PAPER, NOT CASH, TRICK

Nosy Tarsee’s whiskers twitched at a curious bit of corporate paperwork that crossed the Securities and Exchange Commission’s desk last week, the kind of filing that reads as dry as a tax form but, read closely, tells you exactly who’s about to get fed.

A certain listed real estate trust, the one that has to hand 90 percent of its earnings to shareholders every year, which means it can’t just hoard cash to go shopping, just got its authorized capital stock blessed by the regulator at a brand-new, much higher ceiling.

Up from roughly P39.8 billion to a round P57 billion. On paper, boring. In practice, the company just gave itself a much bigger tank to swim in. Why the bigger tank? Because the trust was almost out of room. Before the increase, its authorized shares were nearly maxed out — about 3.98 billion authorized against 3.7 billion already walking around outstanding. Barely any headroom left. And headroom is exactly what you need when your sponsor, a very familiar conglomerate with a habit of feeding its listed Real Estate Investment Trust (REIT) child prime real estate in exchange for paper instead of cash, has another batch of buildings ready to hand over.

Which is precisely what’s happening. Some 441 million new shares are getting minted, priced at a tidy premium over the 30-day volume-weighted average, and handed to the sponsor and one of its subsidiaries in exchange for two commercial properties, one in Cebu, one in Pasig, together valued north of P19 billion.

No cash changes hands. No new loans get drawn. The buildings simply walk in, the shares walk out, and presto: assets under management jump from P138 billion to P158 billion in one swing, the trust’s biggest single-year addition since it went public.

Here’s the part Nosy Tarsee finds delicious: pricing it at a premium isn’t just generosity, it’s a regulatory escape hatch.

Price the swap shares above the volume-weighted average and the deal slides past the exchange’s rights-offering and public-offering requirements. Translation: no need to ask the broader investing public to chip in cash, no dilution from a public follow-on, just a quiet related-party exchange that gets to call itself “tax-free” and “yield-accretive” in the same breath.

Now, is anyone getting hurt? The textbook answer is dilution, about 12 percent more shares outstanding once the dust settles, which thins everyone else’s slice of the pie. But management’s pitch, delivered with a straight face, is that the new buildings will generate enough rental income to grow per-share dividends, even with more shares diluting the loot.

But the real tell, Tarsee thinks, isn’t this one deal, it’s the size of that new ceiling. P57 billion in authorized capital is far more than what one P19-billion swap requires. That kind of overhead isn’t built for a single transaction. It’s built for a pipeline.

Once the ceiling is raised, every future sourcing from the sponsor’s warehouse of properties just needs a board nod, not another trip to the stockholders or another round at the SEC. Quietly and efficiently, the trust has set itself up to keep eating by using just bigger plates.