Ready to pop: First REIT’s birthing priced at P27 per share

The first real estate trust fund (REIT) in the country, Ayala Land Inc. (ALI)-backed AREIT Inc., has priced its initial public offering (IPO) at P27 per share, a level seen to attract yield-seeking investors in this period of record low interest rates.

The pricing level finalizes the base size of this REIT curtain-raiser at P12.33 billion. If the overallotment option is exercised, this is set to rise to P13.57 billion.

Inquirer’s poll of analysts expected a dividend rate ranging from 5.1 percent to as high as 5.9 percent per annum from AREIT.

The offer period will run from July 27 to Aug. 3, while listing on the Philippine Stock Exchange will be on Aug. 13.

REIT is a new asset class that gives investors the option to invest directly in the finished products that are already earning money, such as residential and office rental units, hotels, hospitals, shopping malls and other infrastructure ventures. It is meant to attract investors because the REIT law requires the distribution of at least 90 percent of income as dividends annually.

“It’s the longest pregnancy that we waited for. It took 10 years for this baby to come out. It’s very good for the development of the capital markets,” BDO Unibank Inc. chief investment officer Fritz Ocampo said in a recent briefing, referring to REIT as an asset class.

AREIT, in particular, offers better returns to investors than time deposit or Treasury bills as well as a “safe mechanism” because all the properties in the REIT basket have recurring income and are in good locations, according to Ocampo.

April Lee-Tan, head of research at COL Financial, said aside from pricing prospects, “ALI may increase the dividend payout above the 90-percent minimum to make AREIT’s yield more competitive.”

Manuel Cruz, chief strategist at Papa Securities, said the pricing of P27 per share would translate to an “attractive” dividend yield of 5.9 percent per annum.

As much as 502.57 million common shares of AREIT will be sold to the public, consisting of up to 47.86 million primary common shares, up to 409.02 million secondary shares and an overallotment option of up to 45.69 million shares.

About 70 percent of the firm’s shares will be earmarked for international and domestic institutional buyers while the remaining 30 percent will be offered to eligible trading participants and local small investors.

To date, AREIT’s portfolio consists of five buildings in three projects, totaling 153,000 square meters of gross leasable area (GLA). The REIT does not own the land on which these buildings stand.

The biggest of the assets infused into AREIT is Ayala North Exchange, which has two office towers atop a three-story retail podium, and a collection of 293 serviced apartment units branded as Seda Residences Makati.