Property developer Ayala Land Inc. (ALI) on Monday said it has completed its deal to transfer the ownership of the The 30th commercial development to its real estate investment trust (REIT) unit, AREIT Inc.
Ayala Land transferred the property located in Meralco Avenue in Pasig for P5.1 billion.
The 30th is a commercial building with a total gross leasable area (GLA) of 74,704 square meters composed of a 19-storey office tower with a GLA of 47,871 sq.m. and a 4-storey retail podium with a GLA of 26,833 square meters.
Ayala Land previously owned 54 percent of the The 30th. The development is currently under a 36-year land lease agreement between ALI and the land owner, MBS Development Corp. ALI will assign the land lease contract to AREIT as part of the condition of the sale, it said.
The 30th was completed in 2017. The office tower currently has an average occupancy of 94 percent. The office building is predominantly leased to business-process outsourcing firms of about 87 percent of GLA.
Standard office lease terms are fixed for a period of 5 years and renewable for another 5 years.
The retail podium is operated by North Eastern Commercial Corp. (NECC), a wholly-owned subsidiary of Ayala Land under the Ayala Malls brand. NECC will pay a monthly guaranteed building lease to AREIT for a period of 36 years, in line with the land lease term of the property. With this transaction, AREIT will not be subjected to volatility risk from retail operations.
Office and mall lease rates are increased annually by 3 percent to 5 percent.
“The disposition of The 30th Commercial Development is part of ALI’s commitment as AREIT’s sponsor to support AREIT’s growth plans. The funds raised will be reinvested by ALI into ongoing and future commercial leasing projects in Metro Manila and other key regions in the Philippines within one year from the date of the receipt of such proceeds,” the company said.
“Furthermore, ALI as shareholder shall be entitled to additional dividends derived from the higher distributable income generated by AREIT as a result of the transaction.”
AREIT, meanwhile, received multiple international awards and citations in 2020 as the first REIT to list in the Philippine Stock Exchange (PSE) last year.
The said IPO was named the South East Asia Deal of the Year by FinanceAsia, which commended AREIT’s “determination and dedication to opening the Philippines’s equity market to the REIT sector” in spite of multiple regulatory hurdles. FinanceAsia considered the listing an important step forward for the PSE as it brought additional liquidity to the market.
The Asset Country Awards 2020 cited AREIT as the Best IPO in the Philippines for breaking barriers as the first ever REIT in the country. The Asset’s annual Triple A recognition represents the industry’s most prestigious awards for banking, finance, treasury and the capital markets.
The AREIT initial public offering was also instrumental in garnering for Ayala Land the 2020 Best Investor Relations for a Corporate Transaction award in South East Asia from United Kingdom-based IR Magazine.