Filinvest REIT goes public today

The Gotianun Family’s entrant into the PSE’s new REIT sector, FILRT [FILRT 7.00], will begin trading this morning after a relatively quiet offer period. FILRT’s sponsor, Filinvest Land [FLI 1.13 unch], sold P12.6 billion worth of FILRT stock to IPO investors who will no doubt check in at some point today to see whether the open market agrees with their take on the FILRT value proposition.

FILRT has said that its annualized yield would be 6.3% at a price of P7/share, a yield which looks quite high compared to the yields thrown off by FILRT’s established peers, AREIT [AREIT 36.40 0.27%] (4.6% yield) and DDMP [DDMPR 1.78 1.11%] (4.5% yield).

If we take FILRT’s projection of its rent collections at face value, we would expect to see FILRT’s stock price rise to bring FILRT’s yield more in line with that of AREIT and DDMPR. To bring FILRT’s yield into AREIT’s 4.6% yield range (assuming no change to FILRT’s rent collection or projected dividend payouts), FILRT’s stock price would need to rise up to P9.56/share (if my calculations are correct; it's always advised to do your own research).

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 It will be very interesting to see how the market values FILRT. I have heard casual remarks from friends about their distaste for FLI and its products, but this REIT offering isn’t about FLI selling mid-market condos with questionable finishing and frustrating condo administration policies; it’s about FLI selling a slice of the earnings from its well-oiled commercial leasing machine, FILRT, which is a very different product. At a very high level, the safer the return, the more expensive the price (and the lower the yield), and the riskier the return, the more affordable the price (and the higher the yield).

If investors view the quality of FILRT’s income stream (and the aggregate of its future income streams) to be at least comparable to AREIT’s and DDMPR’s, then it stands to reason that investors would pay more than P7/share for the right to earn those returns. That would raise FILRT’s share price and lower the yield. FILRT’s REIT IPO cohort, RL Commercial REIT [RCR 7.31] and MREIT [MREIT 22.00] will also be watching these developments very closely. MREIT just released its preliminary terms and conditions of its IPO, and the new dates appear to have pushed MREIT’s IPO back a few weeks (IPO on September 30th).

RCR also put out its preliminary REIT plan on the same day, and it looks like RCR has moved its dates slightly forward (IPO on September 14th). At the very least, these next six weeks will put an awful lot of equity capital back into the hands of FLI, Robinsons Land [RLC 16.00 0.12%], and Megaworld [MEG 2.89 0.34%], which will need to be deployed in the Philippines within the year. I’m just excited to get a few new entries to plop into the MB REIT Tracker because I’m just like that and I find the pricing of these companies fascinating. 

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