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Stock Commentary

Ayala Land [ALI] cuts residential projects to fund logistics, land buys

Merkado Barkada
Ayala Land [ALI] cuts residential projects to fund logistics, land buys

Ayala Land [ALI 36.00 0.28%], the Ayala Family’s property development arm disclosed, in its Reinvestment Plan report, that it has reallocated the use of the proceeds from the IPO of AREIT [AREIT 36.25 0.41%] last year.

This report is required by the REIT Law, where ALI is meant to show it spent the proceeds that it earned from the AREIT IPO on real estate or infrastructure projects in the Philippines. They’re supposed to submit this report twice; first before the IPO to show how they intend to use the funds, and then last at the end at the 1-year anniversary of the IPO to show how the money was actually allocated.

Looking at the differences between the two reports can (maybe?) give some insight into how ALI’s thinking has changed over the past year due to its own circumstances, its own experiences, or the market generally. ALI said that it cut P6.8 billion from 12 development projects that it had identified in its first report due to “changes in development schedules as a results of market conditions”; the biggest change was the removal (entirely) of the Evo City Retail (P420 million) project, plus reductions in spending on 11 other retail/residential projects.

The money was re-allocated to 14 other projects, plus 3 projects that were referred to as just “Land acquisition”. Several of the beefed-up projects are in the industrial/logistics space, with a focus on Laguna and Cavite.

MB BOTTOM-LINE

Bilyonaryo characterizes this shift as being away from residential/retail development and towards buying land (some call this “adding to its landbank”), but I read the tea leaves a little differently.

To me, this looks like the Ayala Family increasing its turn towards industrial lot development and the logistics industry. The report didn’t provide detail on the land that ALI plans to acquire as part of this landbanking exercise, but if the thinking that lead to the changes still applies, my bet is that ALI will continue moving toward increasing its exposure to industrial land and, more specifically, land that can easily be converted to logistics-industry standards like warehousing, cold storage, and processing facilities.

Just another piece of circumstantial evidence to support my thesis that logistics (as broad as that term is, I know) is the hottest thing going right now. 

 

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