Ayala Land boosts AREIT's property holdings

MANILA, Philippines — Ayala Land Inc. will infuse more commercial properties to AREIT Inc. in exchange for more shares, in a multi-billion peso transaction that would further expand the country’s first ever real estate investment trust (REIT) portfolio.

Ayala Land would swap commercial properties valued at P15.5 billion to AREIT for more ownership in the REIT firm, AREIT said in a disclosure to the stock exchange on Wednesday. 

To accommodate a bigger stake from its parent, AREIT would increase its capital stock to P29.5 billion from the current P11.7 billion to give room for Ayala Land's purchase of 483.3 million primary common shares. The transaction will be done via a property-for-share swap at a price of P32 per share.

Once completed, AREIT's leasing portfolio would grow to 549,000 sq. from 344,000 sqm for a total property value of P52 billion. The REIT firm's outstanding common shares would also increase to 1.5 billion, of which 66% would be owned by Ayala Land.

“Notwithstanding ALI’s increased ownership, AREIT’s dividend per share is projected to grow with the addition of these new assets. At the exchange price of P32 per share, these assets to be infused are yield accretive to AREIT at 6%,” Carol Mills, the REIT company's president and chief executive, said.

AREIT did not name the properties it will receive from Ayala Land but only said these assets are “primarily composed of office leasing properties.” They would be the latest addition to AREIT’s growing portfolio that recently included Ayala Malls The 30th in Pasig City and an industrial land leased by Integrated Micro-Electronics, Inc. located in Laguna Technopark.

A bigger portfolio means more sources of income for AREIT and, in turn, higher rewards for investors. This is because REIT firms are mandated by the law to declare 90% of earnings from its property ventures as dividends to shareholders. Last year, AREIT's total dividend payouts were priced at P1.32 per share.

“The priority of AREIT is to deliver to its investors a compelling yield that grows over time. This is derived from its stable recurring income with contracted escalations, as well as the addition of new assets in the portfolio,” Mills said.

As it is, AREIT is proving that REIT could be a successful investment vehicle in country. This was convincing enough for the likes of DoubleDragon and Filinvest to join the country's growing REIT club this year.

On Wednesday, shares in AREIT inched up 0.92% to close at P32.80 each.