A Step-by-Step Guide in Investing in REITs

Last Updated on May 26, 2022 by Lamudi

Since its debut in the market in 2020, property experts have been firm in saying it’s right to invest in REITs. Real estate investment trusts are companies that own and operate properties for the purpose of generating income. The assets cover a wide range of niches, from office spaces, shopping malls, and apartments to hotels, warehouses, and even data centers.

This variety of assets points to one of the competitive advantages of REITs that seasoned investors love: diversification. Some companies already have different kinds of properties in their portfolio. For instance, the Ayala-sponsored AREIT, the first REIT to be introduced in the market, holds some office buildings, an industrial park, and a shopping center. By investing in AREIT, you can easily diversify your asset portfolio.

More than the diversification potential, the gains in the investment are, of course, the main attractive feature of REITs. You don’t need huge capital to start investing in this asset. But the yield can be promising, which comes from the dividends supplied by the rental income from the properties under the REIT. Take note that these are recurring gains, precisely because they come from rentals. To put it simply, it’s a high-yield, stable investment.

Given all these financial perks, the question stands: how exactly do you start investing in REITs? These simple steps below should guide you in your debut as a REIT investor:

Step 1: Open a Trading Account

Different financial institutions in the country have trading platforms. Below are some of the brokers recognized by the Philippine Stock Exchange, which have online channels. You can select based on the minimum deposit you prefer. 

Step 2: Sign up for a PSE EASy Account

When you’re investing in the REIT market, you must have a PSE EASy account, since this is where you can subscribe to an IPO. This account can be linked to your chosen trading platform. It’s available on desktop and mobile via the app from the Apple Store and Google Play Store. It’s ideal to have the mobile app, so you can easily access your account anywhere.

Registration is easy. You simply have to fill out the online form and choose a broker as your trading participant. PSE EASy will send a link to the email address you provided for the verification of the account.

Step 3: Create a Name-on-Central Depository (NoCD) Account

The NoCD is a requirement when investing in REITs. With this account, you’re giving the trading platform permission to gather, process, and share personal information, such as name, mailing address, date of birth, and email address, among others.

The authorization is pretty straightforward since you only have to log into your trading account and click on the link that asks for your authorization.

Step 4: Subscribe to REIT IPO

Once you’re logged into the PSE EASy (PSE Electronic Allocation System) account, you can now see the available REIT IPO from the dashboard. But if you have a preferred REIT, you can search for it on the platform.

Before you hit Subscribe, pay attention to these factors:

Quality of properties

The income generated from the real estate assets translates to the cash dividends you get. Ask yourself these questions:

• Are the properties well-built and well-maintained?
• How susceptible are they to damages from natural disasters?
• Do they have PEZA (Philippine Economic Zone Authority (Peza) accreditations?
• Are they compliant with green building regulations?
• Where is the property located?
• Are there employment opportunities around the vicinity?
• What are the infrastructure projects and future developments near the property?

These questions should give you an idea about the quality of the REIT assets, as well as their potential growth.

Types of properties

REITs come in different niches. It’s safer to invest in growing industries. Currently, industrial properties are booming, driven by the popularity of e-commerce. Office REITs are likely to recover from the pandemic in the next months, as vaccination ramps up and employees return to the workplace. 

While keeping an eye on growing industries, do consider the risks. For instance, under the office REITs, there’s a possibility of higher vacancy rates for properties serving POGO (Philippine offshore gaming operators) tenants given the legal reforms unfolding in the industry.

Financial performance

Look at the REIT’s dividend history. Aside from an excellent track record of paying dividends, you should also look at how the dividends are growing over time, particularly if they can weather inflation. 

As with other investments, it’s important to look at the financials of the REIT company. Consider the funds from operations, the cash flow of the company. FFO is calculated by adding depreciation and amortization to the earnings and then subtracting any gains on sales of assets.

Profile of tenants

By investing in REIT assets that lease to reputable tenants, you can expect stable cash flows and excellent growth in the future. For this reason, seasoned investors also inspect the tenants of the properties owned by REITs. Usually, they go for those that have long-term lease agreements with multinational brands. 

Profile of the sponsor

The sponsor of REIT matters, especially its property portfolio, because it can supply more assets to beef up the investments under the REIT company. A REIT sponsored by a property giant with a huge portfolio of different rental properties will have a competitive edge in boosting profits, dividends, and asset base. 

Once you’re settled with a particular REIT, enter the number of shares you want to purchase, then hit the Subscribe button. 

Step 5: Pay for the shares

After clicking the Subscribe button, you’ll receive an email summarizing your IPO subscription and payment instructions. You can pay through bank transfer or deposit. Once the payment goes through, the shares will be credited to your trading account.

REIT Options in the Philippines

As of writing, these are the REITs available in the market and their corresponding sponsors:

AREIT by Ayala Land

This is the first REIT to be introduced in the market. It debuted in August 2020, with a 12 billion initial public offering (IPO). The company holds different kinds of properties, including: 

• Solaris One in Legaspi Village, Makati City (office)
• Ayala North Exchange in Legaspi Village, Makati City (office)
• McKinley Exchange along McKinley Road in Makati (office)
• Teleperformance Cebu in Cebu IT Park, Cebu City (office)
• A lot in the Laguna Technopark in Biñan, Laguna (industrial)
• The 30th Mall along Meralco Avenue, Pasig City (retail)
• Vertis North in North Triangle, Quezon City (mixed-use estate)
• One and Two Evotech in Sta. Rosa, Laguna (office)
• Bacolod Capitol Corporate Center in Bacolod, Negros Occidental (office)
• Ayala Northpoint Technohub in Talisay, Negros Occidental (office)
• Office-condominium units at BPI-Philam Life in Makati
• Office-condominium units at Madrigal Business Park in Alabang
• eBloc Towers 1 to 4 in Cebu IT Park
• Ayala Center Cebu Tower in Cebu Business Park
• Tech Tower in Cebu Business Park

DDMP REIT by Double Dragon Properties

This is the first REIT to be introduced in 2021, following AREIT. With a P14.7 billion maiden offering, the company features office towers that have retail components, as well as a luxury serviced residential building. The properties occupy a mixed-use estate built by Double Dragon Properties, DD Meridian Park, located in Bay Area, Pasay. Below are the assets of the company:

• DoubleDragon Plaza (office)
• DoubleDragon Center East (office)
• DoubleDragon Center West (office)
• DoubleDragon Tower (office)
• Ascott-DD Meridian Park (luxury serviced residences)

FILREIT by Filinvest Land

Introduced in August 2021, the Filinvest-backed REIT had a P12.6-billion initial public offering. Its portfolio consists of 17 modern, grade-A office buildings serving multinational business process outsourcing (BPO) firms. The 16 properties are located in Northgate Cyberzone, Alabang, namely:

• 5132
• Axis Tower 1
• Capital One
• Filinvest One
• Filinvest Two
• Filinvest Three
• iHub 1
• iHub 2
• Plaza A
• Plaza B
• Plaza C
• Plaza D
• Plaza E
• Vector One
• Vector Two
• Vector Three

Meanwhile, at Filinvest Cyberzone Cebu, FILREIT owns Cebu Tower 1, another grade-A office building, which is also PEZA-accredited.

RCR by Robinsons Land

RLC Commercial REIT, backed by property giant Robinsons Land Corporation, had an initial public offering (IPO) of P23.5 billion. It was introduced in September 2021, featuring a portfolio of properties located in important business districts in the country. Here are the real estate assets under RCR:

• Exxa Tower in Libis, Quezon City 
• Cybergate Naga in Naga, Camarines Sur
• Cybergate Delta along J.P. Laurel Avenue, Davao City
• Robinsons Summit Center along Ayala Avenue, Makati City
• Robinsons Luisita Office in San Miguel, Tarlac
• Robinsons Equitable Tower in Ortigas Center, Pasig City
• Cyber Sigma in Fort Bonifacio, Taguig City
• Robinsons Galleria Cebu Office along General Maxilom Avenue, Cebu City
• Tera Tower in Bridgetowne, Quezon City
• Robinsons Cybergate Cebu in Capitol Site, Cebu City
• Cyberscape Beta in Ortigas Center, Pasig City
• Cyberscape Alpha in Ortigas Center, Pasig City
• Zeta Tower in Bridgetowne, Quezon City
• Robinsons Cybergate Center 2 along Pioneer Street, Mandaluyong City
• Robinsons Cybergate Center 3 along Pioneer Street, Mandaluyong City
• Robinsons Cyberscape Gamma along Topaz and Ruby Roads, Pasig City
• Robinsons Cybergate Bacolod in Singcang, Bacolod

MREIT by Megaworld

Launched in October 2021, the Megaworld-sponsored REIT had an initial public offering of P14.7 billion. The company holds various office buildings in its portfolio, along with a hotel, all located in prime townships Megaworld built.

Here are the real estate assets:

In Eastwood, Quezon City:

• 1800 Eastwood Avenue 
• 1880 Eastwood Avenue 
• E-Commerce Plaza

In McKinley Hill, Taguig:

• 8/10 Upper McKinley 18/20 
• Upper McKinley 
• One World Square 
• Two World Square 
• Three World Square

In Iloilo Business Park, Iloilo City:

• One Techno Place
• Two Techno Place
• Three Techno Place
• One Global Center
• Richmonde Hotel
• Richmonde Tower

CREIT by Citicore Energy

The country’s first renewable energy real estate investment trust company debuted in February 2022. Its goal is to offer shareholders a sustainable investment platform with a renewable energy asset portfolio. CREIT raised a total of P6.4 billion through its initial public offering. 

Below are the real estate assets of the company, situated in key growth areas in the Philippines:

• Clark Solar Plant in Pampanga 
• Citicore Solar Cebu in Toledo
• Citicore Solar Negros Occidental in Silay
• Citicore Solar Bataan in Freeport Area
• Citicore Solar Bulacan in San Ildefonso 
• Citicore Solar Tarlac in Armenia 
• Citicore Solar Tarlac 2 in Armenia

VistaREIT by Vista Land

This REIT company’s initial public offering secured the approval of Securities and Exchange Commission in May 2022. It offered up to 3.3 billion common shares at a price of up to P2.50 apiece. It has an overallotment option of up to 333 million common shares. With the full exercise of the overallotment, VistaREIT nets PHP8.79 billion from the offer.

The REIT company’s portfolio is composed of these office and retail properties:

• All Home in Pamplona Dos, Las Piñas
• Starmall Las Piñas Annex in Pamplona Tres
• Starmall San Jose del Monte in Bulacan
• Vista Mall Pampanga in San Fernando 
• SOMO – A Vista Mall in Bacoor, Cavite
• Vista Mall Antipolo in Rizal
• Vista Mall General Trias along Arnaldo Highway
• Vista Mall Tanza along Tanza-Trece Road 
• Starmall Talisay Cebu in Lawanan 1
• Vista Mall Imus along Emilio Aguinaldo Highway 
• Vista Hub Molino in Bacoor, Cavite
• Vista Hub BGC in The Fort, Taguig

REITs are an excellent investment vehicle, as long as you do a thorough research on the companies you’re eyeing. Keep abreast with what’s happening in the real estate industry to plan your next investments. Equipped with industry knowledge, you’re a few steps closer to growing your money and building wealth.

Stay tuned for the latest real estate news and tips by following Lamudi on Facebook, Twitter, Instagram, Youtube, and LinkedIn.

Photo via DepositPhotos

Sources:

• https://www.bdo.com.ph/securities/home/reit-investing
• https://www.bpitrade.com/PDF/FATCA/faqs.pdf
• https://www.colfinancial.com/ape/final2/home/account_type_details.html
• https://www.firstmetrosec.com.ph/fmsec/7-Account%20Opening%20FAQs
• https://globalinks.com.ph/Faqs
• https://www.areit.com.ph/
• https://business.inquirer.net/315301/ayala-lands-areit-ventures-into-industrial-space-leasing
• https://business.inquirer.net/324625/areit-expands-property-portfolio-after-swap-deal-with-ali
• https://www.ddmpreit.com/company/business.php
• https://www.filinvestreit.com/projects/northgate-cyberzone
• https://www.filinvestreit.com/projects/filinvest-cyberzone-cebu
• https://www.rlcommercialreit.com.ph/the-portfolio