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Real estate investment trusts (REITs) are generally seen to be advantageous for some reasons: a way to diversify one’s portfolio apart from stocks as well as being able to invest in real estate without having to manage one’s properties. But just like property investments, returns could be expected by investors from rental income through the assets. And in the Philippines, at least 90% of distributable income must be paid as dividends to shareholders, as per the REIT Act of 2009.

Even as the legal framework for such companies has already been established way back more than a decade, REITs just recently rose in the country. The first REIT listing on the Philippine Stock Exchange (PSE) was only made in 2020.  Nonetheless, more companies are seen to be part of the country’s REIT space, while the existing ones are seeking to diversify their assets and tenants.

Among 14 initial public offerings (IPO) targeted by the PSE this 2023, 11 are companies and REITs that will list on the main board.

Currently, the Philippines has eight REITs, with the AREIT, Inc. being the first to debut on the PSE in August 2020. Also among the country’s REITs are Citicore Energy REIT Corp., DDMP REIT, Inc., Filinvest Reit Corp., MREIT, Inc., Premier Island Power REIT Corp., RL Commercial REIT, Inc., and VistaREIT, Inc.

AREIT is looking at P22.5 billion worth of asset infusion this year, which include “prime flagship developments” of its sponsor Ayala Land, Inc., namely One Ayala Avenue and Glorietta 1 and 2 mall and office buildings in Makati; as well as Ayala Malls MarQuee in Angeles, Pampanga, according to AREIT President and CEO Carol T. Mills.

Ms. Mills also considered that the addition of these developments would benefit AREIT in terms of portfolio expansion, diversification of its assets, and shareholder return.

Such an infusion will bring AREIT’s total properties to 23. It would also expand its total assets to P87 billion, according to AREIT, which makes it “well ahead” of its three-year investment plan to have P90 billion worth of Asset Under Management (AUM).

“Our goal is to ensure that AREIT is not only large enough in size today but also has a healthy pipeline for future growth,” Ms. Mills said.

Meanwhile, RL Commercial REIT, Inc. (RCR) also expanded its portfolio last year with the addition of Robinsons Cyberscape Gamma and Robinsons Cybergate Bacolod in 2022. Such infusion generated growth in its net income in the first quarter of this year to P1.09 billion.

Last month, RCR also became the first office REIT company to have the EDGE (Excellence in Design for Greater Efficiencies) Champion status, as 213,158 square meters (sq.m.) of its portfolio are EDGE-certified building space.

More offices are also set to expand the portfolio of MREIT, Inc. from its sponsor Megaworld Corp., which has leasable area totaled at 150,500 sq.m.

According to MREIT, these acquisitions include seven grade A office buildings that include Two West Campus, Ten West Campus, Science Hub Tower 3, and Science Hub Tower 4 in Metro Manila; as well as the One Fintech Place and Two Fintech Place in Iloilo Business Park; and the Davao Finance Center in Davao Park District.

With these additional properties, MREIT’s portfolio will expand to 475,500 sq.m., making it near to its targeted 500,000 sq.m. of AUM by the end of 2024.

MREIT President and CEO Kevin Andrew L. Tan said that they are looking forward to finalizing the company’s succeeding set of acquisitions soon.

Filinvest REIT Corp. (FILRT) aims to expand its portfolio as well with an addition extending 12,400 sq.m. The company’s portfolio expansion covers new leases and co-working spaces. It also seeks diversification in terms of adding on the share of coworking and traditional tenants and lessening the focus on large names in business process outsourcing (BPO).

FILRT also looks into expanding its portfolio by encompassing other asset classes such as properties in the retail, residential, and leisure, and industrial segments.

Meanwhile, the DDMP REIT, Inc. earlier this year has shared its aim of diversifying its tenant mix, particularly tenants from financial services, banking, insurance, technology, media, service industries and government agencies.

The Philippine REIT space also expanded with Citicore Energy REIT Corp. (CREIT), the first energy-focused REIT listing in the country.

In August last year, CREIT President and CEO Oliver Y. Tan shared that the company aims to augment its portfolio to 950 megawatts by 2025.

Meanwhile, the Citicore Renewable Energy Corp. has plans to have its IPO this year to invest $4 billion for its new solar projects.

The PSE also approved the IPO application of Premiere Island Power REIT Corp. (PREIT), Prime Asset Ventures’s power and infrastructure REIT platform, in the previous year. PREIT is likewise aiming for growth and diversification of its portfolio on power generation.

Another REIT making its debut last year was VistaREIT, Inc., which has by far 10 retail malls and two PEZA-registered office buildings in its portfolio, with gross leasable area spanning over 250,000 sq.m.

Other companies such as SM Prime Holdings, Inc. have plans to make its REIT offering. However, the saif company might push back its filing from the initial third-quarter schedule as low demand is seen.

OUTLOOK ON REITs

The country’s REITs are seen to be supported by the economy reopening further from the pandemic. China Bank Securities Corp. Research Director Rastine Mackie D. Mercado told BusinessWorld in a report last January that further economic activity could support occupancy and rental rates of office and retail REITs.

“Apart from this, revenue growth could also be supported by annual rental escalation, and incremental revenues from asset infusions,” he added.

However, the continued remote or hybrid work arrangements for some BPOs as well as the decrease and stricter regulations on Philippine offshore gaming operators (POGO) could offset the benefit from the economic reopening, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in the same report.

AP Securities, Inc. Equity Research Analyst Carlos Angelo O. Temporal expected further pursuit of REIT listings among property companies, according to a BusinessWorld report from February. REITs, along with companies in growth sectors, are seen to tower over IPOs this 2023.

“In general, the IPOs will depend on market conditions. If we see the market to continue to gain strength, then we can expect more IPOs,” COL Financial Group, Inc. First Vice-President April Lynn C. Lee-Tan added. — Chelsey Keith P. Ignacio

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