AREIT Inc. is acquiring P17.33 billion worth of malls and hotels from sponsor Ayala Land Inc. (ALI) and its subsidiaries in exchange for new shares, expanding the real estate investment trust’s exposure to the retail and hospitality sectors.

In a disclosure on Tuesday, AREIT said its board approved the issuance of 462.48 million common shares at P37.48 apiece in exchange for six properties.

These properties are Glorietta 4 and Ayala Malls Circuit in Makati, Ayala Malls Capitol Central in Bacolod, Ayala Malls Cloverleaf in Quezon City, New World Hotel Makati and Seda Vertis North in Quezon City.

New assets to increase operating cash flows

AREIT said the new assets are expected to increase its operating cash flows and boost dividends per share once they are added to its portfolio.

“The asset-for-share swap will be accretive after the new assets are infused,” AREIT said.

The four malls will be transferred under a direct lease structure, allowing AREIT to benefit directly from mall operations and rental increases instead of receiving a fixed building lease.

The two hotels, meanwhile, will be under master leases with fixed and variable components, providing AREIT with base rental income as well as additional earnings tied to hotel performance.

Settled entirely through shares

The transaction will be settled entirely through shares, allowing AREIT to acquire the six properties without a P17.33-billion cash outlay.

The P37.48 issue price is also slightly above AREIT’s 30-day volume-weighted average price of P37.29.

AREIT said the valuations of the properties and shares were within the fair-value ranges determined by FTI Consulting and Asian Appraisal.

The company pegged the dividend yield from its existing assets at around 6.7 percent based on the P37.29 average share price.

Ayala Land Inc., AREIT’s sponsor, currently owns 59.03 percent of the REIT directly and indirectly.

AREIT expects to execute the deed of exchange and file the necessary applications with the Securities and Exchange Commission by October.

SEC approval is targeted by the end of the year, while the parties expect to secure the necessary tax clearances from the Bureau of Internal Revenue in 2027.

The transaction is expected to qualify as a tax-free exchange under the Tax Code.