Property Firms Urged to Explore REITs

A recent report by Colliers Philippines advises property developers to divest assets into real estate investment trusts

Property developers in the Philippines are being urged to explore divesting other assets into real estate investment trusts (REITs) in order to capitalise on more opportunities in the developing sector. “In our view, the Philippine REIT market is primed for further diversification and developers should be on the lookout for other assets that can be divested into their REIT companies,” Colliers Philippines said in a recent report. “Colliers believes that the further diversification of the Philippine REIT market bodes well for property firms, investors, and the Philippine property market in general,” it added.

Colliers explained that at the height of the pandemic, developers only divested office assets. “As the government relaxed Covid restrictions and more economic segments reopened, other property sectors such as retail, hotel, and industrial also saw gradual recovery, making them viable asset classes to be utilized for REIT listing,” the investment management firm said.

It emphasised that non-traditional asset classes such as infrastructure projects (including toll roads), cold and self-storage facilities, data centres, and hospitals can also be infused into the property firms’ REIT vehicles to further attract more investors. “We even see some firms exploring the feasibility of divesting other asset classes including business parks, data centres, as well as co-working and co-living facilities,” Colliers said. It recommended that firms also explore the viability of infrastructure and renewable energy projects.

Colliers said REIT firms and stakeholders should be mindful of the regulatory environment that they are operating in and should be updated of the proposed amendments to the REIT law and how new measures and provisions are likely to stall or advance the sector. Moreover, it also recommended that developers should assess the ideal REIT portfolio mix that will provide the optimal yield for investors.

“Property firms should consider divesting asset classes that will provide the highest dividend to investors based on these asset classes’ performance in the market,” it said and added, “Office and industrial are usually part of developers’ portfolio mixes but property firms should also look at other viable assets in the future including retail and hotel.”