The Gotianun Group is transferring ownership of its flagship Festival Mall-Main Mall in Filinvest City, Alabang, Muntinlupa City to Filinvest REIT Corporation (FILRT) in a P6.26 billion deal that marks the real estate investment trust’s entry into the retail leasing business.
In a disclosure to the Philippine Stock Exchange (PSE), Filinvest Land Inc. (FLI) said it is selling the 26-year-old Festival Mall to FILRT in exchange for 1.63 billion FILRT shares at an issue price of P3.85 per share under a tax-free property-for-share swap transaction.
"The transaction fulfills FLI’s commitment as the sponsor of FILRT to continually support the growth and expansion of its REIT portfolio through the infusion of high-quality income-generating real estate assets," FLI said.
It added that, upon the Securities and Exchange Commission’s (SEC) approval of the transaction, FLI and FILRT shall execute a lease agreement for the building.
In a separate disclosure, FILRT said the issue price represents a 30 percent premium over the 30-day volume weighted average price of P2.94 per FILRT share, and falls within the fair value price range provided by FTI Consulting’s Fairness Opinion and LeeChiu Property Consultants Inc.’s Valuation Report.
The property was appraised by Leechiu Property Consultants, and a fairness opinion was provided by FTI Consulting. A discounted cash flow (DCF) approach was used as the primary method to determine the value of the property.
Under the DCF approach, the future cash flows of the property were discounted using a weighted average cost of capital (WACC) based on a capital asset pricing model. A direct capitalization approach was also used as a secondary reference for the valuation of the property.
For the valuation of the shares, FTI Consulting used various methodologies such as the DCF approach, a dividend discount model, and a comparable public companies’ method, to arrive at a range of values for the fair value of FILRT shares.
The primary common shares to be issued by FILRT to FLI will come from the unissued common shares of FILRT. This will be subject to the approval by FILRT’s shareholders and regulatory approvals.
Upon the SEC’s approval of the transaction, FLI and FILRT shall execute a lease agreement for the property.
“Pursuant to the approval of the transaction, the Board approved the conduct of a special stockholders’ meeting (SSM) to be held on March 4, at 10:00 AM. The record date for the determination of stockholders entitled to notice and right to vote at the SSM is February 10, 2025,” the firm said.
FILRT’s diversification into mall leasing comes after its expansion into the hospitality space with the acquisition of 2.9 hectares of land owned by Filinvest Development Corporation (FDC) in Boracay Island for P1.05 billion in cash.
The land is being leased by Boracay Seascapes Inc. (BSI), the building owner of Crimson Resort & Spa Boracay and a subsidiary of FDC.
FILRT President and CEO Maricel Brion-Lirio said this is the company’s first asset infusion since its initial public offering and “not only increases the distributable income to our shareholders in the immediate term but also supports our goal of delivering stable dividends and increasing the potential for capital appreciation in the longer term.”
Brion-Lirio said in November of last year that Filinvest REIT aims to double its portfolio over the next three years through asset infusions from the Filinvest Group as well as through acquisitions.
“These are Grade A office buildings, retail assets under the Filinvest malls and township portfolio, and hotels under the Crimson and West brands in key tourist destinations of the country. We are also open to infusions of commercial assets from third parties outside of the Filinvest Group, granted they pass assessment and investment criteria,” she said.