Cantos, Tricia Nicole A.

GCDN-2020T3-9767
FINALS EXAM - REITs in the Philippines

First, what are REITs?

REITs refer to Real Estate Investment Trusts. They are companies that own and
operate real estate properties to generate income. REITs include hotels, data centers,
cell towers, hospitals, commercial areas, office spaces, shopping centers, apartments,
warehouses and other buildings. Investors prefer REITs because of diversification,
lower risk and higher returns.
Almost all REITs would simply lease out and collect rent on the various properties that
they own. The company then generates income out of this and they then pay back
investors through dividends.
The best part is — REITs are required to pay out at least 90% of their taxable income to
their investors.
REITs are essentially corporations that manage real estate assets that produce regular
income such as hotels, apartment buildings, office and commercial buildings, and
shopping malls. According to the Securities and Exchange Commission, besides
providing real estate companies a cheaper source of capital and promoting economic
development, growth in tourism and liquidity in the capital markets, REITs allow both
small and large investors to participate in the direct ownership of real estate and is an
alternative investment instrument to foreign investors as well as OFWs.
Real Estate Investments Trusts are historically one of the best-performing asset classes
in the market today. As we know, real properties grow in value over time and don’t
depreciate in value easily, REITs also produce more income through regular rental
revenue. They also have the ability to generate dividends.
Some REITs are already diversified, meaning, they are invested in different real estate
properties such as shopping mall units, commercial buildings, office spaces, hotels and
the like. If you want to allocate a part of your portfolio with real estate business, REITs
are excellent option. Diversification is one of the most effective strategies of investing.
The very first REIT in the country, the Ayala Real Estate Investment Trust (AREIT),
debuted in the market in 2020 and was 2x over-subscribed. According to available
sources, expected dividend for this year is pegged at 4.85% in 2020 and expected to
increase to 5.85% in the following year.
Recently, property company Double Dragon formed DD Meridian Park REIT (DDMP
REIT) that included 7 buildings and whose share is priced at ₱2.25 apiece, which
experts estimate to give dividend yield of 5.07% and 5.45% in the next two years,
respectively. When it debuted on March 24, 2021, the price remain unchanged at the
closing hour of the trading day.
On August 12, 2021, the Filinvest REIT (FILRT) traded in the local bourse for the very
first time at a price of ₱7.00 per share. FILRT was sponsored by the Filinvest Land, Inc.,
previously known as Cyberzone Properties, Inc., owned by the Gotianun family. Its
portfolio includes 17 buildings, all but one are located in Alabang. The other one
building is located in Cebu City. About 9 out of 10 tenants are BPO (business process
outsourcing) companies.

 AYALA LAND REIT (AREIT)

The Securities and Exchange Commission approved Ayala Land REIT (AREIT), the
first-ever REIT (Real Estate Investment Trust) in the Philippines. AREIT Initial Public
Offering started last July 27 to August 3, 2020 (through PSE EASy) and July 24 to 30
through online broker. Many investors bought shares during the IPO of the first REIT on
the market.
REITs are attractive assets because you will earn money by receiving regular cash
dividends. After all, 90% of REITs taxable earnings are required to be given to
shareholders, and income of REITs are exempt from 30% corporate tax.
AREIT is a subsidiary of Ayala Land, one of the largest property developers in the
Philippines. Ayala Land continuous to develop high-end residential, shopping centers,
offices, hotels, and resorts. It is a very stable company with a strong balance sheet.
With Ayala Land’s solid track record, we’re confident AREIT would follow a robust
performance.

 DOUBLEDRAGON PROPERTIES REIT

DoubleDragon Properties REIT is a Real Estate Investment Trust offered by
DoubleDragon Properties Corp. It is the second REIT available and listed on the
Philippine Stock Exchange. Its IPO began on March 10, 2021, until March 16, 2021,
with an offering of P2.25 per share. The listing on the PSE started on March 23 under
the ticker DDMPR.
One of the unique benefits of REITs vs. stocks is the regular dividend payouts. REITs
listed on the Philippine Stock Exchange are required by law to distribute 90% of their
Distributable Income as dividends to its shareholders.
That is per SEC’s Rule 4 Section 4 Implementing Rules and Regulations on REIT. As
an investor of DoubleDragon REIT, you will earn dividend income from your shares of
your REIT as long as the company remains profitable. You will also earn profit when the
value of DDMPR grows over time.
With the DDMPR IPO share price of 2.25 per share, the projected dividend yield is
5.07% for 2021 and 2022.
Real estate experts manage the Asset Under Management (AUM) of REIT. With
DoubleDragon Properties, they already have a solid track record.
The REIT’s properties are located in a prime location of the Pasay Central Business
District’s fast-rising hub. Just a few steps to SM Mall of Asia, Entertainment City, World
Trade Center, PICC, and other high traffic commercial centers. The properties are also
near LRT and MRT stations and a few minutes away from the NAIA International
Airport.
The premier location of their properties will add more advantages for continuous and full
occupancy as much as rental income. Besides, the value of the prime double corner
4.75-hectare block is titled land ownership. Its value will appreciate every year.
Unlike getting a condo, dealing with long contracts, and paying for mortgages, investing
in REIT like DDMPR is more convenient. You can get in and out of your real estate
investment quicker on any trading day as these assets are traded on the stock
exchange.

 FILINVEST REIT
Filinvest REIT or FILREIT is a Real Estate Investment Trust of Filinvest Land Inc., one
of the largest property developers in the Philippines. FILREIT maintains a world-class
portfolio of office buildings and commercial properties catering to multinational BPO
(Business Process Outsource) and IT (Information Technology) companies.
According to COL Financial, one of the best and trusted stock brokers in the country,
the projected dividend per share for 2022 is P0.463, which turns to a 6.62% yield at P7
per share offer price. They also mentioned that “the yield is significantly higher than the
10-year government bond yield of 3.8%, making FILRT a good yield-enhancing play.
With 88% of rental revenue projections based on existing contracts, the risk of not
meeting its projected payout is minimal.”
Their office properties are rated Grade A by a reputable global real estate services firm,
Jones Lang Lasalle. The strength of BPO and IT sectors will drive a consistent growth
to Filinvest REIT rental income.
According to Filinvest REIT prospectus, the company maintains 17 fully operational
Grade A office buildings. They have more than 300,000 sqm gross leasable area. The
average occupancy rate is 90.3% as of April 30, 2021; multinational BPO companies
occupy 88.4%.
Famous brands that occupy their FILREIT properties include Accenture, Capital One,
Genpact, Concentrix, Optum, and many more.
The parent company of Filinvest REIT, Filinvest Land Inc. (FLI), has a great track
record, and they have over 75 years of experience in the real estate property business.
They have built more than 200 residential developments nationwide. Filinvest Land Inc.
also manages 31 offices and 7 retail projects.
Since FILREIT is traded in the stock market, it carries volatility and risks such as
geopolitical factors, global market trends, current aspects of the Philippine economy,
non-renewal of tenants, pandemic issues, and missed company earnings. As a trader
and investor, you should always know your risk tolerance, strategy and objectives.

 RL COMMERCIAL REIT (RCR)

The newest REIT in the market.
RL Commercial REIT, Inc. ("RCR") is a real estate company established in the
Philippines. The amendment to the Corporation’s Articles of Incorporation to reflect the
change in name from "Robinsons Realty and Management Corporation" to "RL
Commercial REIT, Inc." was filed on 27 April 2021, and is currently pending approval
with the Securities and Exchange Commission.
The Company shall operate as a Real Estate Investment Trust, upon compliance with
the requirements of the REIT Law and its implementing rules and regulations.
The Philippine Stock Exchange has approved the listing via initial public offering of RL
Commercial REIT Inc. (RCR). Sponsored by Gokongwei family-owned Robinsons Land
Corp., RCR plans to raise up to P26.7 billion when it offers up to 3.34 billion common
shares at a maximum offer price of P7.31 per share and an over-allotment option of up
to 305 million common shares.
Should all the shares sell out at the maximum offer price, RCR's market capitalization is
expected to balloon to P72.7 billion. This makes RCR’s IPO the country's largest real
estate investment trust (REIT) by portfolio valuation and asset size, longest in land
lease tenure, and most geographically diversified office REIT in the country.
The Securities and Exchange Commission had earlier given the green light for the IPOs
of RCR as well as Megaworld’s planned IPO of its subsidiary MREIT.
RCR’s listing will make it the fourth REIT in the PSE after Ayala Land’s AREIT,
DoubleDragon’s DDMP REIT, and the Gotianuns’ Filinvest REIT Corp (FILRT).
RCR’s offer period will run from August 25 to September 3, 2021, with a target listing
date on September 14, 2021.
According to a news release, RCR’s sponsor RLC has extended land leases of as long
as 99 years to RCR, which would provide it with the longest land lease tenure among
Philippine REITs to date.
RCR’s initial portfolio consists of 14 commercial real estate assets with a total gross
leasable area of 425,315 square meters located not just across Metro Manila (Makati,
BGC and Ortigas, Quezon City and Mandaluyong), but also in the key provincial cities
of Naga, Tarlac, Cebu, and Davao. The company has a committed occupancy rate of 99
percent and has an appraised value of P73.9 billion as of 30 June 2021 according to
real estate services company Santos Knight Frank.

The investors should buy into REITs as it provides a good portfolio diversification
strategy due to its relatively low correlation with the returns of other equities and fixed-
income investments.
REITs also influence accountability and transparency in the real estate sector, as it is
required to engage the services of a fund manager who will ensure the development of
investment strategies and accumulate the assets to make the REIT more attractive; a
property manager who will oversee property and lease management services, including
rent collection, tenant services and other similar services; and competent property
valuer.
Financial Executives Institute of the Philippines (FINEX) president Francis Lim said in a
recent webinar that REITs deepen the Philippine capital markets and provide investors
with more investment options.
“For investors, REITs implement the constitutional policy of democratization of wealth,”
Lim said.
He added that REITs can also plow back a portion of the company’s income to related
property development projects. Lim said this reinvestment can spark more economic
activity, which may fuel hope for a quicker bounce back for the Philippine economy.
“REITs also help build a more vibrant capital market and spur infrastructure
development,” Lim said.
With the Philippine REIT market still in its early stages, the expected launch of more
REITs in the future will not only give more opportunities for investors but will also help
the Philippine economy get back on its feet.
The Philippine REIT market was just getting started when the Philippine Stock
Exchange (PSE) welcomed its first REIT listing in August of last year. At present, there
are two REITs listed on the PSE particularly:

AREIT Inc. of Ayala Group

• Launched in August 2020
• Current portfolio of 344,000 square meters (sqm) of gross leasable space (GLA) worth
P37 billion
• This includes Solaris One, Ayala North Exchange, and McKinley Exchange, all in
Makati City; the 30th commercial development in Pasig; and an industrial land leased by
Integrated Micro-Electronics Inc. in Laguna Technopark.

DDMP REIT Inc. of DoubleDragon Properties Corp.

• Launched in March 2021
• Portfolio consists of six office towers within the 4.75 hectare DD Meridian Park in
Pasay City.
• This includes the four-tower DoubleDragon Plaza, the DoubleDragon Center East and
the DoubleDragon Center West, with a combined GLA of approximately 172,252 sqm.
While only two REITs are currently listed, Colliers Philippines associate director for
research Joey Roi Bondoc says that more developers are planning to do REITs as they
bank on the recovery of the economy.
Among the companies that have filed applications for REIT offerings with the Securities
and Exchange Commission (SEC) are:

Filinvest REIT Corp. of Filinvest Group

• 16 office buildings within the 18.7-hectare Northgate Cyberzone in Filinvest City in
Alabang, Muntinlupa and one office tower with a retail component in Cebu Cyberzone in
Cebu City.
• Total GLA of 301,362 sqm
• SEC application for REIT offering filed in March
• Plans to raise P15 billion

RL Commercial REIT Inc. of Robinsons Land Corp.

• 14 PEZA- accredited assets with over 400,000 sqm s of GLA across key Metro Manila
cities.
• This includes the Exxa-Zeta Towers in Quezon City, Robinsons Summit Center in
Makati City, Robinsons Cyberscape Alpha and Robinsons Cyberscape Beta in Pasig
City and Robinsons Cybergate Centers 2 and 3 in Mandaluyong City.
• SEC application for REIT offering filed in May
• Plans to raise P26.7 billion