GT Capital 'open' to launching REIT under 'right conditions

GT Capital [GTCAP 568.00, up 0.7%; 1419% avgVol] [link] confirmed a news report quoting the company’s Senior VP as saying, “Just like any conglomerate, we want to diversify and REITs are one vehicle toward that end. Sure if conditions are right, then we are able to develop more on the rental side, then we will definitely consider that.” In its clarification letter to the PSE, GTCAP said that it is “open to the possibility of launching and listing its own [REIT] in the future if the right conditions are present and if FLI can ramp up recurring income.” GTCAP then said that it has no plan to “launch and list FLI as a REIT”. Filinvest Land [FLI 0.68, down 1.4%; 2137% avgVol] is a property development subsidiary of GTCAP.

MB bottom-line: As GTCAP says, the REIT Law is configured to be attractive to conglomerates as a way to raise money, so as a conglomerate, the prospect of raising money by listing a REIT is something that is going to be on the company’s radar. That said, there’s a lot to read into about GTCAP’s tone: they’re just not that interested. It sounds like they want to improve the valuation of the assets that could comprise a future REIT before rolling those assets up and selling them. This is what I get from the line about wanting to increase FLI’s recurring income. That makes sense. But with rates as high as they are right now, the valuation that GTCAP could get for those FLI assets might not look attractive enough to the board to act. But as rates come down (slowly over the next two years) and as GTCAP and FLI are able to improve FLI’s recurring income, perhaps the two sliders reach a point where the prospect of listing a REIT becomes attractive enough to submit a prospectus. Feels far away, though.

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