The Securities and Exchange Commission (SEC) sees real estate investment trusts (REITs) gaining more traction among investors and directing them away from wasting hard-earned cash in scams.
“REITs are proving to be very attractive to the local retail investors. On the average, more than half of the investments in the first three REIT IPOs, or 53 percent to be exact, were placed by individuals,” said SEC Chairperson Emilio B. Aquino.
He said “This momentum is expected to be carried onto the retail offering of RLC REIT which, we are informed, saw an oversubscription in the Trading Participants’ tranche with 116 eligible brokers participating in the transaction.”
Aquino noted that, “This wide participation of retail investors in REITs' IPOs attains one of the aims of the REIT Act of presenting REITs as a vehicle for the democratization of wealth in the country.”
It also shows the potential of REITs as viable alternative to pulling away investible money from scams and all sorts of risky investment products being peddled in the internet and social media.
“This is what the SEC wants to see - investible funds being allocated into more productive and income-producing ventures such as the real estate and infrastructure projects of the REIT-sponsors rather than being wasted in scams,” said Aquino.
REIT IPOs are also a viable capital-raising scheme for the selling shareholders, the sponsoring real estate companies.
In the case of RL Commercial REIT (RCR), the biggest REIT IPO so far, its sponsor Robinsons Land Corporation was able to attract P23.5 billion for the secondary sale of the offered shares.
“Adding it to the P39.6 billion raised by the sponsors of the three previous REIT IPOs, expect a huge amount totaling P63.1 billion being plowed back into the economy,” said Aquino.
He noted that, “the appealing message here is that the sponsoring real estate companies are presented with a feasible funding channel for their future projects through the formation of REITs.”
This financing substitute attains another objective of the REIT Act of recycling back capital through the re-investment program of the sponsoring property companies, said Aquino.
Meanwhile, RCR’s listing increases the total market capitalization of REIT companies listed in the PSE to P171.3 billion from P107.1 billion.
“It represents 0.91 percent of the total stock market capitalization of the PSE, a big jump of 34 basis points from 0.57 percent level accounted for by the three previous REIT listings,” Aquino pointed out.
He added that, “Noticeably, the sustained growth of the local REIT market is crucial to expanding and opening new horizons for our capital market.
“We want to see the REIT sector opening new investment window for foreign investors, inspiring the formulation of a new REIT sectoral index, and causing the formation of an Exchange Traded Fund comprised of REIT listed companies.”
Aquino said the SEC is hopeful that REITs will continue to thrive and substantially promote the development of our capital markets.