Tale of the Tape: REIT IPOs

Published August 16, 2021, 3:50 PM

by James A. Loyola

It has been said that 2021 is the year of the REIT (real estate investment trust)`after two initial public offerings with a combined market capitalization of P74.36 billion plus two more IPOs in the pipeline with a maximum combined market cap of P128.43 billion.

Makati CBD skyline

These four IPOs come on the heels of pioneer AREIT of Ayala Land which raised P13.57 billion from its IPO last year for a listing market cap of P27.69 billion.

DDMP REIT of DoubleDragon Properties Corporation raised P13.37 billion from its IPO and listed with a market cap of P40.11 billion early this year. Its overallotment option was not exercised.

Last week, Filinvest REIT Corporation (FILREIT) listed with a market cap of P34.25 billion after raising P11.44 billion from its IPO (P12.58 billion if overallotment option is fully exercised).

Coming soon is the IPO of Robinsons Land’s RL Commercial REIT Corporation worth up to P26.67 billion and a market cap of up to P72.73 billion and Megaworld’s MREIT IPO which aims to raise up to P27.27 billion for a market cap of P55.51 billion.

On the drawing board is the Villar Group’s REIT (VREIT) slated for the last quarter of 2021 but it has yet to filed its registration statement with Securities and Exchange Commission.

With three listed REITs and two more impending IPOs, investors are suddenly spoiled for choice. However, not all REITs are created equal as each has its own advantages and disadvantages—depending on which metrics are used.

Based on IPO documents filed with regulators, Business Bulletin will try to make it easier for investors by showing how the 5 REITs compare to each other. A “Tale of the Tape for REITs,” so to speak.

Already mentioned are the market capitalization of offering sizes for the 5 REITs. In terms of public float, AREIT has the highest (44.55 percent), followed by MREIT (up to 48.96 percent) while FILREIT and RLC REIT are almost the same (up to almost 37 percent) and DDMP REIT the smallest at 33.4 percent.

As to the size of their initial assets, as measured in terms of gross leasable area (GLA), RLC REIT has the biggest (425,315 square meters) followed by FILREIT (301,361 sqm), MREIT (224,431 sqm), DDMP REIT (172,252 sqm), and AREIT (152,756 sqm).

For diversity of location of its leasing properties, RLC REIT leads with is assets spread over 9 cities nationwide, followed by MREIT (3 cities), FILREIT (2 cities), DDMP REIT (1 city), and AREIT (1 city).

Meanwhile, for average age of its buildings, MREIT has the oldest (11 years) followed by RLC REIT (8 years, FILREIT (7 years), AREIT (5 years), and DDMP REIT has the youngest at an average of 3 years.

For the remaining years before their current tenants’ lease contracts expire, AREIT leads with 5.8 years, followed by MREIT (4.7 years), RLC REIT (4.3 years), DDMP REIT (4.2 years), and FILREIT (3.8 years).

For the remaining lease years of the land on which their buildings stand on, DDMP REIT has the biggest advantage since it owns the land while RLC REIT has the longest remaining lease at 89 years followed by FILREIT (71 years), MREIT (50 years), and AREIT (37 years).

For their tenant mix, all of the 5 have a majority of traditional and business process outsourcing tenants (FILREIT 96.6 percent, MREIT 93.8 percent, RLC REIT 88.2 percent, DDMP REIT 81.5 percent, and AREIT 75.9 percent).

REITs with POGO tenants are DDMP REIT (10.3 percent), RLC REIT (2.8 percent), and FILREIT (2.7 percent) while those with services apartments or hotels are AREIT (17.1 percent), MREIT (3.2 percent), and RLC REIT (1.5 percent).

Investors will invariably ask how much they can potentially earn from parking their funds in REITs. Aside from possible windfalls from share price appreciation, they get to earn cash dividends from 90 percent of the REIT’s profit.

Based on estimates for this year, FILREIT leads with 6.3 percent followed by DDMP REIT (5.07 percent), RLC REIT (4.91 percent), AREIT (4.85 percent), and MREIT (4.1 percent).

For next year, there is no estimate for AREIT while FILREIT expects a yield of 6.6 percent followed by DDMP REIT (5.45 percent), RLC REIT (5.26 percent), and MREIT (4.5 percent).