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Stock Commentary

Filinvest REIT to receive 3 buildings from Filinvest Land

Merkado Barkada
Filinvest REIT to receive 3 buildings from Filinvest Land

Filinvest Land [FLI 1.11 unch] plans to transfer three buildings to FILRT within 12-18 months of Filinvest REIT's [FILRT 7.00] IPO, which is scheduled for August 12.

The three buildings are PBCom in Makati, Axis tower 2 in North Gate Cyberzone in Alabang, and Cebu tower 2 in Cebu IT Park. The buildings have a combined GLA of 103,000 square metres, which, once transferred, would increase FILRT’s total GLA by 34%.

FILRT is the second of our existing and future REITs to reveal anything like a post-IPO acquisition strategy; Barkadans will remember how AREIT [AREIT 36.00 1.10%] included its post-IPO acquisition of the Teleperformance Cebu building, and then went on to add another 200,000 square metres in a transfer from Ayala Land [ALI 32.50 1.96%] earlier this year. 

DDMP [DDMPR 1.80 3.74%] has been on the PSE for four months already, and has yet to add to its portfolio through acquisitions or transfers, and the two other pre-IPO REITs, Megaworld’s REIT [MREIT 22.00] and RL Commercial REIT [RCR 7.31], released REIT plans that lack insight into the respective company’s post-IPO acquisition strategies.

MB BOTTOM-LINE

The FILRT IPO is 100% secondary, which means that all of the money raised will go directly to FLI, the sponsor/parent company of FILRT. This means that FILRT will be “born” with very little in the way of working capital, let alone enough reserves to purchase the buildings from FLI in cash.

This means that, like ALI and AREIT have done, FLI and FILRT will likely engage in some kind of shares-for-property swap where FILRT will issue new primary shares to FLI in exchange for the three buildings. This will be a dilutive event but it shouldn’t be too much of a problem for investors, provided the valuations of the properties coming in are not wonky and too tilted in FLI’s favor (at FILRT investors’ expense).

The interesting bit from the Manila Standard article is that the FILRT representative said that this initial 3-building infusion is just one part of the 315,000 square metres of property that FILRT has identified in the FLI portfolio for eventual transfer to FILRT. It’s also interesting to note that FILRT will start public life with 36.74% of its shares in public hands, which is actually quite close to the 33.33% minimum public ownership level established by the REIT Law and its associated implementing rules and regulations.

I don’t know the particulars of the transaction yet, but unless I’m missing something, this transaction would probably require FILRT to do a follow-on offering or stock rights offering to bring its public ownership level up to where it could issue a large enough batch of new shares to FLI for the properties. Following quite closely in AREIT’s footsteps, possibly!

 

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AREIT AYALA LAND DOUBLE DRAGON PROPERTIES CORP. FILINVEST LAND MEGAWORLD PHILIPPINE STOCK EXCHANGE REAL ESTATE INVESTMENT TRUST REIT ROBINSONS LAND INC
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