SM Prime Considers REIT Approach

Property giant and shopping mall operator SM Prime Holdings, Inc. bared plans to set up its own real estate investment trust (REIT). However, with the pandemic still in the background, the company was pushed to rethink its strategies. 

Nearly a year ago, the company said that it hoped to launch the biggest REIT offering in the country that amounts to $1 billion, as per Inquirer. This would allow the property developer to further expand its empire by recycling capital from its mature properties.

Chief Finance Officer John Nai Peng C. Ong said in a BusinessWorld report that the company has been working on its REIT approach for quite some time. But it’s still in the process of “firming up” the structure.

Exploring REIT Options

Ong also mentioned that the company is considering injecting office properties or even retail spaces into its REITs. Meanwhile, company president Jeffrey Lim said that SM Prime is planning to have an office REIT initial public offering. 

Lim added that given the current situation, they would be working on the office REIT first, then the retail spaces may come in later. The company may not inject malls into its REITs at this time, seeing that pre-pandemic foot traffic in shopping centers is still not back. There’s also a possibility that weekend mall traffic will change instantly if stronger restrictions are imposed due to a surge in COVID-19 cases. 

Nevertheless, SM Prime remains optimistic about its figures for 2022. Some of its largest spaces have been converted to vaccination sites or government-run satellite sites for passport and national ID applications.

Growing Market Demand

As the Philippines continues to see a healthy pipeline of REITs, support from investors also increased. Based on a global survey by the European Public Real Estate Association (EPRA), REITs accounted for O.96% of the Philippines’ gross domestic product (GDP) last year. As per Manila Bulletin, this placed the country among major economies in South and Asian regions, despite the REIT sector being less than two years old. 

According to the Securities and Exchange Communities (SEC), the total market capitalization of REITs has reached $3.46 billion. Based on the SEC data as of November 2021, some of the top REIT companies include Robinsons Land Commercial REIT (RCR), Megaworld REIT (MREIT), and DD Meridian Park REIT (DDMP REIT).

Under the REIT law, capital raised by companies should be reinvested in the country and used to develop domestic capital markets, finance infrastructure projects, and promote the participation of small investors in real estate investments. 

New Developments in REIT Sector

Earlier this May, SEC approved the initial public offerings of VistaREIT and Raslag Corporation. VistaREIT, sponsored by Villar-led companies, will offer up to 3,337,500,000 common shares priced up to P2.50 apiece, according to Philippine News Agency

Raslag Corp, on the other hand, will offer the public up to 350 million common shares priced up to P2 per share. Proceeds from the offering will be used to finance the company’s solar projects in Pampanga.

Raslag will join Citicore Energy REIT in the growing number of companies to get income from solar energy investments. This involvement with solar energy is also aligned with the country’s climate ambitions, which include accelerating the transition to clean energy. 

Meanwhile, MREIT has announced its acquisition of new prime office buildings within Philippine Economic Zone Authority (PEZA)-accredited zones. This move is part of the company’s P20-billion acquisition plan for 2022.

MREIT is one of the firms capitalizing on the expected demand for office space following the return-to-office order. Its strategy includes injecting high-quality office buildings into its REITS, hence the acquisition of new office towers in McKinley West Taguig and Iloilo Business Park. 

MREIT ended with a net income of P687.2 million for the first quarter of the year.

Sources: Inquirer, BusinessWorld, Manila Bulletin, Philippine News Agency 

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