Ayala Land [ALI 37.20 ?2.2%; 62% avgVol] [link] subsidiary, AREIT [AREIT 36.80 ?0.3%; 136% avgVol], shared that it received approval from the SEC for its P28.6 billion property-for-share swap with various sibling and affiliate companies in the Ayala Group. The transferred properties include an office building, a mall, two business hotels, and 2,759,135 of industrial land in Zambales. The swap was done using new (primary) AREIT shares at an exchange price of P34.00/share, which was a 3.75% premium over the 30-day volume-weighted average price (30-day VWAP) of AREIT shares at the time. AREIT said that it expects the transfer to “boost dividends per share”, with the expected yield of 3% for the office building, 2.5% for the mall and hotels, and 1.5% for the industrial land. As per AREIT, its FY23 yield was approximately 6.6% relative to the 30-day VWAP price, and this transaction could increase AREIT’s overall yield to 6.96% once the assets are infused. AREIT will be able to recognize income from the new assets starting from July 1, 2024.
MB BOTTOM-LINE: I think AREIT did a great job of explaining how this transaction will benefit shareholders. It’s one thing to execute a massive property-for-share swap and simply assert that the transaction is “dividend accretive”. (That just means they expect the transaction to add to the company’s dividend per share.) But that alone doesn’t tell us a lot about how much they expect the properties to add to the dividend, or how the different asset types are anticipated to contribute. AREIT’s transparency gives some footing to measure the actual against the expected. Of course, the disclosure says that “estimated yields and total shareholder return are subject to actual operating performance and market conditions” – that’s just business. But with this level of detail, they aren’t able to just marginally increase the dividend by a few centavos and claim “mission accomplished” because the dividend was boosted. I would love for other REITs to follow AREIT’s lead here in terms of the level of detail provided in the discussion section of this disclosure.
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