AREIT completes P1.2-B cash acquisition of 153-room Seda Lio resort hotel

AREIT [AREIT 33.95, down 0.4%; 163% avgVol] [link] announced that it completed the acquisition of the 153-room Seda Lio resort-hotel in El Nido from subsidiaries of its sponsor, Ayala Land [ALI 32.30, down 3.0%; 144% avgVol]. The purchase price of P1.192 billion was paid in cash, with 95% due on the signing of the Deed of Exchange, and the remaining 5% due by the end of Q3. AREIT said that the transaction is part of its “2024 growth plans”, which include the additional transfer of Ayala Triangle Gardens Tower 2, Greenbelt 3, Greenbelt 5, Seda Hotel, and Holiday Inn and Suites in Makati. AREIT will also acquire a 276-hectare piece of industrial land from ACEN [ACEN 4.07, down 4.5%; 57% avgVol]. Once AREIT has completed all of the transactions, it will increase the value of its assets under management from P87 billion to P117 billion. The remaining parts of this transaction will be purchased using a property-for-share swap that will be voted on by the shareholders at the Special Stockholders Meeting on February 12.

MB bottom-line: AREIT is the king of REITs. Its commitment to growing the dividend is what makes the company so attractive as a long-term investment. While this part of the 2024 plan is a relatively small transaction, the cash basis will make for a quick transfer that will quickly give AREIT shareholders the benefit of the revenue from the hotel. The other parts of this plan will require AREIT to issue shares to pay for the assets, but this is exactly what AREIT shareholders should want to have happen. This isn’t an example of dilution to be feared. This is how the tax incentive structure in the Philippines has been configured, and this is how our REITs are expected to grow.

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