PSE approves Philippines' first REIT IPO

Local bourse operator Philippine Stock Exchange Inc. (PSE) said Saturday it has cleared the initial public offering (IPO) of AREIT Inc., the first Real Estate Investment Trust (REIT) to be listed in the stock market.

Property developer Ayala Land Inc. serves as the sponsor of AREIT.

In February, Ayala Land said its subsidiary AREIT Inc. - previously known as AyalaLand REIT Inc. and One Dela Rosa Property Development Inc. - filed its application for a REIT offering to the SEC.

The application came after the release of the revised Implementing Rules and Regulations (IRR) of Republic Act No. 9856 or the Real Estate Investment Trust Act of 2009 last Jan. 20, 2020.

The REIT Act was passed in 2009, which allowed companies to list their real property assets on the Philippine Stock Exchange as a new vehicle to raise funds for other investments and expansion initiatives.

"We are set to witness a milestone in the capital market with the first REIT IPO. We are excited over the prospects of the REIT sector now that we have a first mover in REIT listing,” PSE President and CEO Ramon Monzon said.

AREIT will be offering a total of 502.57 million shares, inclusive of the over-allotment option of 45,688,700 shares. AREIT shares have an indicative price of up to P30.05 per share.

The final offer price will be determined after the company’s book-building process.

The scheduled offer period of AREIT is from July 27 to August 3, 2020.

“We are pleased that AREIT has decided to pursue its IPO even under the present economic challenges brought about by the COVID-19 pandemic. We are optimistic that the company’s IPO will pave the way for other property firms, even those that are not yet listed in the PSE, to consider listing REITs,” Monzon said.

As an asset class, REITs are required to declare dividends of at least 90% of its distributable income.

“Aside from the potential advantages this investment instrument provides to investors, REITs provide a positive multiplier effect on the economy due to enhanced economic activity. Furthermore, REITs may help boost the government's Build, Build, Build program given the wide range of real estate property assets it can own, including hospitals, cell towers, airports, seaports, and infrastructure development," Monzon said.

"The reinvestment clause in the REIT Rules of the Securities and Exchange Commission also facilitates that proceeds from identified activities are invested back in real estate or infrastructure projects in the country,” he added.

Similar to trading dollar-denominated securities, REITs may only be traded through eligible brokers.

Aside from fulfilling the requirements to be an eligible broker, trading participants must comply with PSE’s REIT rule on the recording of securities ownership of its clients under a Name-on-Central-Depository (NoCD) arrangement, according to the stock exchange.

This is among the investor protection features of REIT investing, it said.

As with other IPOs, AREIT’s offering will have a local small investor (LSI) tranche, in which 10% of the offered shares will be allocated to LSIs.

Subscription to LSI shares may be done online through the PSE EASy website or mobile application. — DVM, GMA News