THE TAKEOFF of real estate investment trusts (REITs) in the Philippines this year, starting with Ayala Land, Inc. (ALI), is seen to drive developments in cities outside Metro Manila and spark growth in new segments for real estate firms.
In its report “First Mover Advantage” published yesterday, real estate consultancy firm Colliers International Philippines said it expects more REITs to be launched soon following the regulatory adjustments made by the Securities and Exchange Commission (SEC).
“Colliers believes that REIT implementation in the Philippines will likely result in the further differentiation and innovation of domestic property development projects which should eventually benefit Filipino investors and end-users,” it said.
It said the revised REIT rules lowering the minimum public float to 33% and the paid-up capital requirement to P300 million makes the investment tool an attractive option for developers to raise fresh capital.
“Colliers recommends that developers use REITs to access a cheaper source of capital and renovate and reposition assets such as offices, malls, and warehouses,” it said.
Colliers noted the new guidelines, which the SEC published last month, came at the perfect time as the country’s property market is on an upswing. For instance, the office market is growing about 1 million square meters every year, and take-up is likewise reaching above 900,000 square meters every year, it added.
Colliers said that as Metro Manila continues to grow while developable land remains limited, it is expected that property developers may soon move to provincial cities to utilize REITs. Among the areas it mentioned are Cebu, Davao, Iloilo, Bacolod and Pampanga.
“Given the dearth of developable land and surging land values in Metro Manila, firms may also use REIT proceeds to develop integrated communities in key cities outside the country’s capital… We also encourage provincial players that meet the capitalization requirement to tap REIT,” it said.
Aside from typical real estate assets namely office, retail, warehouses and hotels, the consultancy firm said there is an opportunity for other segments to take advantage of REITs.
“With the government being more active in attracting private sector investment, property firms should also explore possible public-private partnership (PPP) projects that cover hospitals, schools, and toll roads as these assets meet the requirement to generate recurring income,” it said.
“The Philippine REIT landscape can now truly develop, which should entice homegrown developers such as those in Cebu and Davao to participate in this new capital fund-raising option,” it added.
ALI led the country’s first REIT application with an offer to sell up to 478,639,700 shares in its subsidiary AREIT, Inc. This covers divesting in three commercial buildings in Makati City, namely Solaris One, Ayala North Exchange and McKinley Exchange. — Denise A. Valdez