Frederick D. Go shares optimism in new projects and RCR, the largest REIT market to date
Filipinos equate Robinsons with its malls, starting with the iconic one along EDSA and at the intersection of Ortigas Avenue. Robinsons Galleria, which is near a historical landmark where pivotal moments in our story as a nation unfolded, stands as a background witness.
For me personally, I was just at Robinsons Galleria when I lined up for a COMELEC registration since the mall accommodated residents of Quezon City's third district. I was pleasantly surprised with the upgrades inside the mall, which I haven’t visited for ages. There’s a new area where more food outlets are located. The pandemic may have affected foot traffic but this mall would surely make a grand comeback once the world returns to normalcy.
To a lot of Filipinos, Robinsons is about its malls located all over the country, with the newest one located in La Union. But Robinsons is more than that! It is a full-service developer building landmarks and enviable projects in the residential, office, and hospitality markets.
Manila Bulletin's Property Living was given a chance to set up an online interview with Frederick D. Go, Robinsons Land Corp. (RLC) president and also RCR chairman. RCR here refers to RL Commercial REIT, Inc., which Go said is the largest REIT in terms of market capitalization, portfolio valuation, and asset size. It is also the widest in terms of geographical coverage and longest in land lease tenure.
“Our initial portfolio boasts of 14 PEZA-accredited offices with an IT-BPM tenant base of approximately 70 percent,” Go said.
Read on to learn more about RLC’s plans after the pandemic and how it plans to make its REIT the right choice.
MB: How is RLC coping after more than a year of the pandemic?
Frederick D. Go (FDG): I am confident to share that RLC has been coping well amid the challenges of the pandemic. Obviously, for our malls, it’s not the same because of the imposed limitations. Our hotels also face challenges largely due to travel restrictions. However, when we look at Robinsons Homes, it’s a different story. Robinsons Homes sees blockbuster records compared to years before, as more people seek homes or properties in subdivisions with open spaces or an alfresco field.
For example, we are proud of Bridgetowne, a masterplanned 30-hectare destination estate spanning the border of Pasig and Quezon City, which bears the slogan “live, work, play, inspire.” It features several offices, a mall, residential buildings, and other soon-to-rise world-class projects.
Another business that is doing well nowadays are our office buildings, primarily because our largest tenant base would be the Information Technology and Business Process Management (IT-BPM) industry including, of course, the business process outsourcing (BPO) industry, that has been identified by the government as essential services. This is why we’re very much excited as well for RL Commercial REIT, Inc. (RCR), our initial portfolio boasts of 14 PEZA-accredited offices with an IT-BPM tenant base of approximately 70 percent.
MB: Online was the mode of selling, marketing, and launching of the products of a lot of real estate companies... what practices of RLC would remain (or be totally forgotten) once the pandemic subsides?
FDG: Yes, we boosted our digital efforts amid the pandemic. But before this, we already had digital measures as well, it was just a matter of amplifying it. In the regular course of doing business, I would say we didn’t have a major shift.
Of course, we are implementing small adjustments here and there like putting more focus on the essentials, exploring non-traditional tenants such as cloud kitchens, co-working spaces in the malls, and etc.
But in majority, I strongly believe the way of life would return to 90 percent of the way it used to be when everybody's been vaccinated, and there's a general feeling of confidence that herd immunity has been achieved. Consequently, 90 percent of our practices in RLC that we had before the pandemic will still be there but of course with innovations that we learned during these times.
When the situation gets better, I’m confident that the factors that matter in our businesses will remain the same – people will still congregate, go out and eat with friends in malls, travel and stay in hotels, and work as teams in offices. When that happens, RLC properties and RCR offices will be there to welcome Filipinos.
MB: How is RLC positioning itself in the market, considering the tight competition in the real estate industry?
FDG: As of now, RLC is being recognized for our capacity to build the country’s premier integrated smart city with our destination estate project Bridgetowne. We are also banking on our proven track record of being in the real estate industry for over 41 years.
We’re also supporting RCR, PH’s largest REIT in terms of market capitalization, portfolio valuation, and asset size; widest in geographical coverage; and longest in land lease tenure.
MB: What are the efforts done by RLC to help its stakeholders, especially its sales people, during these tough times?
FDG: We take care of our employees, especially our frontliners, by providing them with alcohol, gloves, masks, face shields, and all purpose cleaners, food packs, etc. For those applicable, we also provide sleeping and resting facilities. We also give incentives to those who report to work amid stricter quarantine restrictions.
To add, RLC also assists the government in hosting vaccinations sites through its malls and spaces all over the country, assisting local government units in their efforts to vaccinate the general public.
I would also like to share that we incorporated our very own foundation – Robinsons Land Foundation Inc. – last year. The foundation will be active in various social welfare programs such as supporting disaster response, community development, social involvement, health and nutrition, and child welfare and child education.
MB: How does RLC see the market this year end? or perhaps next year when (hopefully) we reach some sort of herd immunity to feel some kind of normalcy?
FDG: Generally, we are optimistic with the prospects of our businesses especially for our residential properties and offices in the RCR portfolio. The vaccination program from both the government and private sector is seen to speed up the return to normalcy. More people are excited to welcome the better normal where they can dine out again, celebrate in malls, and come back to their respective workspaces as the need to socialize is a big part of mental health.
MB: Is there something that we should be excited about RLC in the coming years?
FDG: There are a lot of things to look forward to but I cannot stress enough our excitement for Bridgetowne and RCR.
As the sponsor of RCR, RLC will lend its full support to REIT. In fact, RLC and RCR have entered into a memorandum of understanding for the potential acquisition of RLC’s Cyberscape Gamma in Ortigas CBD and/or Robinsons Cybergate Center 1 in Mandaluyong.
Inclusive of the MOU assets, RLC has approximately 204,000-square meter GLA in existing office assets, 68,000-square meter GLA of BPO spaces located within RLC’s various commercial centers, as well as 150,000-square meter GLA of properties that are in various stages of construction.
Overall, RLC’s potential pipeline for infusions to RCR amounts to a total GLA of approximately 422,000 square meters over time. All potential infusions, of course, are subject to the fund manager’s recommendations, market conditions, the requirements of RCR’s business, and the approval of the relevant regulatory bodies.
MB: With RCR’s listing in the Philippine Stock Exchange on Sept. 14, how would you interest investors and put your REIT above the existing and upcoming disclosed Philippine REITs? It would seem that every real estate company is jumping on the REIT-train; how does the market differentiate?
FDG: I am proud to say that RL Commercial REIT (RCR) definitely stands out because it is the largest REIT in terms of market capitalization, portfolio valuation, and asset size; widest in geographical coverage; and longest in land lease tenure. Please allow me to break down the points that sets RCR apart from other REITs:
Largest REIT
■ RCR will be the largest REIT in the market to date. At the IPO price of P6.45 per share, RCR will have the largest total market capitalization of P64.2 billion (~USD 1.3B). It also bags the biggest portfolio valuation at P73.9 billion (per Santos Knight Frank’s valuation) and the largest GLA at 425,000 square meters spread across 14 assets.
Widest in geographical coverage
■ The RCR portfolio is also the most geographically diversified REIT in the country. 9 4 percent of our 425,000-square meter GLA is spread across CBDs in Makati, Pasig, Taguig, and key Metro Manila cities like Mandaluyong and Quezon City, with the remaining six percent located in high growth commercial hubs in Metro Cebu, Metro Davao, Naga, and Tarlac City. This gives us an unrivalled presence in nine cities all over the country. It is important for us in RCR to cultivate spaces that provide employment opportunities for Filipinos. We are proud to say that business process outsourcing (BPO) is at the core of the RCR portfolio. BPOs are known to provide one of the highest paying jobs in the country.
Longest in land lease tenure
■ RCR’s portfolio has the longest average land lease tenure of 89 years. It includes a portion of assets held on freehold, with the rest of the assets predominantly composed of long 99 year land leases. The land is leased from RLC, so it speaks of the commitment of RLC to support RCR.
■ Our committed occupancy rate also stands at 99 percent thanks to sticky tenants with whom we have long-term relationships. This is also largely due to the fact that the RCR portfolio contains properties with the best asset class. RCR has a relatively younger and more modern portfolio of office assets, with an overall average age of only eight years. These assets all have a proven track record of profitability. These reflect on our tenant renewal and replacement rate in 2019 and 2020 that has allowed us to retain a 100 percent occupancy for our buildings.
Additionally, RCR's assets have consistently maintained higher occupancy and tenant rates. Top tenants include Accenture, Concentrix, Hinduja, and EY to name a few. Lastly, RCR aims to amplify RLC’s commitment to sustainability in managing two Leadership in Energy and Environmental Design (LEED) certified assets, namely Tera Tower and Exxa-Zeta Tower both located in Quezon City.
RCR’s clear path to growth is also a huge advantage. Organically, we have fixed annual rental escalations of between three to five percent p.a. On the other hand, in terms of inorganic growth, we have a strong office pipeline and a clear plan for infusing one to two assets per year into the REIT, and have plans to inject between 40,000 and 100,000-square meter of GLA to grow RCR’s portfolio.
To note, the proceeds from the offer will be received by RLC and reinvested according to the Reinvestment Plan detailed in our prospectus. But definitely, it will not be used to pay debt. Instead, it will be used to fund growth at the RLC level.