DOUBLEDRAGON READIES P 17-B REIT OFFERING
Fresh from the successful initial public offering (IPO) of retailer Merrymart Consumer Corp., young tycoon Edgar Sia II is braving the stock market anew likely in October with what could be the country’s largest real estate investment trust (REIT) offering to date worth nearly P17 billion.
Sia-led Doubledragon Properties Corp. is set to infuse its single most valuable property portfolio—dd Meridian Park in Pasay City where the company’s headquarter office is—into a REIT with a basket of assets estimated at P50.89 billion, one third of which will be sold to the public.
This IPO intends to raise as much as P16.97 billion that the group can use to fund other local real estate projects this year. Although it is not the curtain-raiser for REIT as a new asset class in the Philippines as Ayala Land-sponsored AREIT Inc. is coming to market first, Sia’s proposed offering is bigger than AREIT’S maximum IPO size of P15.1 billion.
“Doubledragon’s plan is to conduct the first tranche of REIT listing this year that will consist of seven buildings all situated in DD Meridian Complex which are mainly offices. For next year, the plan is to create another REIT arm for the second REIT listing, which will be composed of a mixed asset basket of commercial, hospitality, office and warehouses,” Sia said.
The seven buildings at the corner of Edsa Extension and Diosdado Macapagal Boulevard to be folded into DDMP REIT have a total area of 248,349 square meters.
In a disclosure to the Philippine Stock Exchange (PSE) on Friday, Doubledragon estimated that proceeds from this REIT offering would be enough to construct about 450,000 sqm of building floor area, which will significantly increase the group’s leasable portfolio and recurring rental revenue.
Doubledragon is preparing to file its REIT listing application with the Securities and Exchange Commission and the PSE in August, with the aim to list DDMP REIT by October.
With the REIT listing, Doubledragon’s equity is seen to breach the P50-billion mark.
“Other than the safeguards already indicated in the REIT listing rules, REIT investors generally want five elements present: 1. Asset basket in a prime location that is seen to remain relevant in the next 30 to 50 years at least; 2. Reasonable yield above a bond coupon; 3. Good tenant mix; 4. Capable property management; and 5. Good pipeline of assets for future infusion. We believe all of these elements are present in Doubledragon’s leasable portfolio,” Sia said.
“The REIT valuation of $1 billion, we believe, is an attractive size that would appeal to a strong pool of both foreign and local REIT investors,” said Doubledragon chief investment officer Hannah Yulo-luccini.
“REITS are a good way to recycle capital for expansion of the company’s portfolio and raise equity to further boost its balance sheet. Since the offer will only cover 33.33 percent of the REIT basket, Doubledragon will retain majority of the REIT assets so it will remain consolidated in the company’s balance sheet,” Yulo-luccini added.
Doubledragon said two more buildings were planned to be infused into the DDMP REIT in two to three years. They are still currently under construction, also in the DD Meridian Park complex.
REIT is a company that primarily invests in income-generating real estate such as office spaces, shopping malls, service apartments, and even hotels, hospitals and warehouses. It gives investors an opportunity to invest directly in the finished projects rather than the developer itself. This was meant to attract dividend-seeking investors because the REIT law required the distribution of at least 90 percent of income as dividends annually.
The REIT Act, passed by Congress in 2009, allows REIT companies to list and trade its shares of stock, allowing developers to recycle capital for further property development and expansion initiatives.
DD Meridian Park Development Corp. is a joint venture partnership between DoubleDragon and the Yujuico family. The complex sits on a five-hectare prime commercial property at the Bay Area.