By Denise A. Valdez, Reporter
THE new rules on real estate investment trust (REIT) is starting to attract businesses outside traditional property developers, as operators of toll roads and airports have begun studying the potential of such fund-raising tool.
Metro Pacific Tollways Corp. (MPTC) and Megawide Construction Corp. have both expressed interest in tapping the financial instrument and said they were looking at the possibility of issuing infrastructure REITs.
“We are studying the REITs as possible funding alternative,” MPTC President Rodrigo E. Franco said in a text message over the weekend.
While the company has not made any decision on REITs yet, he said MPTC finds it attractive because it fits the company’s assets. “It allows asset owners to securitize part of the portfolio and, if structured properly, can be a more efficient means of raising funds,” Mr. Franco said.
MPTC is a unit of Metro Pacific Investments Corp. (MPIC) which operates several toll roads in the country, such as the North Luzon Expressway (NLEx), Subic-Clark-Tarlac Expressway (SCTEx) and Manila-Cavite Expressway (CAVITEx).
It is also building the Cavite-Laguna Expressway (CALAx), the Cebu-Cordova Link Expressway (CCLEx) and the NLEx-South Luzon Expressway Connector Road.
REITs require a company to have a recurring income portfolio that investors may put their money into through the purchase of public shares. The new rules of the Securities and Exchange Commission (SEC) require a minimum public float of 33% and a paid-up capital of P300 million for REITs.
MPIC reported last month that the average daily vehicle entry in NLEx, CAVITEx and SCTEx rose 13% to 535,503 in 2019, helping MPTC post an 18% year-on-year increase in core net income to P5.3 billion.
MPIC is one of three key Philippine units of First Pacific, the others being Philex Mining Corp. and PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls.
For Megawide, which controls assets such as the Mactan-Cebu International Airport and the Parañaque Integrated Terminal Exchange (PITX), REITs are similarly an attractive financial instrument.
“Our guys are doing a study on REIT for our infra assets like airport and PITX,” Megawide Chairman and Chief Executive Officer Edgar B. Saavedra said in a text message over the weekend.
Megawide has not set a timeline on its REIT plans yet, but Mr. Saavedra said the tool is particularly attractive because REITs are tax efficient.
Compared with regular publicly listed companies, those that are participating in REITs are exempted from value-added tax for the transfer of properties to a REIT vehicle. This rule — which was not the case when the REIT law was passed in 2009 — was among what kept investors from doing REIT offerings in the past 10 years.
Since the SEC issued its new REIT guidelines in January, Ayala Land, Inc. subsidiary AREIT, Inc. has applied to do an offer of shares in three office assets in Makati City to raise up to P1.36 billion.
DoubleDragon Properties Corp. has also previously disclosed a plan to raise about P11 billion annually over the next six years through REITs.
Ayala-led Bank of the Philippine Islands (BPI) said last week it was projecting the Philippines’ market capitalization for REITs to reach $7 11 billion in a few years.