Agribusiness firm Calata moves to set up REIT

PROSPECTS for real estate investment trusts (REIT) to kickstart in the Philippines got a boost yesterday, with Calata Corp. taking a concrete step to eventually launch such a stock corporation in partnership with foreign casino investors.

In a disclosure to the Philippine Stock Exchange on Tuesday, the agribusiness firm announced its partnership with Sino-America Gaming Investment Group, LLC and Macau Resources Group Ltd. for the creation of a corporate vehicle that will eventually list on the bourse as a REIT.

The companies, which entered into the partnership late Monday, target to launch the corporate vehicle either within the month or September, Calata Corporate Secretary, Compliance Officer and Corporate Information Officer Jose Marie E. Fabella said in a telephone interview.

“The plan really is to have a corporate vehicle, which will intend to be a REIT in the future,” he explained.

The envisioned corporate vehicle will count among its property portfolio the P65- billion integrated resort and casino development proposed by Sino and the Macau Group within a 14-hectare site on Mactan Island in Cebu.

The development called Mactan Leisure City incorporates three hotels, including what could be Southeast Asia’s first sevenstar hotel; a casino and entertainment complex; commercial, retail and conference facilities; and a yacht club.

“The land will be owned by Calata, but not Mactan Leisure City. We will just lease the land to Mactan Leisure City,” Mr. Fabella said.

The investment group from the United States and the gaming operator from Macau will initially invest around P836.1 million.

Of the amount, P234 million will pass through Calata and the remaining P602.1 million will directly go into the corporate vehicle.

Calata will own majority of the corporate vehicle that will house subsequent undertakings.

Sino, in particular, looks forward to capitalizing future agriculture projects with the Philippine firm.

“Mactan Leisure City will not be the only project; there will be numerous acquisitions of properties. It just so happened that one is related to gaming. So, subsequently — or if it permits — there will be subsequent acquisitions,” Calata’s Mr. Fabella said.

LAYING THE FOUNDATION

Calata will evaluate the feasibility of listing the corporate vehicle on the stock exchange as a REIT along the way.

The partnership will particularly take into account the performance of Mactan Leisure City, which is expected to start commercial operations in 2020 and generate around P55.74 billion in gross revenues annually.

“Eventually, after 2020 or so, if we are qualified or if a study will return favourable results, then we will proceed with [the REIT listing],” Mr. Fabella said.

“Right now, we are trying to lay the foundation for the establishment of a profitable REIT.”

Major property developers in the Philippines have expressed intention to enter the REIT market, as the government of President Rodrigo R. Duterte moves to tackle restrictive taxation and ownership rules applied to such investment vehicles.

The country’s REIT measure or Republic Act No. 9856 lapsed into law in December 2009.

NO INCENTIVE THEN

Stringent implementing rules and regulations (IRR) issued under President Benigno S.C. Aquino III’s watch, however, kept property firms from tapping the new capital market product.

Companies have particularly raised issues over the taxation of asset transfers and the increase in the minimum public float to 67% from 33% within a three-year period, as required under the REIT law’s IRR.

The administration of Mr. Duterte has instigated a review of the IRR amid efforts to advance infrastructure development in the Philippines.

WAITING

Among others, SM Prime, Inc. has revisited plans to launch a REIT on the stock exchange, a move that can easily raise the company $500 million to $1 billion in fresh capital.

Asked if SM remains keen on pursuing such a plan, SM Investments Corp. Senior VicePresident for Investor Relations Corazon P. Guidote replied in a mobile text message: “Yes, SM is interested to issue a REIT; however, the whole property sector is waiting for more conducive features in relation to the REIT Law and its regulations.”

For Calata, the planned REIT will unlock another revenue stream.

The company has relied primarily on the distribution of farming products for revenues.

“It’s an augmentation to the profitability of Calata because managing real property is also one of the businesses of Calata,” Mr. Fabella said.

“We hope, with this new venture, our profitability will increase.”

Shares in Calata gained 78 centavos or 28.16% to settle at P3.55 apiece on Tuesday. It was the top gainer and the 15th most actively traded stock on the bourse.