AREIT buys Ayala Malls The 30th, raises funds for more buyouts
MANILA, Philippines — Ayala-backed AREIT Inc. is setting the stage for more property purchases by raising and borrowing money to fund future investments.
In a disclosure to the stock exchange on Friday, the country’s first ever real estate investment trust (REIT) firm revealed plans to raise P18.4 billion through a combination of bond issuances and bank loans.
At the onset, the company’s board approved the maiden sale of P6.4 billion in 10-year retail bonds and/or corporate notes “for the purpose of financing asset acquisitions.” A credit line of up to P12 billion will also be established from banks.
The fund-raising came shortly after AREIT divulged plans to raise P15 billion over the next 3 years to ensure liquidity in building its property portfolio. While money from the latest bond float is said to go to real estate buyouts, Anna Corenee Agravio, property stocks analysts at Regina Capital Development Corp, said some of them may be kept for when the rainy days are over.
“It’s likely that AREIT will be using this to fund further acquisitions, yes. But since debt market conditions right now are favorable, it could also be a move to strengthen AREIT's balance sheet amid possibly more operational cost pressures brought about by the pandemic,” Agravio said in a Viber message.
Currently, AREIT owns properties with a combined scale of 170,000 square meter. Adding to its growing portfolio on Friday was Ayala Malls The 30th, which the firm purchased from its sister company, Ayala Land Inc., for P5.1 billion.
The mall is situated in a 76,000-sqm lot along Meralco Avenue in Pasig City. Once the transaction is completed, AREIT said the company’s total floor space would increase to 246,000 sqm.
“The office building in the 30th is PEZA (Philippine Economic Zone Authority) accredited so it is an attractive asset,” April Lee-Tan, head of research at COL Financial, said in a tweet. A PEZA asset enjoys government tax perks such as income tax holidays.
“Meanwhile, the mall part will be leased out to (Ayala Land), reducing the risk of vacancies on the part of AREIT,” Tan added.
Apart from Ayala Malls The 30th, AREIT also now owns the building host to Teleperformance Cebu, a business process firm, as well as three office buildings in Makati City namely Solaris One, Ayala North Exchange and McKinley Exchange.
AREIT is listed at the stock exchange and under government regulations, 90% of earnings from its ventures would have to be declared as dividends and distributed to its shareholders. While currently all purchases are happening with the pandemic in the background, Regina Capital’s Agravio, does not expect tight cash flows that may derail AREIT’s payouts to shareholders.
“AREIT continues to bank on the near-full occupancy of all the buildings in its portfolio. Rental income from the office sector across the industry has proven to be more resilient,” she said.
“Since AREIT's tenants are primarily office occupiers, its revenues are more stable than other companies with diversified portfolios,” she added.
On Friday, shares in AREIT shed 0.19% to cap the week at P25.65 each.
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