By Denise A. Valdez, Reporter
THE introduction of real estate investment trust (REIT) in the Philippines is seen to attract both existing and first-time investors, potentially making the market a rival of Thailand and Malaysia in the next few years.
In a briefing in Makati City yesterday, Ayala-led Bank of the Philippine Islands (BPI) said the country has the potential to reach a market capitalization of $7-11 billion for REITs.
“There’s a lot of potential. Interesting proxies for this potential in the Philippine REIT market are Malaysia and Thailand, which have been growing their REIT markets for the past five to seven years,” BPI Head of Corporate Banking Strategy, Products and Solutions Reginaldo B. Cariaso said.
“These two countries have about $7 billion and $11 billion, respectively, of market capitalizations of REITs, which I think the Philippines is also capable of achieving,” he added.
Noting that the Philippines took a little more time for REITs to be launched compared to the more mature markets of Singapore and Hong Kong, Mr. Cariaso said the country can instead rely on its large population and fast-growing gross domestic product (GDP) to keep pace with other REIT-facilitating countries like Malaysia and Thailand.
“There is significant potential for office, retail, and commercial growth, as well as industrial, logistics, and infrastructure, if we execute successfully,” he said.
The Securities and Exchange Commission (SEC) released earlier this year the revised guidelines for REIT applications, reducing the minimum public float to 33% and the paid-up capital requirement to P300 million.
Since then, it has attracted the country’s first REIT application from Ayala Land, Inc. subsidiary AREIT, Inc., which is seen to raise up to P1.36 billion in net proceeds.
Mr. Cariaso said that as the stock market sees volatility due to the coronavirus disease 2019 (COVID-19) outbreak, REITs can become an attractive new asset class for investors looking to diversify.
“I think equity investors will definitely be there,” he said, referring to potential REIT investors. He noted these individuals may be losing so much money in the stock market lately and would want something less volatile — which is what REIT offers as this is a “more conservative instrument.”
Unlike other stocks, Mr. Cariaso said REITs offer high dividend payouts and competitive yields and is more stable and inflation-hedged with attractive total returns.
“If you had exposure to something, obviously you’d rather be in something less volatile than pure stocks right now. I think REITs would be something nice to have,” Mr. Cariaso said.
He added property is a generally attractive long-term investment segment for many investors, particularly those in the middle class. But because real estate companies are dependent on ability to buy landbank, develop property and sell, REIT is a viable alternative as it allows investors to put their money in already income-generating assets.
“It makes it relatively affordable to get exposure to real estate assets until you eventually want to buy your property,” Mr. Cariaso said. “Will investors in the provinces be attracted to that? I don’t see why not.”
The Ayalas’ REIT application is currently being reviewed by the SEC. Other companies that have also previously expressed interest in launching REITs are DoubleDragon Properties Corp., Megaworld Corp., Robinsons Land Corp., SM Prime Holdings, Inc. and Century Properties Group, Inc.