For many real estate investment trust (REIT) shareholders, the immediate appeal lies in the consistent and often growing dividend payouts. So, when a REIT announces an expansion – be it acquiring new properties or developing existing ones – the natural expectation is that this growth will translate directly into fatter dividend checks. However, to say it doesn’t really impact you at all for expansion to increase the revenues and profits of a REIT if the new shares issued to pay for that expansion don’t allow the dividend to increase highlights a crucial point: the relationship between expansion, new share issuance, and shareholder value is more nuanced than a simple dividend bump.
While a static or even declining dividend following an expansion funded by new share issuance can certainly be disheartening, the assertion that it doesn’t really impact you at all is an oversimplification. Neutral or non-accretive injections could help diversify a REIT’s portfolio or set a REIT up for future growth.
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In all but one of our Philippine REITS, the parent or sponsor companies are also publicly listed. It then begs the question of where best to invest, in the parent or the REIT?
We first need to be clear on what we are investing in. Let’s compare Ayala Land / Robinsons Land vs their children, AREIT and RCR. Investing in the REIT is ownership of income generating properties which includes offices, malls, land, hotels, warehouses etc. As an investor, you become a landlord and collect quarterly dividends as your share of the REIT’s rental income. By the law, REITs are required to distribute at least 90% of income to shareholders.
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In a move that signals a major strategic expansion for the country’s real estate investment trust sector, Ayala Land Inc. (ALI) has announced the infusion of two prime retail properties into its REIT, AREIT Inc., via a substantial P19.5-billion property-for-share swap.
The Assets at the Heart of the Deal
The massive share swap involves two of Ayala Land’s well-known mall properties:Ayala Center Cebu (Cebu City)
Ayala Malls Feliz (Pasig City)
In exchange for these high-value properties, AREIT will issue 444.131 million primary common shares to its parent company, ALI.
Why This is a Game-Changer for AREIT
The addition of these two dynamic retail destinations is set to revolutionize AREIT’s portfolio, driving significant growth and diversification:
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AUM Boost: The infusion will swell AREIT’s total assets under management (AUM) to an impressive P158 billion. -
The Philippine Real Estate Investment Trust (REIT) market has grown rapidly since the debut of AREIT Inc. in 2020. With eight REITs now listed, this investment vehicle—mandated to distribute at least 90% of its annual income as dividends—has become a cornerstone for investors seeking stable, income-generating assets. However, a significant portion of the current REIT roster is concentrated in commercial, office, and mall properties. This is about to change.
The SEC Steps In to Define “REIT-able”
To spur further listings and diversify the market, the Securities and Exchange Commission (SEC) is moving to officially define and expand the list of eligible “income-generating assets” that can be held by a REIT.
As SEC Chairman Francis Lim noted, the commission plans to “enumerate them in order to minimize issues.” This is a crucial clarification, as the current law broadly defines “Income-generating real estate” to include properties held for generating income like rentals, toll fees, and user’s fees. By explicitly listing assets, the SEC is opening the door for a wave of non-traditional REITs.
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Diversification is the Name of the Game
While the initial success of office and commercial REITs has been excellent, a market concentration in a single sector, even one as strong as real estate, poses risks. Investors need different asset classes to hedge against sector-specific downturns, such as the volatility seen in the office segment following the shift to remote work. -
The proposed “Keep Call Centers in America Act” is a U.S. Senate bill that poses a significant risk to the Philippines’ booming business process outsourcing (BPO) industry. This legislation aims to reverse the trend of offshoring call center jobs by imposing penalties on companies that move operations overseas. If passed, this act could have a ripple effect on the Philippine economy, particularly on its BPO sector and the real estate market.
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The Act’s Provisions and Their Implications
The core of the “Keep Call Centers in America Act” is to discourage offshoring by making it less economically attractive. Key provisions include:
Public Offshoring List: The bill requires the U.S. Department of Labor (DOL) to create and maintain a public list of employers that have relocated call center work overseas. This public disclosure could lead to reputational damage for companies.
Loss of Federal Benefits: Businesses on this list would become ineligible for new federal grants, loans, and certain contracts. This is a major disincentive, especially for companies with significant government business.
