THE Philippine Stock Exchange Inc. (PSE) has cleared the initial public offering (IPO) of Areit Inc., the first real estate investment trust (Reit) to be listed in the PSE.
Ayala Land Inc. (ALI) serves as the sponsor of Areit.
“We are set to witness a milestone in the capital market with the first Reit IPO. We are excited over the prospects of the Reit sector now that we have a first mover in Reit listing,” said PSE president and chief executive Ramon Monzon.
Areit will offer a total of 502.57 million shares, inclusive of the over-allotment option of 45,688,700 shares. Areit shares have an indicative price of up to P30.05 per share. The final offer price will be determined after the company’s book building process.
The scheduled offer period of Areit is from July 27 to Aug. 3, 2020.
Reit is a company that owns, and in most cases operates, income-producing real estate.
“We are pleased that Areit has decided to pursue its IPO even under the present economic challenges brought about by the Covid-19 pandemic. We are optimistic that the company’s IPO will pave the way for other property firms, even those that are not yet listed in the PSE, to consider listing Reits,” Monzon added.
As an asset class, Reits are required to declare dividends of at least 90 percent of its distributable income.
“Aside from the potential advantages this investment instrument provides to investors, Reits provide a positive multiplier effect on the economy due to enhanced economic activity. Furthermore, Reits may help boost government’s Build, Build, Build program given the wide range of real estate property assets it can own, including hospitals, cell towers, airports, seaports and infrastructure development. The reinvestment clause in the Reit Rules of the Securities and Exchange Commission also facilitates that proceeds from identified activities are invested back in real estate or infrastructure projects in the country,” Monzon explained.
Impact of Reit
Property consultant Colliers International Philippines, on the other hand, believes that Reit implementation in the Philippines will likely result in the further differentiation and innovation of domestic property development projects which should eventually benefit Filipino investors and end-users.
“In our opinion, now is the most opportune time to launch Reits as the Philippine property market has been on an upswing. The Philippines’ office market, for instance, is one of the most active in the region, with about a million square meters (10.8 million square feet) being completed every year and an annual take-up of more than 900,000 square meters (9.7 million square feet). We project Metro Manila office lease rates to be among the fastest-growing in Asia from 2020 to 2022,” the company said in its research note.
Colliers expects ALI’s move to entice national and provincial players to follow suit.
Colliers recommends that developers use Reits to access a cheaper source of capital and renovate and reposition assets such as offices, malls and warehouses. Given the dearth of developable land and surging land values in Metro Manila, firms may also use Reit proceeds to develop integrated communities in key cities outside the country’s capital such as Cebu, Davao, Iloilo, Bacolod and Pampanga.
Colliers also encouraged provincial players that meet the capitalization requirement to tap Reit.
Similar to trading Dollar Denominated Securities, Reits may only be traded through eligible brokers. Aside from fulfilling the requirements to be an eligible broker, trading participants must comply with PSE’s Reit rule on the recording of securities ownership of its clients under a Name-on-Central-Depository arrangement. This is among the investor protection features of Reit investing.
As with other IPOs, Areit’s offering will have a local small investor (LSI) tranche, wherein 10 percent of the offered shares will be allocated to LSIs. Subscription to LSI shares may be done online through the PSE EASy website or mobile application. (KOC with PR)