DoubleDragon targets P11B in maiden REIT listing
By Denise A. Valdez
DOUBLEDRAGON Properties Corp. is finalizing plans for its maiden real estate investment trust (REIT) listing as it targets to raise about P11 billion every year in the next six years through the investment vehicle.
In an e-mail to BusinessWorld over the weekend, DoubleDragon Chairman Edgar “Injap” J. Sia II said the company is “very happy” with the REIT guidelines released by the government last week, and it wants to firm up the size, asset composition and timeline for the REIT listing within the first quarter.
“As of now, DoubleDragon is looking at possible REIT listing of about 1/4 of its currently completed leasable GFA (gross floor area) portfolio. We aim to do REIT listing for a total of about 200,000 sq.m. leasing asset every year…,” he said.
He added the move “should enable DoubleDragon to generate about P11 billion of new capital annually in the next six years starting from 2020 to 2025 at an estimated cap rate of 6%.”
“We intend to choose the most mature assets for the first tranche of REIT listing on the first year, and then the following year choose another batch of leasable space that has ripened and matured on that specific year,” he said.
DoubleDragon had completed 603,000 square meters (sq.m.) of leasable space in its portfolio as of end-2018. In the nine months to September 2019, its recurring revenues jumped 41% to P2.9 billion, pushing it closer to its goal of sourcing 90% of its total revenues from recurring revenues by 2020.
Mr. Sia said he is confident of the company’s portfolio of diversified leasing assets, which he noted are “sunrise real estate hard assets” and will not be affected by “foreign-owned online digital e-commerce platforms that are expected to reach its inflection growth points in the Philippine market soon.”
DoubleDragon’s assets are comprised of mall spaces, office spaces, hotel rooms and industrial spaces. It is targeting to hit 1.2-million sq.m. of leasable space within the year, which will be comprised of 700,000 sq.m. from CityMalls branches; 300,000 sq.m. from office spaces in DD Meridian Park and Jollibee Tower; 100,000 sq.m. from hotel rooms in Hotel 101 and Jinjiang Inn Philippines; and 100,000 sq.m. from industrial spaces in CentralHub.
“We believe the availability of REIT in the Philippines came just in time for DoubleDragon to begin this year harvesting the fruits from the seeds that [it] has strategically planted across the country in the past five years,” Mr. Sia said.
“…REIT is a very efficient way for recurring income generating portfolio holders like DoubleDragon to raise new equity capital,” he added.
Shares in DoubleDragon at the stock exchange gained 16 centavos or 0.90% to P18 each on Friday.
The approved REIT guidelines allow a minimum public ownership of 33%, a minimum paid-up capital of P300 million and tax exemption for the transfer of property into a REIT vehicle. Proceeds from a REIT listing must be reinvested in a real estate or infrastructure project in the Philippines within a year.
The Philippine Stock Exchange, Inc. (PSE) said in a statement the new guidelines had sparked excitement from property developers, noting one company had already met with PSE President and Chief Executive Officer Ramon S. Monzon last week to discuss its plans.
“[J]ust days after the momentous signing event, the President of the biggest property firm in the country met with us to discuss their REIT listing plans and timetable,” Mr. Monzon was quoted in the statement as saying.
“When a one trillion peso company wants to be the first to have a REIT listing and a sizeable first one at that, you know that the confidence in this new asset class and the support it will get from property companies will be remarkable,” he added.
Property giant Ayala Land, Inc., which has a market value of P609 billion as of Friday, had previously disclosed plans to raise about $300 million from its maiden REIT offering involving its office assets in Makati.
Other companies that have expressed interest in REIT before are Megaworld Corp., Robinsons Land Corp., SM Prime Holdings, Inc. and Century Properties Group, Inc.