Modest growth seen for RL Commercial REIT

RL Commercial REIT Inc. (RCR), the real estate investment trust (REIT) unit of Robinsons Land Corp. (RLC), will likely deliver modest growth this year amid steady occupancy, Maybank Investment Banking Group said.

A sustained occupancy rate of at least 94 percent and annual rental rate escalations of as low as 3.0 percent will likely help RCR deliver 4.0 percent year-on-year growth in 2024, Maybank said in a report.

“We expect [the] overall occupancy rate and lease escalation rate to remain steady at 96 percent and 4.0 percent per annum, respectively. Revenue growth is likely to track the pace of rental rate escalation,” it added.

As of end-September 2023, the company saw occupancy drop to 94 percent from last year’s 98 percent, but a 4.0-percent rise in average rental rates resulted in a nine-month revenue gain of 2.0 percent.

Maybank said it was expecting RCR’s occupancy level to be maintained as “74 percent and 10 percent of its tenants are BPO (business process outsourcing) and traditional office occupants, respectively, and less than 20 percent of its leases are expiring in 2024.”

Another tailwind for the company will be the potential property infusions of RLC, with the sponsor having 1.6 million square meters (sqm) of gross leasable area (GLA) and around 741,000 sqm of office GLA as of September 2023.

A ramp-up in occupancy rate on the back of higher demand from BPOs, greater-than-expected lease escalation rates, and value-accretive acquisitions were seen driving RCR’s growth.

“Key risks, however, include lower-than-expected lease renewals and rental escalation amid a high office industry vacancy rate of 19 percent,” Maybank noted.

For the fiscal years 2023-2025, the company was projected to deliver a compound annual growth rate of 5.0 percent in distribution per unit, or the number of dividends that REIT investors get for each unit they own.

RCR’s share price declined by 3 centavos to P5.47 each last Friday.