SEC effectively clears Ayala Land’s REIT offering

The Securities and Exchange Commission (SEC) has largely cleared the initial public offering of a real estate investment trust (REIT) with Ayala Land, Inc. as sponsor.

In its July 9 meeting, the Commission En Banc considered favorably the registration statement of AREIT, Inc. for 1,092,986,504 common shares for listing and trading on the Main Board of the Philippine Stock Exchange under the trading symbol “AREIT.”

The SEC shall issue the corresponding Order of Registration and the Permit to Offer Securities for Sale upon determination that the company, formerly known as One Dela Rosa Property Development, Inc., has complied with the remaining requirements.

The registration statement covers up to 47,864,000 new common shares and up to 409,019,000 existing common shares for public offering, with an overallotment option of up to 45,688,700 secondary shares, at a maximum offer price of P30.05 apiece.

AREIT may run the public offering from July 27 to 31 and debut on the Philippine Stock Exchange on August 7, based on the latest timetable submitted to the Commission.

AREIT could raise P1.332 billion in net proceeds from the primary offer for the expansion of its building portfolio through the acquisition of a fourth building, Teleperformance Cebu, excluding the land, from a subsidiary of the sponsor or an alternative property from the sponsor or any of its subsidiaries or affiliates.

Ayala Land, meanwhile, could net about P13.309 billion from the secondary offer, assuming full exercise of the overallotment option. As required under the Revised Implementing Rules and Regulations (IRR) of Republic Act No. 9856, or the REIT Act of 2009, the sponsor shall reinvest the net proceeds in real estate and/or infrastructure projects in the Philippines within a year.

BPI Capital Corporation will serve as the sole global coordinator for the maiden share sale. It will concurrently act as joint bookrunner, together with UBS AG Singapore Branch, and joint lead underwriter, along with PNB Capital and Investment Corporation and SB Capital Investment Corporation.

Assuming full exercise of the overallotment option, the public offering would allow the public to own 49% of the issued and outstanding common shares of AREIT.

Ayala Land will retain a 41.61% shareholding in AREIT, while its subsidiary AyalaLand Offices, Inc. will own the remaining 9.39% upon completion of the public offering.

As mandated by law, shareholders are entitled to receive as dividends at least 90% of the annual distributable income of the stock corporation established principally for the purpose of owning income-generating real estate assets.

As defined in the REIT Act, distributable income refers to a REIT’s net income as adjusted for unrealized gains and losses/ expenses and impairment losses, and other items in accordance with internationally accepted accounting standards. It excludes proceeds from the sale of the REIT’s assets that are reinvested in the REIT within one year from the date of the sale.

Such dividends shall be payable only from the unrestricted retained earnings of the REIT as provided for under Section 42 of Republic Act No. 11232, or the Revised Corporation Code of the Philippines.

At present, AREIT’s property portfolio consists of three commercial buildings, excluding the land on which they stand, namely Solaris One and Ayala North Exchange and, as of February 1, 2020, McKinley Exchange via lease from the sponsor.

AREIT Fund Managers, Inc., formerly AyalaLand Commercial REIT, Inc., will manage the assets of AREIT with a focus on generating rental income and increasing the company’s assets over time.

Meanwhile, AREIT Property Managers, Inc., formerly Next Urban Alliance Development Corp., will manage the leases, market the properties, and oversee the maintenance and repair of the structure and utilities of the properties, among others.

AREIT filed its registration statement with the SEC following the issuance of the Revised IRR of the REIT Act last January 20.

Among others, the SEC lowered the minimum public ownership requirement in line with the provision of the REIT Act that a REIT must have at least 1,000 public shareholders each owning at least 50 shares of any class of shares and, in aggregate, at least one-third of the outstanding capital stock.

REITs were previously required to maintain a 40% public ownership in the first year of their listing. Prior to its amendment, Rule 4 of the IRR further required REITs to increase their public float to 67% within three years from their listing.

The Bureau of Internal Revenue also amended past revenue regulations to exempt from the 12% value-added tax the transfer of properties in exchange for shares for control in REITs, in accordance with Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) Law.