I encourage anyone interested in CREIT to watch the video above and I’ll highlight the interesting points below.

It is good for investors to have more options and CREIT allows us to diversify away from traditional office REITs. It is unique among the crop of REITs because it’s essentially a renewable energy REIT and CREIT actually captures around 95% of the power generation income of the solar power plants. Oliver explained why there had to be a Power Co. – REIT Co. lease structure and why not just capture the power generation income directly. It boiled down to the REIT Law limiting the definition of income to “rental income” so they needed to be creative. The way the lease is structured is that there is a guaranteed base rent plus a variable rate rent applicable when the tenant earns more.

Knowing that, we need to understand Citicore Renewable Energy Corp. which is CREIT’s sponsor and tenant. It has been in the solar plant business for 6 years and is vertically integrated: design-develop-build-operate and maintain. The outlook for renewable energy is bright. It currently only serves around 20% of the Philippines’ energy needs and there is a strong government push to bring that up to around 50%. It produces electricity, something that we cannot live without. Oliver pointed out that if the power plant had no offtaker, it can then sell electricity to the wholesale electricity spot market (WESM), where renewables have priority (by government mandate).

The host, Marvin, rightfully pointed out that the key risk for Citicore is really execution. It currently has 163 megawatts; 200 megawatts in advanced development and more than a 1000 megawatts in the pipeline. If it can successfully use debt and equity to ramp up capacity while delivering a growing stream of quarterly dividends, then CREIT investors win. It has an estimated dividend yield of 7.27% for 2022 and 7.73% for 2023.