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Stock Commentary

AREIT reveals 3-year investment plan

Merkado Barkada
AREIT reveals 3-year investment plan
It’s interesting to hear AREIT is considering getting into the retail, logistics, and industrial sectors, though I’d prefer the REIT offerings to shy away from becoming mini diversified holdcos.
Merkado Barkada

AREIT [AREIT 36.2 8.1%] [link] disclosed its 3-year investment plan, where AREIT said that it plans to grow its portfolio by at least 100,000 sqm of leasable space each year for the next three years, growing its assets under management by between P10 billion and P15 billion each year during that same span.

AREIT is looking to produce 10 to 12% “shareholder return” through 3-5% rent escalations and new acquisitions. AREIT also said that it would consider diversifying the REIT’s holdings to include “malls, logistics and industrial properties” to reduce its sector concentration risk.

The slides at the end of the document revealed that AREIT’s weighted average lease expiry (WALE) actually increased from 7.7 years to 8.7 years, with its largest tenant (Integrated Microelectronics [IMI 4.9 0.6%]) accounting for 18% of AREIT’s leasable area. AREIT’s stock was up over 8% on relatively heavy volume.

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AREIT’s size is just under 700,000 sqm, so that kind of growth is quite significant.

The document was light on the kind of news-making plans that tantalize with mentions of specific properties and their potential impact on the dividend, but it did mention that AREIT plans to raise its overall debt to 30% of the value of its deposited properties to fund acquisitions (up from its current level of 6%).

That’s around P12 billion in debt that it can use, in concert with equity, to expand the dividend for AREIT shareholders.

It’s interesting to hear AREIT is considering getting into the retail, logistics, and industrial sectors, though I’d prefer the REIT offerings to shy away from becoming mini diversified holdcos.

The whole point for me was to place specific bets on long-term trends, but I’m ready to listen to anything with a well-defined strategy.   

 

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