Do you want to become a part-owner of Ayala North Exchange?

August 02, 2020

DO you know that for as low as  the price of a second-hand cellphone you can  now own a piece of three “Class A” buildings in Makati’s business district?  I am not kidding. And these buildings are Ayala North Exchange, where Bank of the Philippine Islands is temporarily headquartered, the McKinley Exchange and Solaris One Building.

Ayala North Exchange is located at the north end of Ayala Avenue. It is a two-tower office facility with a combined gross leasable area of approximately 56,000 square meters. These office towers are specially designed for both multi-national and business process outsourcing companies.  Aside from a retail podium, it also features a  312-room Seda Hotel.

The McKinley Exchange Corporate Center is an office building at the corner of EDSA and McKinley Road in Makati City. This office development is built to fit the unique 24/7 requirements of IT and business process outsourcing firms with an approximate gross leasable area of 11,000 square meters.

Solaris One is a 24-storey Class A building  built on over 3,000 sq. m. of prime property along Dela Rosa Street in the Makati CBD. The building is BPO-ready and  offers large, efficient floor plates approximately 2,800 sq. m per floor.

Part ownership of these buildings  will now  be possible because of Ayala Land Real Estate Investment Trust or AREIT which is going public  this Friday.  Just to refresh: A real estate investment trust (REIT) is a company that owns, and in most cases operates, income-producing real estate. 

AREIT is the very first of its kind in the Philippines  to be greenlighted by the Securities and Exchange Commission under the REIT Act. AREIT proposes to make an  initial public offering of 1.092 billion common shares at a maximum price of P30.05 each on the main board of the Philippine Stock Exchange (PSE). The IPO expects to  raise up to P1.4 billion for AREIT, which will help the company fund the acquisition of  a fourth asset, Teleperformance Cebu. Reinvestment of the proceeds of the IPO in another property is mandated by the REIT Law.   According to my broker, BPI Securities, their minimum selling lot is only 100 shares, or roughly P3,000, arguably  a most affordable way to own income-generating assets such as apartments, offices, malls, warehouses and hotels.

BPI Capital Corp., headed by Ms. Rhoda Huang,  will serve as the global coordinator for the share sale. BPI CAP  will also be the sale’s bookrunner, together with UBS AG Singapore, and lead underwriter, along with PNB Capital and Investment Corp. and SB Capital Investment Corp.

Why would I want to buy AREIT shares? First, I want to be able to tell my daughter Frannie that I will now become a co-owner of Ayala North Exchange, where I attend my board meetings. Second, it is a great investment. Given  the fact that  Philippine 10-year yields now are at 2.81 percent, AREIT provides  a superior instrument that offers 4.9 percent this year and with the possibility of another 1 percent increase next year. The business model is extremely sound. It is basically a leasing company with one of the best property managers in the country. You have secure cash flows, very good dividend yields. Note that despite the COVID-19 pandemic, the demand for office space from BPOs remains resilient as foreign companies based in developed countries continue to outsource their operations to reduce labor cost. AREIT  is good for long term investors willing to participate in a very secure portion of the property market.

A word of caution, however, from my investment counselor Carlos Jalandoni of BPI Asset Management and Trust Corporation (BPI AMTC).  Mr. Jalandoni is just a little concerned about the timing. This is equity, not a bond, he says. It does not behave like a preferred share. It is subject to the volatility of the market.  And precisely, because of the volatility, Mr. Jalandoni  suggests that an investor cost average rather than go all-in at once.

(Disclosure: The writer sits as an Independent Director in the boards of BPI, BPI AMTC and BPI Capital.)
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