Analysts expect higher AREIT yields

By Justine Irish D. Tabile

THE approved additional swap shares of AREIT, Inc. as well as higher interest rates are expected to improve its dividend yield, according to analysts.

“AREIT may be an appealing investment at this time because of its 97% recorded building occupancy rate, 98% rental collection rate, and leases that are contracted with an average lease expiration of close to 6 years, exhibiting higher tenancy all over its properties,” Timson Securities, Inc. Head of Online Trading Marc Kebinson L. Lood said in a Viber message.

AREIT’s income should be stable depending on its dividend yield which is expected to rise as interest rate rises, he added.

“Increases in interest rates may imply that the economy is strong and doing well, and thus companies are profiting and paying sizable dividends, particularly for AREIT, whose tenants are mostly business process outsourcing (BPOs).”

He added “that AREIT would benefit from a stronger dollar as a result of interest rate hikes in the United States.”

Yields represent the return in dividends for the company’s shareholders, whereas dividends refer to the portion of a company’s quarterly profit allocated to investors.

Yields are expected to rise as the price of AREIT shares are expected to be lowered in the market as an effect of rising rates, according to an analyst.

“Investing in AREIT is a hybrid of fixed income and equity; one can expect regularity in dividends mandated by law, as well as capital appreciation driven by AREIT’s organic and inorganic growth,” Mr. Lood said.

Regina Capital Development Corp. Head of Sales Luis A. Limlingan said that shareholders of AREIT may look “forward to sustained dividend declaration against a volatile global equities market.”

“The share-swap deal with Ayala Land will greatly improve AREIT’s GLA (gross leasing area) by a little more than half a million square meters (sq.m.), giving the company a rather attractive AUM (assets under management) of around P60 billion,” Mr. Limlingan added.

AREIT disclosed on Friday that the Philippine Stock Exchange approved its application to list an additional 483.24 million common shares to cover the company’s property-for-share swap transaction with Ayala Land, Inc. (ALI).

The transaction will infuse three Vertis North Commercial Development office buildings and a retail podium situated in Quezon City.

One and Two Evotech buildings in Nuvali Santa Rosa, Laguna and Negros Occidental’s Bacolod Capitol Corporate Center and Ayala Northpoint Technohub will also be infused.

The approved listing would also infuse office condominium units at BPI-Philam Life buildings in Makati Central Business District and Madrigal Business Park in Alabang.

AREIT’s GLA will then expand to 549,000 sq.m. and its AUM to P53 billion.

The swap shares were listed with the PSE on Thursday and are subject to a lock-up period of 180 days with BPI Securities Corp. as escrow agent.

Year on year, the property-for-share swap increased AREIT’s dividend per share by 13% in the first half.

“The importance of REITs listing in a company is that the capital raised will be used to acquire more properties for higher dividends, which is something that investors seek and an excellent addition to an investment portfolio,” Mr. Lood said.

On Friday, AREIT closed 0.39% lower at P38.75 apiece, while its sponsor ALI closed unchanged at P27.80 apiece.