The Securities and Exchange Commission approved Ayala Land REIT (AREIT), the first-ever REIT (Real Estate Investment Trust) in the Philippines. AREIT Initial Public Offering started last July 27 to August 3, 2020 (through PSE EASy) and July 24 to 30 through online broker. Many investors bought shares during the IPO of the first REIT on the market.
AREIT IPO price was reduced from P30.05 to P27. Listing in the PSE was on August 13, 2020. Did you buy shares on the IPO, or did you wait for it to be available for trading?
Admittedly, there are some mixed opinions from investors about Ayala Land REIT IPO. Nonetheless, we laid out the benefits and risks of investing in AREIT.
Top 5 Reasons Why You Should Invest in Ayala Land REIT:
Regular Income
Stability
Zero Contract
Upside Potential
Beat Low-Interest Rates
1. Regular Income
The number one reason why you must invest in AREIT is the ability to generate regular income. REITs are attractive assets because you will earn money by receiving regular cash dividends. After all, 90% of REITs taxable earnings are required to be given to shareholders, and income of REITs are exempt from 30% corporate tax.
2. Stability
AREIT is a subsidiary of Ayala Land, one of the largest property developers in the Philippines. Ayala Land continuous to develop high-end residential, shopping centers, offices, hotels, and resorts. It is a very stable company with a strong balance sheet. With Ayala Land’s solid track record, we’re confident AREIT would follow a robust performance.
3. Zero Contract
Unlike buying a real estate property, investors often have to go through contracts and pay a monthly mortgage. Securing loans to purchase real estate properties requires plenty of effort and many documentations. Investing in REITs requiresminimal effortas you can buy and sell your shares online, provided you have an online trading account. Most importantly, it doesn’t require a contract.
4. Upside Potential
Like other assets in the property sector, REITs have more upside potential, especially now that the covid19 pandemic has caused many real estate companies’ stocks to fall. The property sector is always a resilient business. They still have a long-term positive outlook. This crisis is a big opportunity for long term investors to buy during dips.
5. Beat Low-Interest Rates
Yes, investing in stocks and assets like REITs could beat inflation and beat low-interest rates you would earn from bonds and time deposits. While you receive from regular dividends payout, you will also have the potential to gain more when the value of the REITs grow in the market.
What are the Risks Involved When Investing AREIT?
Of course, all investments have risks. AREIT is not an exemption. Below are the risks of investing in Ayala Land REIT.
Economic Slowdown
Low Rent Income
Market Volatility
Pandemic
Bad News
Economic Slowdown
When our economy grows slowly, when GDP is low, and when government earnings are less than spending, investors become less confident to invest in the Philippines. That could create less volume of trades, could diminish market capitalization, and could also slow down the growth of the stock price.
Low Rent Income
Because REITs rely more on rental income, low rents and leases can affect the company’s earnings badly. When the company doesn’t meet earnings expectations, investors would be disappointed. It affects more many things negatively.
Market Volatility
Any asset traded in the stock exchange is affected by market volatility. It can either be local or global. Whatever happens in the local economy could affect the stock market—the same way with what’s happening outside the country. Stocks could go up or down.
Pandemic
Although it could happen in a century or many decades, a pandemic is a huge risk. So invest only what you are comfortable to lose.
Bad News
Bad news is another factor that could hurt the price of stocks and other investments traded in the stock market. Whether you are a short term or long term trader, it helps to be updated so that you can enter or exit with some nice profit.
Should I Invest in Ayala Land REIT or Not?
I have always admired Ayala Land, and I honestly can say that the only stocks from my portfolio which recovered faster during covid19 were ALI and SM. The rest were slowly mending.
I’m glad to invest in AREIT, too. It’s the first REIT in PH and looks like the FOMO will linger in the market until more REITs will be listed.
I like recurring income and I like REITs and the ability to earn from dividends. I have a few shares from a well-known German REIT that has not yet reached its all-time high, but I don’t mind. REITs are reliable businesses but if you can’t take short term risks, it’s not for you. I think your outlook with REIT works best for long term.
Trading actively with AREIT requires trading skills capturing the right momentum.
Disclosure: I’m a long term investor of Ayala Land, Inc. (parent company of AREIT). I wrote this article myself, and it expresses my own opinion. This content is for information purposes only and should never be considered as professional advice. Every investor has different risk tolerance and goals. Always do your own research. All investments have risks. Risk only the money you’re not afraid to lose.
Investing in real estate at prime locations and with consistent property management promises not only good quality of life but also great financial returns.
Investing in real estate at prime locations and with consistent property management promises not only good quality of life but also great financial returns.
To qualify as a REIT, companies are required to pay out at least 90% of their taxable income to shareholders. That makes REITs a good source of dividends. “People buy REITs usually because they like the income,” DeHollander says. “Especially now, with historically low interest rates.”
And, as advocacy group Nareit reports, REITs have historically low leverage in terms of debt-to-market-assets. They also hold a good measure of fixed-rate debt, which is unaffcted by interest rate hikes—at least until that debt must be refinanced.
REITs are a great way to add real estate to your investment portfolio. June 16, 2023, at 4:35 p.m. Real estate investments can be an excellent way to earn returns, generate cash flow, hedge against inflation and diversify a portfolio.
Some of the advantages of land ownership include cash returns on sale, lease income, and added assets, and potentially increased borrowing power. The rule of thumb to make the land a valuable purchase is purchasing the right piece of land at the right price.
Ayala Land's organizational strength lies in the competence and professionalism of its people. In our products, our quality derives from good planning, high-performance materials fashioned by cutting-edge technology as well as superior craftsmanship and engineering.
Because of their lower volatility, REIT returns are less correlated to the stock market. That makes REITs an excellent way for investors to build a diversified portfolio and improve their risk and return profile.
Perhaps the biggest advantage of buying REIT shares rather than rental properties is simplicity. REIT investing allows for sharing in value appreciation and rental income without being involved in the hassle of actually buying, managing and selling property. Diversification is another benefit.
REITs don't have to pay a corporate tax, but the downside is that REIT dividends are typically taxed at a higher rate than other investments. Oftentimes, dividends are taxed at the same rate as long-term capital gains, which for many people, is generally lower than the rate at which their regular income is taxed.
Strong REIT balance sheets put the sector in a strong position to deploy capital in 2023, bankers told REIT.com. Meanwhile, REIT debt and equity issuance is expected to improve, and IPO activity, along with an uptick in mergers and acquisitions (M&A), is also a possibility later in the year, they say.
The REIT four-quarter total return averaged 36.4%; it was 5.1% for private real estate. The average REIT outperformance total return spread was 31.3%. REITs outperformed private real estate in nine of 11 instances, or 81.8% of the time.
The sharp rise in interest rates created significant challenges for REITs in 2022, even as fundamentals such as occupancy rates and income measures remained solid. We anticipate a stabilization in the REIT market in 2023 if interest rates stabilize.
REITs offer investors several benefits that make them an ideal fit in any investment portfolio. These include competitive long-term performance, attractive income, liquidity, transparency, and diversification.
The total expenditures made by the REIT, or any of its partners, during the two years preceding the sale of the land may not exceed 30 percent of the net selling price of the property (IRC § 857(b)(6)(C)(ii) ).
The benefits of investing in real estate include passive income, stable cash flow, tax advantages, diversification, and leverage. Real estate investment trusts (REITs) offer a way to invest in real estate without having to own, operate, or finance properties.
Vacant land is right now the most secure and affordable real estate investment. However, buying land requires time, research, and due diligence. Buyers must consider certain factors when choosing land. Determine your budget and start looking for trusted real estate websites to find affordable rural land for sale.
AYALA LAND, INC.'s stock went down last week as the US Federal Reserve's tightening hit the stock market while higher interest rates battered down the property sector. Analysts advised investors to trade cautiously on property stocks.
Ayala Land is able to effectively compete for tenants primarily based upon the quality and location of its buildings, reputation as a building owner, quality of support services provided by its property manager, rental and other charges.
The Ayala Land Premier brand is best known for its exclusive and distinctive developments that appeal to the high-end market; a second brand, Alveo Land Corp., targets the young urban professionals who thrive in vibrant communities that appeal to their active lifestyles; and a third, Avida, caters to middle-income ...
Summary of Why Investors May Not Want to Invest in REITs
But, REITs are not risk free. They may have highly variable returns, are sensitive to changes in interest rates, have income tax implications, may not be liquid, and fees can impact total returns.
Performance-wise, REITs offer attractive risk-adjusted returns and stable cash flow. Also, a real estate presence can be good for a portfolio because it provides diversification and dividend-based income—and the dividends are often higher than you can achieve with other investments.
What are the cons of investing in a REIT? Here are some of the main disadvantages of investing in a REIT. Market volatility: Value can fluctuate based on economic and market conditions. Interest rate risk: Changes in interest rates can affect the value of a REIT.
mutual funds Invest in a wide variety of assets whereas REITs invest only in the Real estate market. This makes Mutual funds more diversified but when compared to return angle Real estate are more beneficial, he added. According to research by the National Association of Real Estate investment trust (NAREIT).
What's The REIT Outlook for 2023? In 2023, the U.S. economy will continue to be marked by mixed economic growth results, waning job gains, elevated inflation, and higher interest rates.
Key Takeaways. REITs that invest in apartments, industrial properties and self-storage are poised to outperform. Concerns about a recession are dampened when it comes to REITs, and analysts see room for the trusts to outperform private real estate in the months ahead.
Interest Rates. During periods of economic growth, REIT prices tend to rise along with interest rates. The reason is that a growing economy increases the value of REITs because the value of their underlying real estate assets increases.
To qualify as a REIT, a company must have the bulk of its assets and income connected to real estate investment and must distribute at least 90 percent of its taxable income to shareholders annually in the form of dividends.
In order to meet the 95% test, at least 95% of a REIT's gross income must be derived from sources described in the 75% test as well as from earnings from certain types of portfolio income such as interest, dividends and gains from sales of securities.
REITs tend to offer a good yield over and above high-quality bonds and most equities, so they are of particular interest to income seekers, though the combination of income and rental growth can be attractive to all investors.
The five largest REITs in the United States in 2021 are: American Tower Corporation, Prologis, Crown Castle International, Simon Property Group and Weyerhaeuser.
The Cheapest Option: REITs—$1,000 to $25,000 or more
A REIT offers the investor a relatively high dividend as well as a highly liquid method of investing in real estate. Most real estate investments are not easy or quick to get out of. An exchange-traded REIT is. Moreover, you can start small with a little bit of cash.
Direct real estate offers more tax breaks than REIT investments, and gives investors more control over decision making. Many REITs are publicly traded on exchanges, so they're easier to buy and sell than traditional real estate.
REITs should generally be considered long-term investments
In many cases, this can take around 10 years to occur. And with publicly traded REITs that fluctuate with the stock market, Jhangiani recommends holding onto them for at least three years.
“I recommend REITs within a managed portfolio,” Devine said, noting that most investors should limit their REIT exposure to between 2 percent and 5 percent of their overall portfolio. Here again, a financial professional can help you determine what percentage of your portfolio you should allocate toward REITs, if any.
The 75 percent test is comprised solely of real estate income. At least 75 percent of a REIT's gross income must be derived from rents from real property, interest on obligations secured by mortgages on real property, dividends from other REITs, and gain from the sale or other disposition of real property.
Real estate investment trusts (REITs) and exchange-traded funds (ETFs) both offer the potential to earn passive income during retirement. There are even REIT ETFs for investors who want the best of both worlds.
If you are looking for stocks with good return, Ayala Corp stock can be a profitable 1-year investment option. Ayala Corp real time quote is equal to 620.000 PHP at 2023-06-21, but your current investment may be devalued in the future.
Is Ayala Land a good company to work for? Ayala Land has an overall rating of 4.2 out of 5, based on over 186 reviews left anonymously by employees. 93% of employees would recommend working at Ayala Land to a friend and 88% have a positive outlook for the business.
Companies with high leverage are usually considered to be at financial risk. Ayala Corp's financial risk is the risk to Ayala Corp stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).
AYALA CORP. shares dipped due to bearish market sentiment as investors continue to monitor the Russia-Ukraine conflict and its impact on surging oil prices. Data from the Philippine Stock Exchange showed a total of 2.83 million Ayala Corp. shares worth P2.
Anchored on values of integrity, long-term vision, empowering leadership, and with a strong commitment to national development, Ayala fulfills its mission to ensure long-term profitability and value creation.
Furthermore, the paper tackled about how Ayala's competitive advantage is not only driven by its diversification strategy but also with its ability to preserve its core, ability to practice conservative financing, and its ability to initiate innovation.
When a stock is transferred from one person or entity to another, the transfer agent transfers the ownership of the stock and records the transaction. The transfer agent also handles the payment of dividends that Ayala Land may declare from time to time.
The Company acknowledges the risk of Ayala Land's operating properties and ongoing projects being impacted by adverse environmental issues such as natural disasters, water shortage, effects of climate change, earthquake, and other similar events.
AYALA LAND, INC.'s stock went down last week as the US Federal Reserve's tightening hit the stock market while higher interest rates battered down the property sector. Analysts advised investors to trade cautiously on property stocks.
What are market risks? The fear of price fluctuations may be the one risk that keeps most would-be investors from actually investing. The prices for securities, commodities and investment fund shares are all affected by price fluctuations.
What is a REIT? REIT stands for Real Estate Investment Trust, which means that companies and real estate developers, like Ayala Land, generate income through a range of property sectors that allow people to invest the same way they do through the stock market.
Introduction: My name is Mr. See Jast, I am a open, jolly, gorgeous, courageous, inexpensive, friendly, homely person who loves writing and wants to share my knowledge and understanding with you.
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