Dilution fears nag AREIT’s P30-B share-for-asset swap

MANILA  -The Ayala Group’s AREIT Inc. is taking over P30 billion worth of prime offices, hotels and industrial land in its biggest asset acquisition since it made its pioneering public debut on the Philippine Stock Exchange three years ago.

The series of transactions, which includes the popular Greenbelt malls in Makati City and a beach resort in El Nido, Palawan, is expected to be completed next year and will help the real estate investment trust (REIT) diversify its portfolio and achieve faster growth.

But it comes amid a sharp selloff in the company’s shares in recent weeks as investors raised concerns about its plans to sell stocks to outside investors. The proposed asset injections will mainly involve share issuances to AREIT affiliates, including REIT sponsor Ayala Land and ACEN, and cause the firm to fall below the minimum public ownership requirement of the exchange.

“As in previous asset infusions, AREIT will remain compliant with the minimum public float requirement as the sponsor will effect a block placement of its shares on or before the expected [Securities and Exchange Commission] approval within the second quarter of next year,” AREIT said in a stock exchange filing on Thursday.

Ayala Land, the company’s main sponsor, said on Thursday its board had approved P21.8 billion worth of asset infusions into AREIT in 2024.

This will involve properties such as the Ayala Triangle Gardens Tower 2, Greenbelt 3 and 5 and Holiday Inn and Suites Makati at Ayala Center, as well as Seda Ayala Center Cebu.

AREIT intends to issue 642.15 million shares to Ayala Land and subsidiaries at P34 per share to pay for the properties.

It will also acquire Ayala Land’s Seda Lio in El Nido, Palawan for P1.2 billion in cash. This will immediately start contributing to AREIT’s earnings within the first quarter of 2024.

READ: Ayala Land to infuse ‘crown jewel’ malls, offices into AREIT via P22.5-B swap

Ayala Land will package the deals with a previously-announced proposal to acquire a 276-hectare industrial estate in Zambales from affiliate ACEN for P6.77 billion, also in exchange for AREIT shares. The consolidated transaction will be presented to shareholders of AREIT during a special meeting on Feb. 12, 2024, the filing showed.

READ: AREIT to buy ACEN’s P6.8-B solar farm land

COL Financial Group chief equity strategist April Lynn Tan said commercial and hotel assets will further diversify AREIT’s portfolio but said the upcoming block placement might weigh on its near-term share performance.

“The timing [of the share offer] is not the best given the high interest rate environment and poor sentiment for REITs,” Tan told the Inquirer.

AREIT shares rebounded 5.85 percent to P29.85 each on Thursday. The stock is down about 15.7 percent since the start of the year versus the 5.2 percent drop in the Philippine benchmark index.

It said the new asset infusions will increase its assets under management to P117 billion and hike its gross leasable building area to more than one million square meters, and its leased industrial land area to 286 hectares by 2024.

“AREIT can have the capacity to grow immensely and attain a market presence at par with some of the REIT players in the region,” Carol Mills, AREIT president and CEO, said in a separate statement.