DoubleDragon, Jollibee to create Philippines' first and largest industrial REIT
MANILA, Philippines — Jollibee Foods Corp. will infuse cash and property assets into one of DoubleDragon Properties Corp.'s units to create the first and largest industrial real estate investment trust (REIT) company in the country.
In a disclosure to the stock exchange on Thursday, the listed property firm of businessman Edgar “Injap” Sia II announced it signed a P3.97-billion binding agreement with Jollibee to expand CentralHub Industrial Centers Inc., DoubleDragon’s industrial leasing subsidiary that will soon be transformed into a REIT company.
Investor reaction to the announcement was mixed. As of 12:15 p.m., shares in DoubleDragon were trading up 1.16% while Jollibee was down 0.75%.
In a separate regulatory filing, Jollibee said it will buy 1.6 billion common shares in CentralHub for P1.9 billion. To increase its shareholdings, the fast food giant would infuse 16.4 hectares of industrial properties currently being used as its commissaries — worth about P2 billion — into CentralHub in exchange for more common stocks.
The additional assets from Jollibee would expand CentralHub’s portfolio to 39.8 hectares. The DoubleDragon unit is targeting to conduct its maiden share sale as a REIT firm in 2022, and Jollibee plans to use the proceeds from the upcoming initial public offering (IPO) to purchase more land where it can build new stores and commissaries, which would also be infused into CentralHub’s portfolio.
“JFC’s plan is to reduce assets tied to real estate properties by converting some of them into securities in REIT and by selling others directly to third parties,” Jollibee Chairman Tony Tan Caktiong said.
“Basically, the REIT will help continuously finance our future expansion while the REIT will keep growing in the years ahead allowing more public investors to buy more REIT shares. This is a more cost-effective way of financing versus owning or pure leasing of properties due to the cash dividends JFC will receive from the REIT,” Caktiong added.
Jollibee did not disclose the specific assets it will put in CentralHub, but DoubleDragon said the investment includes “the largest operating commissary” of Jollibee. Currently, Jollibee has three commissary system sites: Pasig City, Cebu and the central site in Laguna, where the company produces marinated Chicken Joy, frozen patties and pies, as well as breads, sauces, hotdogs and other meat products.
Once CentralHub completely transforms into a publicly-listed REIT firm, it would be required to use the capital it raised to manage or buy more income-generating property assets. In turn, 90% of earnings from these ventures must be rewarded to investors as dividends.
“We see CentralHub to become a major recurring income contributor to DoubleDragon,” Sia said.
Sia is no stranger to REIT. Earlier this year, DoubleDragon’s DDMP REIT Inc. made its debut on the stock market and raised P14.7 billion during its jumbo IPO. That offer was preceded by Ayala-backed AREIT Inc., the country’s first REIT firm that raked in P13.6 billion last year amid pandemic-induced market volatility.
Other big landlords like Filinvest Land Inc., Robinsons Land Corp. and Megaworld Corp. are also gearing up for their REIT IPOs.