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REIT firms’ portfolios outdo ‘market jitters’ — Leechiu Property

LEECHIU Property Consultants (LPC) said the portfolios of the listed real estate investment trust (REIT) companies are “resilient,” all with an occupancy rate of 90% or higher, as Information Technology and Business Process Management (IT-BPM) firms continue to take up office spaces.

“It is to the credit of the REIT sponsors that they put together resilient IT-BPM heavy office portfolios that squarely addressed market jitters,” LPC Director of Research and Consultancy Roy Amado Golez said in a statement on Wednesday.

LPC said IT-BPM firms still took up office spaces even amid the pandemic as companies in recovering economies in the West still outsource jobs in the Philippines and in India. It noted that 129,000 square meters (sq.m.) of office requirements out of 228 sq.m. will be closed in the next six months.

Meanwhile, contractions and lease terminations declined 69% to 42,000 sq.m. in the third quarter this year from 253,000 sq.m. logged in the fourth quarter last year.

“Our numbers indicate that IT-BPMs continue to be expanding in the Philippines, although at a slower rate than in 2019 and earlier. Some observers contend that more contractions will drive down REIT prices, but that is not supported by the data we have presented,” said Mikail C. Barranda, director for commercial leasing at LPC.

As of Nov. 12, LPC noted the 67% price appreciation since Ayala’s AREIT, Inc. listed at the exchange last year.

This was followed by a string of REIT offerings by developers this year, namely: DoubleDragon Properties Corp.’s DDMP REIT, Inc. (DDMPR), Filinvest Land, Inc.’s Filinvest REIT Corp. (FILREIT), Robinsons Land, Corp.’s RL Commercial REIT, Inc. (RCR), and MREIT, Inc. of Megaworld Corp.

“Top REIT portfolios,” RCR and MREIT, have posted stock price appreciations of 11% and 12%, respectively.

LPC also noted that the top portfolios’ gross leasable areas are 100% accredited by the Philippine Economic Zone Authority (PEZA). Mr. Barranda said that since PEZA-accredited spaces are limited until 2025, these “will remain highly viable for the next few years.”

The weighted average leasing expiry of the portfolios are said to range from 3.9 years to 5.8 years, which also include annual escalation clauses in their contracts.

LPC noted that REITs have a combined market capitalization of P260 billion, with approximately 80% of the REIT assets located in the central business districts.

LPC said, “this is an opportune time to build a REIT investment base before post-COVID-19 (coronavirus disease 2019) recovery speeds up capital value appreciation once again,” pointing to the “hypergrowth” seen after the global financial crisis in 2008. — Keren Concepcion G. Valmonte

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