Ayala submitted the filing for AReit after a change in January to the regulations governing Reits. The Philippine government sweetened the rules by lowering the required public float and by offering tax perks.
AReit will offer up to 478.6m units — 430.8m secondary and the rest primary — in the IPO at a price of up to Ps30.05, which would give the deal a size of Ps14.4bn ($283.1m). The base offer of AReit’s IPO will equal 49% of its enlarged equity capital. The deal also includes an over-allotment option of 23.9m units.
The maximum offer price is just a placeholder, meaning it is not uncommon for an issuer to cut the price for the IPO. BPI Capital is the issue manager, bookrunner and lead underwriter of the deal.
AReit owns three office buildings in Makati Central Business District in Manila. Parent and manager Ayala Land will use the proceeds to expand its property portfolio with acquisitions in Manila and other areas of the country.
As of the filing on Friday, Philippine conglomerate Ayala Corp held 44.47% of Ayala Land’s stock, while public investors held the rest, including 23% by foreign owners.
The Reit’s units will trade on the Philippine Stock Exchange.
Reit growth
“Through this initial capital market transaction, [Ayala Land] hopes to pave the way for the development of a Reit market in the country,” the issuer said in a statement.
The Philippines’ Reit framework was launched in 2009. But the asset class has failed to gain support among property companies due to high public ownership requirements and transaction taxes.
Some relief came on January 20, when the regulator said that a Reit’s public float must be at least one-third of its outstanding capital within three years of listing, compared to the previous 67% requirement. The float must comprise 1,000 public shareholders holding at least 50 shares each.
Reits will also be exempt from the 12% value added tax when a transfer of property is made to the trust in exchange for its shares, as long as the party transferring the property acquires 51% of the Reit’s voting capital as a result of the exchange.
The Philippines tax bureau has also removed the requirement that Reits place in escrow the income tax collectible on a dividend that it has declared and deducted from its taxable income.
That's not all. Reits will no longer have to pay the 50% documentary stamp tax which, according to the updated rules, was removed as an “incentive on the transfer of real property to [Reits], in light of the reduced minimum public ownership requirement and in the spirit of ease of doing business”.