Ayala's REIT bucks benchmark cheer in debut
MANILA, Philippines — The Philippines’ maiden listing of a real estate investment trust happened Thursday but there was no cheer.
Ayala-backed AREIT Inc. went against a wider bullish market and sank nearly 8% on its debut, the latest victim of the broader economic uncertainty that the coronavirus disease-2019 (COVID-19) pandemic has perpetuated.
“AREIT was priced at a premium with much of the REIT yield range at 5-6% in the neighboring region,” Aniceto Pangan, equities trader at Diversified Securities Inc., said in a Viber message.
“With the uncertainty brought about by the increasing spread of the pandemic virus, the risk are high that yields may further deteriorate before it stabilizes,” Pangan added.
In the end, it was dismal culmination of a long road for REIT in the Philippines. Before Thursday’s listing, REIT was essentially hampered for more than decade since the law that authorized its establishment was enacted in 2009. Disagreements on tax treatment and public ownership deterred investors from venturing in REIT.
As it is, REIT has a record of being a successful investment vehicle in countries like Singapore. As a publicly-owned listed company, REIT is tasked to use proceeds from share sale to purchase and manage income-generating property assets such as malls, offices and warehouses. At least 90% of income from these ventures are required to be declared as dividends with shareholders.
Ayala Corp. finally became the first company to venture into REIT after the Duterte administration prioritized fixing investor concerns in the project by lowering hefty taxes on property transfers, and relaxing public ownership requirements that reach a high of 67%. The public float has been reduced to 33%.
“The public offering is a strong vote of confidence in our good economic prospects and in the resiliency of many of our industry sectors,” Finance Secretary Carlos Dominguez III said in a speech marking AREIT’s listing early in the day.
“It shares in the optimism that, notwithstanding the global economic downturn today, the Philippine economy has strong fundamentals to rise quickly from the devastation brought about by the global health emergency,” he said.
For April Lee Tan, research head at COL Financial, AREIT “remains an attractive buy” for investors looking for dividends with high yields, which she said are unlikely to go down “at least for the next two years.”
“The lease contracts of AREIT’s tenants are locked in for the next few years. Their office buildings are also (Philippine Economic Zone Authority)-accredited making them very lucrative since PEZA is no longer releasing accreditations for new buildings,” she explained, referring to the country’s biggest economic zone operator.
AREIT’s bearish trade bucked a benchmark that danced to a regional upbeat mood. The bellwether Philippine Stock Exchange index jumped back to 6,000 territory, to close up 1.71% at 6,097.78. All sub-indices, except services, were in the green. Foreigners were net buyers of some P3.74 billion shares.
Luis Limlingan, head of sales at Regina Capital Development Corp. brokerage, said the local bourse joined other Asian markets in tracking a rally in Washington fueled by optimism over the US economic recovery.
Apart from Ayala Land, DoubleDragon Properties Corp. last month announced plans to raise P17 billion by transforming DD Meridian Park in Pasay City into a REIT. Proceeds from the unscheduled offering will be used to construct about 450,000 square meters of building floor area to increase the company’s leasable portfolio and recurring rental revenues.
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