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Real estate investment trust (REIT) pioneer AREIT Inc. has diversified its leasing portfolio with the P5.1 billion acquisition of The 30th commercial hub in Pasig from its sponsor, Ayala Land Inc.
The acquisition of this shopping center along Meralco Avenue will allow AREIT to increase its total portfolio of assets from 170,000 to 246,000 square meters of gross leasing area, the company reported on Friday to the Philippine Stock Exchange.
El 30 is a commercial development that was completed in 2017 by Ayala Land, which owns 54 percent of AREIT. The office building is predominantly fully occupied by business process outsourcing companies.
The agreement was signed just as the Philippines began to relax some of the lockdown protocols that have been in place since mid-March to prevent the spread of COVID-19.
The 30 includes a retail services podium, which will be operated and leased by AREIT’s Ayala Land. The transaction has been approved by AREIT’s board of directors with the support of a committee in charge of reviewing related party transactions.
The P5.1 billion consideration gives AREIT control of 76,000 square feet of leasable space, full ownership of the building and lease over the land on which The 30th was located.
Simultaneously with the acquisition of the building, Ayala Land will assign the long-term land lease to AREIT, which in turn will lease office space to tenants, and the commercial podium to Ayala Land under a fixed lease as the operator of the commercial spaces .
According to the disclosure, the acquisition will be financed through debt. AREIT currently has no debt, allowing you to acquire assets that will boost your performance even if financed with loans.
“This demonstrates AREIT’s ability to grow its portfolio and add value to its shareholders, while its sponsor, Ayala Land, Inc. can recycle capital for its real estate projects in the Philippines,” the disclosure says.
AREIT also obtained board approval for a debt portfolio in the amount of P18.4 billion. Of these, P6.4 billion will be raised through a 10-year retail bond offering, preferred stock or bilateral loans. Another P12 billion will be raised through credit facilities with banks.
REIT or real estate investment trust is a corporation that invests in income-generating real estate such as offices, shopping malls, service departments, hotels, hospitals, and warehouses. It gives investors the opportunity to invest directly in the finished projects rather than the developer itself. This is intended to attract investors seeking dividends because the REIT requires the distribution of at least 90 percent of income as dividends annually. —DORIS DUMLAO-ABADILLA
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