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Everyone dreams of owning and earning top-notch real estate. Unfortunately, before 2020, it took a lot of money to do this. But did you know that today it only takes a few thousand to reap the benefits of owning these top notch properties, and take note, without the headaches normally associated with such a property? ? It is thanks to a relatively new vehicle in our country called REIT.
What is REIT?
REIT stands for Real Estate Investment Trust. It is a business that owns, operates and finances income-generating real estate. It is inspired by mutual funds because it also pools the capital of many investors, large and small. This allows you and me to earn dividends on real estate investments without having to buy, manage and finance the properties ourselves. REITs are required to distribute at least 90% of the profits to their shareholders. Does this sound appealing to you? It makes me.
A little history
In the United States, which is generally our model for our financial instruments, the REIT was created as early as 1960, when most of us were not yet alive. If it was a person, it would already be an elderly person now! The law was enacted to give investors, especially smaller ones, access to income-producing real estate. Today, the total capitalization of listed REITs is over US $ 1.4 trillion.
What about the Philippines, when did the REITs start? I remember my husband Marvin, who is the founding president of the Fund Managers Association of the Philippines (FMAP), attending the congressional hearings on the REIT law. The law was enacted in 2009, but the first REIT wasn’t born until 2020. So yes, we’re pretty new to this game and have a lot of catching up to do.
Continuous offer
The Gokongwei Group is now offering the shares of its REIT, the FPI Commercial RL Inc. (RCR). The price per share is P6.45, allowing you to participate in the earnings of this investment with only a few thousand pesos, as promised in the title of this article.
The offer period begins today, August 25, 2021, until September 3, 2021. Thereafter, it will be listed on September 14, 2021 on the Philippine Stock Exchange (PSE).
The offering size is 3.34 billion shares with an over-allotment option of up to 305 million common shares. In total, the company will be worth 64.2 billion pesos in market capitalization, making it the largest REIT in the country, among listed and future Philippine REITs.
What exactly are you buying?
If you buy RCR shares, you are buying real estate investments from Robinson Land inc. (RLC), one of the country’s leading real estate and property developers with 41 years of experience in the industry. Although RLC remains the landowner, the lease rights belong to RCR, with leases of up to 99 years, making RCR the REIT with the longest land lease. As a shareholder of RCR, you have the right to receive annual dividends. By law, REITs are required to pay dividends of at least 90% of their profits to their shareholders. This means that you have assured dividend income every year.
RCR’s initial portfolio includes 14 commercial properties with a total of 425,000 square meters, making it the largest REIT by asset size, located in nine areas – Makati, Taguig, Quezon City, Pasig, Mandaluyong, Cebu, Tarlac, Naga and Davao. This makes RCR the most geographically diverse REIT. The tenants of these properties consist of almost 70% BPO, 19% traditional tenants, 8% commercial and seat rentals and less than 3% POGO. This diversity secures the payment of rents in the years to come.
Here are some of the commercial real estate investments included for every RCR share you buy.
In addition to the above, potential additions to the RCR portfolio are RLC’s Cyberspace Gamma in Ortigas and / or Robinson’s Cybergate Center 1 in Mandaluyong.
Why should you consider investing in this REIT
Do you already have real estate investments? If you already did, how much money did you have to spend to buy it? Did you have to take out a loan? If you invested in a property for the purpose of earning rental income, what return are you getting now. Here’s how you get your actual return: Add up all of your rental income for the year and then deduct any expenses you incur to run it for a year (property tax, maintenance, dues, etc.) Divide that amount by your investment total (your purchase price and other costs associated with acquiring the asset). What number do you get?
Are you getting more than 5.96%? If you include all of your recurring expenses and all the costs that you incurred to have your rental property, and also assume the vacancy rates that you have, there is a good chance that you will be lower than that. The 5.96% per annum dividend is what you will get from your RCR investment, without the headaches of having a tenant, maintenance, and other landlord related issues. This is because the properties are managed by the REIT. If you want to know the promoters of this company, here they are:
I personally know the President and CEO, Jericho Go. Our sons were on the same dance team. They competed and won not only locally but also international dance competitions. Director Lance Gokongwei is one of the best-selling Pinoy boys I featured in my very first book “Raising Pinoy Boys”. Of course, the other members of the management team and the board of directors led by Frederick Go are all respected names in the industry.
Another potential return you can get from your investment in RCR is capital appreciation or the price of the PSE traded stock.
What’s more, once you need cash or just want to liquidate your RCR investment for whatever reason, you are free to do so, no questions asked, no need to procure real estate brokers, no need to stage your property to get the best price for it, no need to sign the deed of sale and other documents.
What are the risks ?
As with any investment, there are risks associated with investing in REITs in general. Remember, I always tell you that if an investment claims to be risk free, you have to run away. The risks involved are a drop in stock prices due to stock market sentiment, or an increase in interest rates making bonds more attractive, or REIT-specific issues such as falling occupancy rates and lower interest rates. rental company. All of these factors can lead to a potential loss of capital and lower dividend yields.
Fortunately, the existing conditions indicate that the above is unlikely and that the odds are in your favor if you decide to invest in the proposed SPP now.
To sum up, here are the reasons why this investment is worth it right now.
- You can enjoy the benefits of top-notch real estate investments for just a few thousand.
- If you have millions to invest, you can do that too. RCR is the largest Filipino REIT to date in terms of market capitalization, portfolio valuation and asset size, giving way to large local and foreign funds. So, technically, you are co-owners of these big funds, nak!
- RCR has the most diverse REIT with the broadest geographic coverage. You have the chance to enjoy the benefits of top notch properties in various locations with the investment money you currently have.
- No more worrying about the occupancy rate for your real estate investment. RCR has a very high average occupancy rate of 99%. The PEZA accreditation of its buildings also makes it easier to find new tenants.
- RCR has great potential for growth as its sponsor, RLC, has a strong balance sheet and inventory of assets that are expected to be part of RCR’s portfolio in the future.
- RCR is professionally managed, as shown by the management team above.
- Assets are liquid, which is not true in traditional ownership of real estate investments.
- For a healthy asset allocation of your personal portfolio, you can fill this real estate part with RCR REIT for a fraction of the cost and without needing to take out a mortgage.
Hope you now understand REIT and how you can feel like a donation or a donya with top notch real estate investments for just a few thousand pesos by taking action now. Well done to high FQ!
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