REIT getting bigger, wider

 

In my previous columns on real estate investment trust (REIT), I mentioned that the successful launch of REITs in the Philippines bodes well for the property market and the Philippine economy in general.

For one, it places the Philippines at par with other Asian economies that have fully developed capital and real estate markets. Colliers believes the REIT implementation in the Philippines will also result in the further differentiation and innovation of property projects, which should eventually benefit Filipino investors and end-users. Colliers Philippines has highlighted a few recommendations on how provincial and national property firms can maximize the launch of REITs in the Philippines.

Use REITs as a benchmark for valuing assets

The Philippine property market is quite opaque, as actual market information is not readily available. Thus, disclosure of values through REIT transactions should enhance transparency in the property sector moving forward, benefiting all market participants.

Consider priming assets for REIT listing

This is particularly important for mid-tier developers that intend to raise funds by selling assets to major developers in the future. In our opinion, smaller players should consider refurbishing their offices, warehouses and malls within and outside Metro Manila.

Development of integrated communities

Use REIT proceeds to develop integrated communities in key cities outside Manila. Colliers believes that among the more attractive locations are Metro Clark in Pampanga, Iloilo, Cebu, Bacolod, Cavite, Laguna, Batangas and Davao. This should support national developers’ goal of expanding their footprints outside of Metro Manila.

Attractive REIT properties

Colliers believes that developers also need to upgrade their warehouses continuously to keep up with the needs of logistics tenants. Industrial assets are attractive REIT properties and should also be included in developers’ REIT portfolio. The demand for modern logistics facilities has been growing on the back of a thriving e-commerce and a lockdown economy that is projected to rebound at a much faster pace beyond 2021.

We remain optimistic with REIT launches in the Philippines. REITs are primarily supported by the office sector, which is one of the segments likely to propel property growth beyond 2021. In our view, REITs are viable investment options during and beyond the COVID-19 pandemic. It will benefit both developers and investors. Major property players have been maximizing REITs and we see more players following suit.

REITs that have already listed include Ayala Land REIT (AREIT), whose initial public offering price (IPO) was at P27 per share. As of Aug. 31, its per share price stood at P36.80. AREIT’s portfolio was initially valued at P13.6 billion, comprising Ayala North Exchange, Mckinley Exchange and Solaris One. Since its listing, AREIT has acquired additional properties, which include. The 30th Corporate Center in Pasig City, land parcels in Laguna Technopark and Teleperformance Cebu.

DoubleDragon REIT (DDMPR) was listed on March 19 this year with an IPO price of P2.25 a share. According to DDMPR, majority of the proceeds of the IPO will be injected into CentralHub Industrial Centers Inc. to boost its industrial warehouse presence in the country.

Filinvest REIT made its debut on the local bourse on Aug. 12 at P7 per share. Its portfolio consists of 17 buildings, 16 of which are from Northgate Cyberzone in Alabang, while one is an office tower with a retail component in Cebu IT Park.

Megaworld’s REIT listing is scheduled on Sept. 30. MREIT’s property value stood at P55.6 billion consisting of 224,430 sqm of leasable space. MREIT president Kevin Tan said that tenants of their REIT portfolio consist of business process outsourcing (BPO) firms.

Meanwhile, Robinsons Land has set its REIT price at P6.45 per share. At its final offer price, Robinsons Land’s REIT offering will be the country’s largest upon listing on Sept. 14, with a market capitalization of P64.2 billion. The company said it will have the “most geographically diverse” REIT portfolio—14 commercial real estate assets with 425,000 sqm of leasable office space.

Overall, we see office as a property segment of relative stability. Various recovery enablers should further buoy the sector’s attractiveness as a REIT asset. Vaccination efforts are gaining traction and these should support the office segment’s recovery postpandemic. Outsourcing firms also continue to occupy space within and outside Metro Manila. Exciting times ahead for Philippine property and REIT.

 

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