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The RCR Question: When Bigger Isn’t Immediately Better—But Can Be

 


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Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.

By the time RL Commercial REIT (RCR) closed the third quarter of 2025, it had become something rare in the Philippine REIT space: a truly multi-asset platform with a portfolio that now spans both offices and malls across key urban nodes.
And yet, buried inside the good news is the market’s perennial discomfort with REIT growth: dilution first, accretion later—if management executes. 

A ₱30.7B infusion—and the unavoidable math of dilution

The defining event of the quarter was RCR’s nine-mall infusion via a property-for-share swap valued at ₱30.6749 billion, paid by issuing 3.834 billion new shares (SEC approval dated September 5, 2025).
That transaction dramatically expanded RCR’s balance sheet: investment properties rose to ₱140.21 billion as of September 30, 2025, from ₱109.43 billion at end-2024, with management explicitly attributing the bulk of the increase to the newly infused malls. 

But equity-funded growth comes with a tradeoff the market can’t ignore. Shares outstanding rose to 19.5488 billion from 15.7144 billion—a large step-up that affects every per-share metric investors care about.
This is why you can have a quarter where earnings improve, but earnings per share and dividend optics feel muted: the pie got bigger, but the slices multiplied even faster—at least initially. 

Revenue surged—proof the new assets are working

To RCR’s credit, the topline shows the new portfolio is not idle. For the nine months ended September 30, 2025, total revenues reached ₱7.592 billion, up 30% year-on-year, driven by the full-period contribution of the 2024 infusion plus the latest nine-mall infusion in 3Q 2025.
Rental income—the REIT’s lifeblood—rose to ₱6.138 billion, up 29%, again tied directly to the expanded asset base. 

In other words, the engine is pulling. The question for dividend investors isn’t whether rent came in—it did. The question is how much of that rent converts into distributable cash per share after expenses and structural “leakages.” 

Expenses: the quiet governor on dividend growth

Costs moved up as the portfolio scaled. Direct operating costs rose to ₱1.368 billion (+35%), and general and administrative expenses climbed to ₱709 million (+42%) for the nine months ended September 30, 2025, with management citing the same drivers: the expanded portfolio and the newly infused malls.
Within G&A, one line deserves special attention: rent expense of ₱343.9 million. 

Why? Because many of RCR’s properties sit on land leased from its sponsor under long-term arrangements that often price rent as a percentage of monthly rental income (commonly 7% under various land/building lease agreements disclosed in the filing).
That structure can be perfectly workable—but it means as revenue grows, a portion of the benefit automatically flows out as lease expense, tempering the translation of topline gains into distributable income. 

Dividend discipline remains intact—yield becomes the market’s referee

RCR’s formal policy is to maintain an annual cash dividend payout of at least 90% of distributable income, consistent with REIT rules and the company’s own investment strategy.
The numbers show continued compliance: for the nine months ended September 30, 2025, RCR reported distributable income of ₱5.6218 billion (after adding back the straight-line and lease commission adjustments).
Dividends declared through the first three quarters totaled ₱0.3106 per share, and shortly after the period, RCR declared the third regular cash dividend for 2025 covering July–September at ₱0.1060 per share (declared November 7, 2025; payable December 2, 2025). 

That matters for valuation, because REIT investors don’t just look at payout—they look at yield versus alternatives. RCR’s strategy document cites a trailing dividend per share of ₱0.4166 (excluding special dividends), translating to a 5.74% yield at a share price of ₱ 7.26 as of September 30, 2025.
In the same document, the 10-year benchmark yield (BVAL) is cited at 6.03% as of September 30, 2025—meaning RCR was trading at a modest yield “premium valuation” versus the 10-year.
That premium only holds if investors believe dividend growth will keep compounding through accretive acquisitions and stable occupancy. 

NAV: the second anchor (and why RCR hovered around it)

The 17-Q reports a net book value per share (a practical NAV proxy) of ₱7.19 as of September 30, 2025.
At the same date, RCR closed at ₱7.26, implying the stock was trading near NAV, and the filing even notes market capitalization around ₱141.92 billion at that close. 

Trading close to NAV is not an accident. It is the market’s way of saying:

  • “We accept the asset valuation,”
  • “We like the stability,”
  • but also, “Prove the per-share dividend accretion after dilution.” 

Project Epsilon: ₱7.40 as a market-clearing reference point

Then came the sponsor move: in January 2026, Robinsons Land Corporation (RLC) disclosed board authorization to sell 945,946,000 RCR shares at ₱7.40 per share (about ₱7.0 billion), placed with institutional investors, with settlement on January 29, 2026.

This is not a primary issuance—so it does not dilute RCR shareholders and does not directly change distributable income.  But it does matter for valuation: a large institutional block at ₱7.40 can function as a price discovery event, a near-term anchor, and (if absorbed smoothly) a liquidity enhancer that can reduce the “free float discount” markets sometimes assign.



We’ve been blogging for free. If you enjoy our content, consider supporting us!

Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.


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