Negative news pushing Philippine property stock prices below pandemic lows despite many builders’ financial strength has shone a light to Real Estate Investment Trusts (REITs).

REITs offer a compelling, defensive option to the real estate sector, as they are uniquely structured for resilience.

By law, they must hold high-quality, income-generating properties that are independently appraised and aligned with a strategy focused on growing dividends. This typically translates to a strong, predictable financial performance.

Building on this foundation, REITs are diversifying portfolios beyond offices.

AREIT is infused of 2.8 million square meters (sqm) of industrial land, and it, along with RCR, is growing their exposure to commercial retail spaces. Meanwhile, Filinvest REIT Corp. (FILRT) plans an infusion of the famed Festival Mall this year.

Future growth is supported by substantial sponsor pipelines: AREIT’s sponsor (Ayala Land) has the largest property portfolio, RCR’s sponsor (Robinsons Land) holds significant mature retail assets, and MREIT, Inc. (MREIT) targets steady annual infusions of around 100-120k sqm.

This operational strength, fortified by high occupancy rates, allows REITs to deliver on their core promise of reliable income.

Attractive Dividend Yields

REITs can sustainably grow or maintain dividends per share, resulting in highly attractive yields. The yield itself also signals perceived risk, with AREIT’s lower yield reflecting stability and FILRT’s higher yield indicating risk from its lower profitability and occupancy rates.

Overall, Philippine REITs are well-positioned to deliver sustainable dividends and potential capital appreciation given their defensive structure, strong financial performance, and proactive portfolio growth.

REITs remain an attractive way to gain real estate exposure, while mitigating broader sector encumbrance. Our top picks are AREIT and RCR, as both stand out for their compelling growth trajectories and income stability.

(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.)    

GERMAN DE LA PAZ III, CFA serves as an Equity Research Lead at Metrobank’s Trust Banking Group. His coverage includes banks, gaming, telcos, conglomerates, and utilities, as well as select offshore markets. German holds a Bachelor’s degree in Humanities and a master’s degree in Industrial Economics from the University of Asia and the Pacific. Recently, he obtained his CFA charter and is currently pursuing additional industry certifications. In his free time, German enjoys playing sports, particularly basketball, and has a penchant for reading fiction books.   

CHARLES RANDY LUMHOD is an Equity Research Analyst of Metrobank’s Trust Banking Group. His coverage includes shipping, properties, REITS, and consumers, as well as select offshore markets. He holds a Bachelor’s degree, cum laude, in Business Administration major in Financial Management from the University of Santo Tomas. Outside work, he stays active by running and going to the gym.