AREIT upbeat despite office market challenges — CEO

AYALA-LED AREIT, Inc. said it remains optimistic about the country’s office market despite ongoing challenges.

“The office market is still challenged as vacancy remains high at 18 to 20%. But fortunately for AREIT, our occupancy was strong at 97% last year because of our diversified asset base, with office spaces alone having a 93% occupancy rate, which is better than the industry,” AREIT President and Chief Executive Officer (CEO) Carol T. Mills said during the company’s annual stockholders’ meeting on Tuesday.

“We expect to maintain this as we only have less than 10% of our leases expiring this year,” she added.

She said that AREIT’s occupancy rate could be maintained through the business expansion of companies, as well as the continuation of hybrid work.

“Hybrid work continues but with majority of the work being done on-site for most companies today, we have seen higher pedestrian counts in our buildings compared to last year, and we expect hybrid work to continue. Business expansion has also driven many companies to retain office space, especially in the more prime and more productive locations,” she noted.

“In any case, our diversified mix with malls, hotels, and industrial assets complementing offices will certainly help mitigate vacancy risks,” she added.

She also said that AREIT’s portfolio is equipped to mitigate the effects of high interest rates.

“We recognize that interest rates tend to move up and down in the short term. But we deliberately focus on the long-term value and fundamentals of prime commercial real estate.”

“By focusing on strong fundamentals of ALI’s commercial assets, and continuously growing AREIT’s portfolio, the impact of interest rate movements in the interim can be mitigated,” she added.

The Philippine central bank recently opted to keep its target reverse repurchase rate at 6.5% for a fourth consecutive meeting. Interest rates on the overnight deposit and lending facilities were also maintained at 6% and 7%.

Ms. Mills said the company is expecting approval from the Securities and Exchange Commission in the third quarter for a deed of exchange involving a transaction exchanging shares for P28.6 billion worth of assets.

The swap deal involves ALI and its subsidiaries Greenhaven Property Ventures, Inc. and Cebu Insular Hotel Co., Inc., as well as ACEN Corp. unit Buendia Christiana Holdings Corp. (BCHC).

The deed of exchange involves the issuance of 841.26 million primary common AREIT shares to ALI, Greenhaven, Cebu Insular, and BCHC at P34 per share in exchange for the ownership of Ayala Triangle Tower 2 office building, Greenbelt 3 and 5, Holiday Inn and Suites Makati, Seda Ayala Center Cebu, and a 276-hectare industrial land in Palauig, Zambales.

On Wednesday, AREIT shares rose by 0.15% or five centavos to P34 per share while ALI shares increased by 1.79% or 50 centavos to P28.45 apiece. — Revin Mikhael D. Ochave