By VG Cabuag & Bernadette D. Nicolas
THE share price of AREIT Inc., the country’s first real-estate investment trust (REIT) to be listed at the Philippine Stock Exchange (PSE), failed to fly on its first day of trading on Thursday despite the broader market rising.
This did not stop Finance Secretary Carlos G. Dominguez from waxing optimistic, however.
The Philippines’s first REIT listing by the Ayala-backed AREIT Inc. shows the domestic market is now ready to resume business amid the difficulties arising from the Covid-19 pandemic, Dominguez III said.
In a videotaped message on Thursday, the Finance chief expressed optimism that the AREIT’s public offering and listing will encourage more companies to follow suit and form REITs that would “provide attractive and dependable investment opportunities for the average Filipino.”
Aside from being a secure vehicle for small investors, REITs also provide multiplier effects on the economy, considering that the capital and profits to be raised by REIT sponsors will be reinvested exclusively in the domestic real estate and infrastructure sectors, he argued.
“This public offering is a strong vote of confidence in our good economic prospects and in the resiliency of many of our industry sectors, some of which will be occupants of Ayala Land Inc. (ALI)’s REIT properties,” said Dominguez, as he congratulated ALI on the success of its initial public offering (IPO) and listing of its REIT at the PSE.
AREIT shares fell 8 percent to close at P24.90 apiece from its offer price of P27 per share. Its price only went as high as P27.25 but fell later in the trade.
“It is difficult to say [why the stock price went down], but maybe the price setting was set before another MECQ [modified enhanced community quarantine] so these may be factored in to the future earnings projection of the company. Also since index names are starting to pick up, investors probably decided to bet on those names instead,” Luis Limlingan, managing director of Regina Capital and Development Corp., said.
The benchmark index gained 102.78 points on Thursday to close at 6,097.78 points. Total value of trade ended at P17.14 billion, mainly as a result of the listing of AREIT’s shares.
“Today, we are pleased to be part of the historic launching of REIT in the country. The passing of the REIT law in 2009 signified a new opportunity to diversify the offerings in the real-estate industry. Ayala Land was preparing for this as early as 2008. We believed this new asset class would generate benefits for both the company and the investment community,” Fernando Zobel de Ayala, Ayala Land Inc. chairman, said.
Securities and Exchange Commission chairman Emilio B. Aquino said three other real-estate development companies have indicated their interest in forming and listing their own REITs on the PSE.
“While the pandemic may have set back the timelines of some prospective REIT registrants, their interest in registering has been surprisingly unwavering,” he said, adding that REITs may not be expected to fully take off this year since investors will still be familiarizing themselves with this new asset class.
Following the conclusion of the offer, Ayala Land will continue to hold at least 51 percent of AREIT. The post-offer market capitalization will be P27.7 billion, while the public float of AREIT will fall between 44.5 percent and 49 percent subject to the exercise of the over-allocation option. Non-Filipino investors account for 15.7 percent of total outstanding shares.
No more issues
Dominguez, who had strongly pushed the implementation of the 11-year-old Republic Act (RA) 9856 or the REIT Law since he assumed the finance portfolio in 2016, said the contentious issues that for years had prevented REITs in the country from taking off were finally resolved.
The REIT law, with its amended IRR, now allows both small and large investors to own real-estate assets, presenting an alternative and secure investment instrument for middle-income families and overseas Filipino workers (OFWs), while providing real-estate companies a cheaper source of capital as they help develop the Philippine capital market.
AREIT’s public offering is “very encouraging,” especially at this time when the government is preparing the economy to recover from the pandemic, he said.
“REITs will help boost our ‘Build, Build, Build’ program, given the wide range of real-estate property assets it can own. Infrastructure investments will primarily fuel our bounce-back plan. With their high multiplier effect, these investments will stimulate demand and create much-needed new jobs and businesses,” he added.
SEC Chairman Emilio Aquino and PSE President Ramon Monzon were among those present at the event marking AREIT’s listing in the local bourse. ALI Chairman Fernando Zobel de Ayala joined them via Zoom.
Image credits: Nonie Reyes