RL Commercial REIT slashes IPO price by 12%

RL Commercial REIT [RCR 6.45] set its IPO offer price at P6.45/share on Friday, which is a 12% drop from the P7.31/share that RCR indicated in its initial prospectus. The drop in price will pull RCR’s projected to yield up to 5.70%, based on RCR’s FY21 projected earnings. The offer period will run from August 25 to September 3, with the actual IPO on September 14. RCR is owned by the Gokongwei Family through Robinsons Land [RLC 16.90 1.20%], and at the time of its IPO, it is expected to be the largest REIT by portfolio valuation and asset size. RCR has over 99% occupancy, with a tenant mix that is dominated by BPO clients (69%).

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Price is the only real slider that the Gokongweis can easily adjust at this point (numer of shares and the underlying financial projections are rather set), so it’s interesting to watch how the owners use price to custom-fit the offering to the ever-changing market conditions.

At the time the first prospectus was released and RCR priced itself at P7.31/share, AREIT [AREIT 37.30 1.50%] and DDMP [DDMPR 1.83 1.10%], the only two REITs, were paying dividends in the low- to mid-4% range, which is about where RCR’s yield would have been based on that pricing. Now, with the inclusion of Filinvest REIT [FILRT 7.30] and its +6% yield, AREIT’s expansion, and DDMPR’s income growth, yields are creeping upward, and it seems as though RCR reassessed its price to keep its initial yield competitive.

Whether RCR debuts at P7.31 or P6.45 per share has almost no impact on RCR, since all of the money goes to RLC anyway (the deal is all secondary shares); all it does is give investors the chance to make an incrementally higher return on the company’s projected dividends RCR’s occupancy rate is AREIT-level, and its WALE (weighted average lease expiry; see below for an explanation!) is 4.3 years which is decently long-term. Even at this lower price, however, RCR’s projected yield is less than the annualized Q2 yields of both FILRT and DDMPR. 

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