real estate subsidiary that the bank plans to list by way of introduction on the local bourse.

Capital increase

“As a result of the foregoing transactions, the bank will be able to record approximately P34 billion in its books reflecting the difference between the fair value of P46.677 billion and the book value of P12.6 billion of the properties exchanged for shares of PHC,” PNB told the stock exchange.

Specifically, the change will be reflected in PNB’s income statement as of May 28, 2021, “thereby further strengthening its financial position as the transaction will generate P10 billion additional capital, after the effect of the property dividends,” the disclosure said.

Explaining the resulting increase in capital, PNB president Wick Veloso said after generating P34 billion in additional capital from the change in fair value of the properties, the property dividend declaration would cost around P24 billion. This would leave P10 billion in fresh capital for PNB, Veloso said.

He also affirmed that the three property assets mentioned in the disclosure referred to the 10-hectare office along Macapagal Avenue, the old Allied Bank building on Ayala Avenue and the 8,000-square-meter prime lot foreclosed from musician Ramon “RJ” Jacinto. The P46.68-billion collective fair valuation of these properties had been determined by a third party assessor.

Upon completion of the property-for-share swap, PNB increased its share ownership in PHC. Thereafter, PNB’s board approved a property dividend declaration consisting of 239.35 million of its shares of PHC. After the record date of May 18, PNB’s total equity in PHC was reduced to 49 percent.

Maximizing earnings

PHC serves as a holding company that invests, develops and sells all kinds of assets, majority of which are prime real estate properties. Its vision is to focus on maximizing earnings from its current prime assets, which already generate a stable recurring cash inflow while taking advantage of future development opportunities.

The listing of PHC is seen to create an opportunity for price discovery and elimination of capital gains tax, allowing shareholders to unload their holdings at the best market price and lowest cost for shareholders. They may also opt to buy additional shares if they wish to benefit more from the long-term growth of PHC. INQ