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Diversifying portfolio through REIT

MORE investors and property developers will use the real-estate investment trust (REIT) market to expand their portfolio, according to real-estate services and consultancy firm JLL Philippines.

“We believe REITs will play an important role in jump-starting the economy from the adverse effects of the pandemic and will promote growth in the real-estate sector,” said P. Ryan Isip, JLL Philippines’ head of Capital Markets in a press statement.

Isip added, “Because of the nature of REITs, properties will need to be transparent in its income, occupancy, and prospects to make it more attractive to be invested in. Due to this, the REIT market promotes transparency in the real-estate industry. Ultimately, REITs will help attract a lot of investors in the medium to long term and will pave way for us to develop capital investments in the country.”

In a recent webinar, JLL pointed out that the launching of the country’s REIT market in 2020 was a much-needed development and boosted investment sentiment for the property sector.

With REIT going full steam in the local property market, JLL believes more property developers will diversify their portfolio and seek new capital to expand their real-estate buildings.  Further, JLL Philippines also stressed profits earned from being a REIT-listed property can be a source of funding for developers, raising fresh capital to finance future projects, which in turn will ramp up construction activities and employment.

Isip said developers are also aiming to increase their properties’ asset value to make them more attractive investments. “REIT-listed properties tend to be better managed and maintained to make them attractive for tenants to move in. Therefore, it becomes an attractive income-generating property for REITs,” he said.

Philip Mareschal, JLL Philippines’ head of property and asset management, pointed out the importance of contracting third-party property managers to uphold transparency and discover innovative ways of protecting, or even increasing, the asset value to maintain the REIT.

He pointed out that REITs could be also an attractive and substantial investment alternative vehicle for investors.

In a related development, AREIT Inc., the real-estate investment trust of property colossus Ayala Land Inc. (ALI), achieved a milestone when it earned P1.23 billion last year, 42 percent higher than the previous year.

“As the first Philippine REIT, AREIT performed consistently, delivering dividends and growing its assets,” Carol Mills, president and chief executive officer of AREIT said in a press statement.

In 2020, ALI made a strategic investment in the Teleperformance Cebu Building acquiring it in September using primary proceeds from the initial public offering, which quickly contributed to the company’s operating income.

As part of its growth strategy, the company also acquired in January of this year The 30th, a 75,000-sq m commercial development located in Pasig City. In the same month, AREIT also acquired 98,000 square meters of land located at Laguna Technopark currently leased by Integrated Micro-Electronics Inc. for its manufacturing business. Right now, AREIT’s total assets has grown from 153 thousand during its IPO to 344 thousand square meters of gross leasable space, including land that is directly leased and generating income.  The company’s total deposited property is valued at P37 billion.

“Operations remained strong throughout the year. Business resilience, health and safety of all our building locators and service personnel were our focus areas as all our properties remained open throughout the pandemic,” added Mills.

AREIT said it aims to provide a 10 to 12 percent total shareholder return per year through organic growth and new acquisitions.

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