RCR mall infusion lifts income base

From AB Capital's The Opening Bell: Three Moves

Event

RL Commercial REIT Inc. (RCR) approved its fifth asset infusion, acquiring six Robinsons Land Corp. (RLC) lifestyle malls worth P10.62 billion through a property-for-share swap at P8.25/sh. The 160,269sqm portfolio has 96% occupancy and will lift RCR's gross leasable area (GLA) by 14%, expanding total assets to 44.

View

In our view, the infusion should be modestly distributions per share (DPS)-accretive because the assets are likely yielding above RCR's implied distribution cost at the P8.25 issue price. At a 7-8% cap-rate range and 90% payout, we estimate annual DPS uplift at roughly 1-2%.

Catalyst

Key sensitivities are regulatory approval, actual net operating income (NOI), land lease terms, and timing of rent accrual from July 1. If mall income is closer to an 8.5% yield, accretion could approach 3%; if cap rates compress or costs rise, uplift may be thinner.

Action

We think the transaction is positive for both RCR and RLC. RCR gains scale, mall exposure, and wider geography, while RLC crystallizes P10.62 billion of mall value, raises its RCR stake to 58.41%, and keeps income upside through REIT dividends and future asset recycling.

Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.