real estate industry

[ANALYSIS] Not all REITs are created equal

Den Somera

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[ANALYSIS] Not all REITs are created equal

Raffy de Guzman/Rappler

In view of the looming sentiments of government regulators to lower interest rates soon, this is now the time for investors to take a close look at REITs

This is the central message of Ando Leo “Andoy” Beltran in his presentation on Real Estate Investment Trusts (REIT) before the guests of the Monday Circle Financial Forum, an advocacy group for the promotion of financial literacy and development of a well-informed investing public. 

Beltran is vice president on “Business Development & Market Education Department” at the same time “Head of OFW Desk” of First Metro Securities Brokerage Corporation of the Metrobank Group.  

Primarily, REITs are good investment alternatives open to even the ordinary individual or small investor to become co-owners of big income-generating properties. They are stock corporations established principally for the purpose of owning income-generating real estate assets, such as apartment buildings, office buildings, medical facilities, hospitals, hotels, resorts, highways, warehouses, shopping centers, renewable energy resources, or even cold storage facilities, among others. 

Aside from their good capacity for capital appreciation, REITs have good records of high dividend yields, declared and paid regularly because REITs are mandated by law to distribute at least 90% of their distributable income to shareholders.

In view of the looming sentiments of government regulators to lower interest rates soon, this is now the time for investors to take a close look at REITs. According to Beltran, they are an ideal strategic fallback investment positions when income from high interest rates is gone, as you will see from their reviews on the dividend yields offered by the top four REIT issues recommended by his company.  

INFOGRAPHIC: The future of Philippine REITs

Top four REITs

There are only eight REITs that have been listed, so far, in the market since the REIT Act was legislated and approved during the 14th Congress in 2009.    

The main reason for the slow development of REIT was due to resistance on the public ownership level initially prescribed in connection with the implementing rules and regulations (IRR) of the REIT Act, along with the application of the 12% value-added (VAT) tax on the transfer of properties to REITs, as provided through Revenue Regulations No. 13-2011. 

It was only when The Tax Reform for Acceleration and Inclusion (TRAIN) Law, spearheaded by Albay 2nd District Representative and chair of the House of Representatives’ Ways and Means Committee Joey Sarte Salceda, that REITs gained traction, wherein the restrictive ownership and taxation requirements of the old law on REIT was modified.  

These eight listed REITs are as follows:

  • 1) AREIT, Inc. (AREIT)
  • 2) RL Commercial REIT, Inc. (RCR)
  • 3) MREIT, Inc. (MREIT) 
  • 4) Citicore Energy REIT Corp. (CREIT)
  • 5) Filinvest REIT Corp. (FILRT)
  • 6) VistaREIT, Inc. (VREIT)
  • 7) DDMP REIT, Inc. (DDMPR)
  • 8) Premiere Island Power REIT Corporation (PREIT). 

But as claimed by Beltran, not all REITs are created equal.  His company, First Metro Securities, pared down their investment options to only four in the following order: AREIT, MREIT, RCR and CREIT.  

AREIT is the only one with a mall component. It has also recently executed a transaction exchanging shares for five properties valued at P28.6 billion. 

The parties involved in the swap is Ayala Land, Inc. (ALI) and its subsidiaries Greenhaven Property Ventures, Inc. and Cebu Insular Hotel Co., Inc., as well as ACEN Corp. unit Buendia Christiana Holdings Corp. (BCHC). 

About 841.26 million common primary AREIT shares were issued to ALI, Greenhaven, Cebu Insular, and BCHC at P34.00 per share in exchange for the ownership of Ayala Triangle Tower 2 office building, Greenbelt 3 and 5, Holiday Inn and Suites Makati, Seda Ayala Center Cebu, and a 276-hectare industrial land in Palauig, Zambales.

This increased the assets under its management to P117 billion and grew its gross leasable area (GLA) by 3 million square meters (sqm) for 2024, significantly ahead of their 100,000 sqm per year infusion target from 2023 to 2025. 

AREIT’s market capitalization is placed at P81 billion at the market price of P34.20 per share. Per estimates. AREIT’s market price can still hit P36.70 apiece for an additional price appreciation growth of 7.3%. Dividend yield for the year is expected to hit 6.29% per annum. 

Next is MREIT with its principal investment strategy to invest in income-generating real estate, particularly on township and mixed-use properties. 

Megaworld Corporation (MEG) completed the secondary share sale of 40.65 million MREIT shares in April this year at the price P12.30 per share representing around 1.5% of MREIT’s total outstanding shares, resulting into increasing MREIT’s public float to 44.4% and providing further “leeway for the possible acquisition of seven grade A office assets from MEG with total gross leasable area (GLA) of 150,500 sqm.” 

MREIT’s portfolio in this transaction grew to 475,500 sqm from 325,000 sqm, which is just 25,000 sqm shy of the 2024 management target of 500,000 sqm. 

MREIT’s market capitalization is about half of AREIT at P36.29 billion following its market price of P12.98 per share.  Estimates also show that MREIT’s market price can still hit P14.20 apiece for an additional price appreciation growth of 9.93%. Dividend yield for the year is expected to reached 7.61% per annum. 

Ranked third is RCR with the principal investment strategy as leader in a diversified portfolio of income-producing real estate assets for business process outsourcing (IT-BPO) services located in major central business districts and key cities and urban areas across the country. 

Robinsons Land Corp. (RLC) recently completed the placement of 1.7 billion RCR shares at P4.92 per share, which increased its public float to 49.95%. 

The objective of the transaction is to invest approximately P25 billion in assets in RCR to boost its total leasable space by about 60% in 2024, from its current GLA of 480,000 sqm. 

RCR’s market capitalization is placed at P54.64 billion at the market price of P5.09 per share. Again, it is estimated that RCR’s market price can still rise up to P5.70 apiece, equivalent to a price appreciation growth of 11.98%. Dividend yield for the year is expected at 7.69% per annum. 

On the fourth spot is CREIT whose investment strategy is on renewable energy resources under Republic Act 9513 or the Renewable Energy Act of 2008, wherein CREIT doesn’t have a lot of maintenance cost because they only have land where solar panels are situated.

The landholdings of CREIT significantly grew in 2023 with the addition of seven parcels of land with 5.12 million sqm of prospective leasable space.  This also increased CREIT’s total leasable assets to 7.1 million sqm, that at the same time grew its GLA to over 4.3X since its IPO in February 2022. 

CREIT “aims to support its sponsor, CREC, to generate a gross installed capacity of approximately 4,248.8 MW [megawatts] in additional solar power and onshore wind energy generation for CREC’s projects in the ‘Under Development’ stage in the next five years, which significantly contributes to the target of generating approximately 1.0GW [gigawatt] of renewable energy capacity per year, within cluster locations across nine provinces in the Luzon and Visayas regions.”   

CREIT’s market capitalization is placed at P19.6 billion at the market price of P2.77 per share. According to Beltran, CREIT may have reached its full value at this share price. Nevertheless, dividend yield is estimated to hit 7.69% per annum considering its lower operational costs and capital infusion program to boost more property infusions.  

From among the stockbrokers and investment bankers present in the Monday Circle Financial Forum, the rest of the REIT issues that did not make the cut from First Metro Securities’ list were not without exciting investment storylines. They are just behind, at the moment, in some of the general scores on financial fundamentals, landbank and capital infusion potential.  

For instance, they find that their dividend yields at the moment do not appear to be sustainable over time because of challenging growth prospects. Likewise, unlike what have been established by the top three selected REITs, the reputation and record of performance of the sponsors or parent firms have yet to be seen.

FirstMetroSec’s offer

First Metro Securities is providing a convenient, accessible, affordable, and incredible investment services on local or foreign REITs, among others.  

For those who would like to take the first step, simply download the ‘FirstMetroSec GO’ mobile app to fill up the online registration form and upload the documentary requirements, which you can complete – all in under 10 minutes – according to Beltran. 

And while you are normally required to fund your account initially with P5,000.00, Beltran says his company is giving you the opportunity to start investing for as little as P1,000.00.  All you need to do is use the promo code ‘THE MONDAY CIRCLE’ when you get asked ‘How did you learn about us?’

(The article has been prepared for general circulation for the reading public and must not be construed as an offer, or solicitation of an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise.  Moreover, the public should be aware that the writer or any investing parties mentioned in the column may have a conflict of interest that could affect the objectivity of their reported or mentioned investment activity. You may reach the writer at  

Too young to invest in physical real estate? Go for REIT instead

Too young to invest in physical real estate? Go for REIT instead

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