AREIT sold three condo units to fund Seda Lio acquisition

AREIT [AREIT 35.45, down 1.4%; 446% avgVol] [link] disclosed that it sold three condo units in the Ayala-life FGU Center Alabang to NEXTASIA Land for P42.7 million in net proceeds. AREIT said the proceeds would be reinvested in the acquisition of the 153-room Seda Lio hotel in El Nido, Palawan, which it acquired back in January from its sponsor, Ayala Land [ALI 35.95, up 2.0%; 69% avgVol], for P1.2 billion. AREIT paid 95% of the purchase price back when the deal completed in January, but the balance of P59.6 million is due this month and this condo sale transaction appears configured to satisfy that payment using the proceeds from the sale.

MB bottom-line:  I don’t have any inside information on the boardroom thinking that went into this transaction, but it feels rather last-minute and off-brand for AREIT and the Ayala Group more generally. AREIT must have anticipated having funds from some other source when it signed the Seda Lio acquisition deal, and I would love to know the circumstances that aligned to produce this result. This transaction is a rounding error next to the deal itself and is insignificant relative to AREIT’s income and marketcap. The truth is that I forgot they even owned condo units when I originally read the disclosure. Sometimes a rich uncle still needs to pawn one of his many watches to make a payment. It happens. I’d just like to know more about why it happened this way.

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