On July 10, 2020, the Philippines’ Securities and Exchange Commission (SEC) approved the country’s very first initial public offering for Ayala Land Inc.'s real estate investment trust (REIT) subsidiary. A year after, REITs are steadily transforming into attractive options for investors in diversifying their financial portfolios.
However, many are still considering this type of investment due to the viability and sustainability of this latest investment prospect that democratizes real estate investment for new and experienced investors.
What Is a Real Estate Investment Trust (REIT)?
REITs, or real estate investment trusts, are companies that own or finance income-producing real estate across a range of property sectors. A REIT’s real estate portfolio covers various asset types from commercial buildings, such as offices and retail centers, to industrial and logistics properties. Some provide diverse real estate properties, while others focus on offering a specific property type.
Real estate companies looking to venture into the REIT landscape undergo a rigorous process and must fulfill several requirements before qualifying as one. This is an imperative approach by the SEC to ensure the security, reliability, and transparency of REITs, safeguarding and benefiting potential investors in the long run.
Benefits of Investing in REITs
Low-cost Investment For Small Investors
One of the most appealing features of a REIT is that it allows any individual to invest in real estate at a lower amount compared to direct property acquisition.
Attractive Total Returns
REITs are required to pay 90 percent of their annual net income as dividends to shareholders as prescribed by the REIT Act of 2009. REITs are considered long-term investments, offering capital appreciation and stable dividend yields over the years.
Portfolio Diversification. Low-correlation investing is a proven approach to diversify portfolios. The CPA Journal generally defines low correlation as different asset types that differ in return performance. When it comes to REITs, their low correlation with other investment classes reduces the portfolio risks and improves returns.
Interested investors are not required to go through elaborate processes to invest. They can simply invest through a brokerage firm approved by the Philippine Stock Exchange. These professional firms provide the necessary support and market insights to investors, especially for new ones, enabling them to successfully navigate REIT investment.
Positive Outlook for the Philippine Economy
As of September, a total of 4 REITs are publicly listed: AREIT Inc. of Ayala Land Inc., DD Meridian Park REIT of Double Dragon Properties Corp., Filinvest REIT Corp. of Filinvest Land Inc., and Robinsons Land Commercial REIT. The increasing interest in REITs positions the Philippine economy for favorable recovery and growth after the disruptions of the pandemic.
Thinking of investing in industrial and logistics real estate? Connect with real estate experts to know the best course of action.
Reach out to Karen Golez at (+63) 917-524-8029. For inquiries on warehouse listings and other industrial spaces, call us at (+63) 2-8403-5519 or send an email to [email protected].