VistaREIT IPO is TODAY

The most I could say here is that the Villar Family has done a good job at getting a good price for the equity that it’s sold in these companies. That’s probably not going to sit well with the bagholders that are sitting on hefty losses, but that’s all part of the battle of interests that plays out in every IPO
Merkado Barkada

The VistaREIT [VREIT 1.75] [link] IPO is finally here. While the Villar Family’s REIT has moved through the approvals process relatively quickly, it feels like so much has changed in the time since Vista Land & Lifescapes [VLL 2.01 6.51%] applied for this IPO back in March. 

Things seemed so good: At that time, the PSE was trading around 7,134 (10% higher than yesterday’s close), and the country’s leading REITs were trading at higher valuations across the board. Inflation was on the radar screen, but the Russia/Ukraine conflict was still pretty new and there was still some small hope that it was all just a passing phase. Even the VREIT deal itself was much larger, both in size and price, and the success of the IPO seemed somewhat inevitable considering all of the positive economic news that was starting to bubble up with the strong FY21 results and the preliminary Q1/22 whispers, and all of the general interest in REITs after Citicore Energy REIT’s [CREIT 2.42 1.63%] successful IPO in late February. 

Unfortunate reality: Flash forward to today and we see the PSE trading at 6,474, REITs trading relatively flat from their IPO valuations, Russia/Ukraine thing going sideways with no signs of stopping, inflation running rampant through global markets, and interest rates rising with several follow-up raises already planned. About the only thing that’s gone alright so far is that the whole Monkeypox scare hasn’t morphed into some frightening new threat to global economic development. 

What’s different about this REIT? The main difference between VREIT and all of its other REIT cousins is that “malls” are the majority of the REIT portfolio. While malls are vulnerable to the same economic risks that office buildings are, our experience with COVID tells us that malls are more exposed than office buildings when it comes to movement restrictions and pandemic mitigation measures. That said, VREIT points out that its malls have many tenants (anchor or otherwise) that have been considered “essential” in the past, and its malls tend to be located in VLL “communicities” that it feels make it less vulnerable to movement restrictions that make travel between different neighborhoods more difficult. Oh, and also that fat 8.24% projected dividend yield. That’s different!


MB BOTTOM-LINE

There’s a stabilization fund here, but as we saw with Raslag [ASLAG 1.75 1.13%], we can’t expect the stabilization agent to perform miracles if there’s a strong selling pressure that pushes the price below the IPO offer price of P1.75/share at some point today.

Interestingly, VREIT’s stabilization agent is China Bank Securities, which also performed stabilization agent duties for ASLAG’s IPO, where, despite the presence of a stabilization fund, ASLAG’s stock has often wandered fairly deeply into negative territory without a great deal of pushback or support from the stabilization fund.

In terms of Villar Family IPOs, there are a number of investors that have skipped this event based on the lifetime performances of Medilines Distributors [MEDIC 0.66] (-71%), AllDay Marts [ALLDY 0.34 1.52%] (-44%), and AllHome [HOME 4.75 8.12%] (-57%).

In terms of first-day performance, MEDIC tanked immediately, while HOME remained pegged to its IPO offer price by the timely and diligent deployment of stabilization funds, and ALLDY hit the ceiling by going up 50%.

Three very different initial outcomes, but all ended up in the same bucket of bad IPO offer period investments.

At the same time, these companies aren’t bad companies. They earn profits.

They’re run professionally and competently.

The most I could say here is that the Villar Family has done a good job at getting a good price for the equity that it’s sold in these companies.

That’s probably not going to sit well with the bagholders that are sitting on hefty losses, but that’s all part of the battle of interests that plays out in every IPO.

Now, excuse me while I go make myself some popcorn...

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