Real Estate Investment Trust (REIT) In The Philippines

Do not put all your eggs in one basket.

Remember the 4 Golden Rules of Investment: Invest Early, Invest Regularly, Invest Long-term, and Invest using Diversification.

Are you interested in and looking for a more affordable way to own apartments, offices, malls, or even hotels? Then you should consider investing in a Real Estate Investment Trust (REIT).​

As the saying goes, "Do not put all your eggs in one basket." Diversification is protection against ignorance. It makes little sense if you know what you are doing.
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​The Philippine Stock Exchange, Inc. (PSE) conducted a free webinar about Real Estate Investment Trust (REIT). The resource speaker was Mr. J. Mariano P. Ocampo, Managing Director and Head of Equity Capital Markets Investment & Capital Corporation of the Philippines. Here's the excerpt from the webinar.

What Is REIT?
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A Real Estate Investment Trust (REIT) is a stock corporation. Principally organized for the purpose of owning income-generating real estate assets (Republic Act No. 9856 or REIT Act of 2009)

What Are The Features Of A REIT?
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• Equity product with a defined yield and capital gains potential.
• Investors gain a direct participation in income-generating real estate properties or businesses.
• Portfolio diversification through an investment in a pool of properties.
• Income diversification through cash flows secured by long-leases with staggered expiry profile and various end-users.
• Stable and regular dividends under a definite distribution policy.

        - REITs are required to distribute at least 90% of their distributable income.

• Liquidity from listing/trading of shares on the PSE.
• Professionally-managed through independent REIT management entities (Fund and Property Managers).

​REITs have been in Asia for more than 18 years. The Philippines has  lagged behind. While there has been a legislation in place since 2009, there have been no REIT issuance nor listing.

Why REITs Are Expected To Take Off In The Philippines?
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• Positive economic outlook driven by strong fundamentals.
• Metro Manila's real estate investment and development prospects are viewed favorable compared to other emerging economies in the region.
• Market values and rental revenues for commercial property in Manila are growing at a robust pace.
• Substantial inventory of prime, mature, good quality commercial properties that are "REIT-able."
• Significant growth in the outsourcing/offshoring sector driving demand for new commercial real estate.
• Developers need to diversify funding sources to finance new projects and land banking activities.
• A new asset class that market participants have been looking for.

Benefits of REIT Platform

• Benefits to Investors​
• Participation in a new asset class.
• At least 90% of distributable income to be distributed as dividends.​

        - Provides investors with current cash flow returns/yield.

• Opportunity to own equity interest in income-producing real estate.
• Diversification of investment portfolio.
• Liquidity - listed in the stock exchange.

 

• Benefits to Sponsors​
• Ready access to capital.
• Tax and liquidity benefits.
• Marketing advantages and seal of good housekeeping.
• Recycle capital without loss of control.

​       - Can still consolidate REIT into Sponsor/Parent financials.

Formation Of REIT To Be "Successful"
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• High Quality Property Assets​
• Mature, good quality real estate in prime locations.
• Stable rental income from reliable and well-diversified tenant base.
• Strong demand relative to supply over a foreseeable period of time.​

 

• Potential For Growth
• Room for revenue growth through asset enhancements, rent reversions and other developments.
• Extensive and identified pipeline of Sponsor's assets awaiting future injection.
• Third-party assets available through business network of the Sponsor.

 

• Valuation Of Assets To Be Injected Into REIT
• ​Assets are injected into the REIT at a level that investors consider to be fair/attractive and provide an upside.

 

• Valuation Of Assets To Be Injected Into REIT
• ​Yield should represent an acceptable spread over the risk-free rate allowing global evaluation and participation by foreign investors.

 

• Competent Fund Manager
• ​Proven track record in the area of fund management, corporate finance, other relevant finance-related functions, property management or in the development of real estate industry.

 

• Capable Property Manager
• ​​Experienced asset management team with a track record of successful development, management and leasing out activities.
• Tapping external expertise, if necessary, through hiring or joint venture.

 

• Timing
• ​Historically low interest rates make investments in real estate very attractive.

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Development that retail investors should monitor and take advantage of:

(As of January 16, 2024)

SM Prime Holdings, Inc. issued a clarification of a news report for its planned REIT IPO.

"SMPH’s planned real estate investment trust (“REIT”) offering is dependent on market conditions."

Source: https://edge.pse.com.ph/openDiscViewer.do?edge_no=e7830043c210668dabca0fa0c5b4e4d0

​(As of July 17, 2023)

According to ManilaStandard.net, Cosco Capital Inc., owned by businessman Lucio Co, is preparing for a big real estate investment trust offering, which could raise between P15 billion and P30 billion, according to Philippine Stock Exchange president and chief executive Ramon Monzon.

Monzon said in an interview at the sidelines of a forum sponsored by the Securities and Exchange Commission over the weekend that Cosco is ready to file its REIT offering application either this month or next month.

Source: https://manilastandard.net/business/corporate/314350519/cosco-capital-to-raise-p30b-from-planned-reit-offering.html​

​Cosco Capital, Inc. issued a clarification of a news report for this matter, and they are confirming the said news article, particularly that the Company is studying a possible REIT offering.

Source:https://edge.pse.com.ph/openDiscViewer.do?edge_no=a911f6c9d6559b139e4dc6f6c9b65995​


(As of January 17, 2022)

DoubleDragon Corporation's subsidiary CentralHub Centers Inc., a joint venture with Jollibee Foods Corporation, completes the construction of CentralHub-Tarlac Phase-4. The latest progress now fully completes the construction of the 6.2 hectare CentralHub-Tarlac industrial warehouse complex.

DoubleDragon currently has completed CentralHub-Capiz. CentralHub-Tarlac, CentralHub-Pasig, CentralHub-Laguna 1 and CentralHUb-Laguna 2, and will soon add to its completed portfolio are CentralHub-Iloilo, CentralHub-Davao, and CentralHub-Cebu.

CentralHub Industrial Centers Inc., which to date has 43.8 hectares of industrial assets, continues to ramp up construction of its industrial warehouse portfolio after it recently completed its equity joint venture with Jollibee Foods Corp. through the building out its PhP 24.8 Billion industrial leasing portfolio in line with its preparation for the Philippine's first Industrial REIT IPO in the second half of 2022.

Today, Ayala Land-backed AREIT Inc. (PSE:AREIT), DoubleDragon-backed DDMP REIT, Inc. (PSE:DDMPR), Filinvest REIT Corp. (PSE:FILRT), RL Commercial REIT, Inc. (PSE:RCR), MREIT, Inc. (PSE: MREIT), Citicore Energy REIT Corp. (PSE: CREIT), VistaREIT, Inc. (PSE: VREIT), and Premiere Island Power REIT Corporation (PSE: PREIT) have successfully made their trading debut on the Philippine Stock Exchange (PSE).

Disclaimer: This excerpt from the webinar presentation is for educational and information purposes only. This should not be construed as a professional, financial, or investment advice, or recommendations from the PSE.