AREIT Inc. is broadening its retail and hospitality exposure through a P17.3-billion property infusion from Ayala Land Inc. (ALI), a move expected to diversify its income base and create additional room for dividend growth.
Shareholders approved the acquisition of four malls and two hotels on September 23, subject to regulatory approval. The transaction will lift AREIT’s assets under management (AUM) to P177 billion from P159 billion.
Following the infusion, retail and hospitality will account for a combined 41 percent of AREIT’s portfolio, marking their largest share to date and reducing the company’s concentration in offices.
Offices will represent 55 percent of post-transaction AUM, while retail will account for 33 percent, hotels eight percent and land four percent.
The transaction also introduces lease structures that give AREIT greater exposure to property performance. The malls will operate under direct leases, while the New World Makati Hotel and Seda Vertis North will use hybrid master leases that combine fixed rental income with revenue-linked payments.
“This gives AREIT additional avenues for sustainable growth while strengthening the quality and recurring income base of the portfolio,” AREIT President and CEO Alberto de Larrazabal said.
The properties being infused are Glorietta 4, Ayala Malls Capitol Central, Circuit and Cloverleaf, as well as the two hotels.
In exchange, ALI and its subsidiaries will receive 462.48 million AREIT shares priced at P37.48 each.
The enlarged portfolio is expected to raise distributable income and support dividend growth, although the issuance will also expand AREIT’s equity base. Income from the acquired assets will begin accruing once the Securities and Exchange Commission approves the transaction.
