Not to be outdone, SM Prime may yet record biggest REIT IPO worth $1B

Property giant SM Prime Holdings Inc. may launch by 2022 what could be the largest real estate investment trust (REIT) offering in the country with a size of at least $1 billion, allowing the Sy family-led property developer to recycle capital from its mature properties to further expand the real estate empire.

During an online REIT forum hosted by Inquirer Property last week, BDO Capital & Investment Corp. president Eduardo Francisco said SM Prime could wait until next year to launch a REIT offering.

The potential size of $1 billion was based on estimates from preliminary discussions with SM Prime’s management, led by president Jeffrey Lim, given the scale of the company’s property footprint, Francisco said.

“Given that SM Prime is a company with a P1-trillion market cap, an offering of at least $1 billion (P48.50 billion at current exchange rate) is about the right size,” Francisco explained in a phone interview after the online forum.

“But the official stance is, they are not in a hurry. They wanted to watch everyone else,” he said.

New REIT offerings

To date, there is a growing pipeline of new REIT offerings in the country, mostly focused on office leasing portfolios as these have been the resilient subsegment in the pandemic.

The curtain-raiser for this asset class was Ayala Land-led Areit Inc.’s P15.1-billion IPO last year, followed by the P14.7-billion debut of DoubleDragon Properties Corp.-sponsored DDMP REIT last March.

Three more have filed applications to register securities and list. Tycoon Andrew Tan-led Megaworld Corp. plans to raise as much as P27.3 billion from the sale of a 49-percent stake in MREIT Inc.

Robinsons Land-sponsored RLC REIT plans to raise a maximum of P26.7 billion, while Filinvest REIT is seeking a P14.9-billion offering.

Around 90,000 investors

As an asset class, REIT gives investors the option to invest directly in finished products already earning money, such as office units, hotels, shopping malls, residences for rent, infrastructure ventures like toll roads and power plants, and not just in the property developer itself. The Philippine REIT Law of 2009 requires the distribution of at least 90 percent of income annually, thus providing investors an attractive instrument.

Since the first local offering in 2020, REIT Law proponent Francis Lim, a former president of the Philippine Stock Exchange, noted that REITs have attracted around 90,000 investors, thereby deepening the capital markets and providing investors with more options. SM Prime is also the leading shopping mall developer in the country with 76 malls covering 8.6 million square meters of gross floor area (GFA). It also has seven shopping malls in mainland China with 1.3 million square meters of GFA. INQ