First Real Estate Investment Trust listing amid COVID-19 pandemic shows Philippine market ready to resume business

The Philippines’ first Real Estate Investment Trust (REIT) listing done by the Ayala-backed AREIT Inc. signals that the domestic market is ready to resume business amid the challenges arising from the coronavirus-induced global health and economic crisis said Finance Secretary Carlos Dominguez III on Thursday, August 13.

Secretary Dominguez said the country’s first REIT will deliver to the economy a “powerful financial concept” that aims to promote greater inclusiveness in the financial system among Filipinos as it will democratize wealth by opening for thousands of small investors the opportunity to invest in secure and profitable real estate projects.

“This public offering is a strong vote of confidence in our good economic prospects and in the resiliency of many of our industry sectors, some of which will be occupants of Ayala Land Inc. (ALI)’s REIT properties,” said Dominguez in his videotaped message congratulating ALI on the success of its initial public offering (IPO) and listing of its REIT at the Philippine Stock Exchange (PSE) this morning.

“It shares in the optimism that, notwithstanding the global economic downturn today, the Philippine economy has strong fundamentals to rise quickly from the devastation brought about by the global health emergency,” he added.

Dominguez said he is optimistic that AREIT’s public offering and listing will encourage more companies to form REITs that would “provide attractive and dependable investment opportunities for the average Filipino.”

On top of being a secure investment vehicle for small investors, REITs also provide multiplier effects on the economy, considering that the capital and profits to be raised by REIT sponsors will be reinvested exclusively in the domestic real estate and infrastructure sectors, Dominguez noted.

“A REIT public offering not only signals that there is strong confidence in existing real properties, but that the company sees new opportunities for expansion with the proceeds of the offering,” said Dominguez, who had strongly pushed the implementation of the 11-year old Republic Act (RA) No. 9856 or the REIT Law ever since he assumed the finance portfolio in 2016.

In bringing the long-dormant REIT law back to life, Dominguez made sure that the review and redrafting of its implementing rules and regulations (IRR) would guarantee that any profit earned or capital raised by REIT promoters or sponsors would be reinvested in the domestic economy, rather than squirreled away overseas.

“This ensures that the funds invested by Filipinos will stay in our domestic economy and will contribute to the modernization of our infrastructure,” Dominguez said. 

The REIT law, with its amended IRR, now allows both small and large investors to own real estate assets, presenting an alternative and secure investment instrument for middle-income families and overseas Filipino workers (OFWs), while providing real estate companies a cheaper source of capital as they help develop the Philippine capital market.

“Today is a momentous event. More than a decade since the enactment of the REIT Law or the Real Estate Investment Trust Act, we will witness the Philippines’ first REIT listing through Ayala Land’s public offering,” Dominguez said.

Securities and Exchange Commission (SEC) Chairman Emilio Aquino and PSE President Ramon Monzon were among those present at the event marking AREIT’s listing in the local bourse. ALI Chairman Fernando Zobel de Ayala joined them via Zoom.

Dominguez pointed out that it was under the administration of President Duterte when contentious issues that for years had prevented REITs in the country from taking off were finally resolved.

‘We took on the challenge of crafting a regulatory framework for this financial instrument that is right for the country,” he said.  “Ayala Land’s REIT public offering is timely. It signals that our market is ready to resume business after all the difficulties posed by the COVID-19 pandemic.”

AREIT’s public offering is “very encouraging,” especially at this time when the government is preparing the economy to recover from the pandemic, Dominguez said.

“REITs will help boost our ‘Build, Build, Build’ program, given the wide range of real estate property assets it can own. Infrastructure investments will primarily fuel our bounce back plan. With their high multiplier effect, these investments will stimulate demand and create much-needed new jobs and businesses,” he added.

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