The property trust reported higher earnings and dividends per share despite issuing stock for acquisitions. However, a swelling book of finance-lease and related-party receivables makes the balance sheet increasingly dependent on the Ayala group.
MANILA— AREIT Inc. spent the first half of 2026 getting bigger without leaving shareholders with a smaller slice of earnings.
The Philippine real-estate investment trust reported net income of ₱5.62 billion for the six months ended June 30, up 36% from ₱4.12 billion a year earlier. Revenue increased 30% to ₱7.72 billion, reflecting the full contribution of properties acquired in 2025 and income from assets added during the second quarter.
The more consequential figures for investors were measured on a per-share basis. Earnings per share increased 5.5% to ₱1.35 from ₱1.28, while dividends declared for the first two quarters rose 6.8% to a combined ₱1.25 a share from ₱1.17.
Those increases suggest that AREIT’s use of shares to acquire properties has been economically accretive rather than dilutive so far. Profit grew fast enough to overcome the effect of a substantially larger capital base.
That is an important test for an acquisition-driven REIT. Issuing shares can enlarge the portfolio and lift total income while still leaving existing investors worse off if the acquired earnings don’t compensate for the additional shares. AREIT cleared that hurdle during the first half, at least on its reported per-share results.
There is an important timing qualification. The latest property-for-share transaction received regulatory approval only on June 25, five days before the end of the reporting period. The first-half figures therefore include only a limited contribution—and limited weighted-average share impact—from the newly issued stock. A cleaner test of the latest transaction’s full accretion will come in subsequent reporting periods.
Earnings outpaced the share count
AREIT issued 441.1 million new shares for Ayala Center Cebu Mall and Ayala Malls Feliz, two properties valued at a combined ₱19.48 billion. The shares were issued at ₱44.15 each to Ayala Land Inc. and an affiliated company.
After retiring 67.3 million treasury shares, AREIT ended June with 4.16 billion shares outstanding, up from 3.72 billion at the end of 2025.
The share issuance changes ownership percentages, so “non-dilution” shouldn’t be understood literally. Existing holders own a smaller percentage of a larger company. In economic terms, however, the relevant question is whether earnings and dividends attributable to each share continue to rise. On that measure, the expansion has avoided dilution so far.
| Per-share measure | 1H 2026 | Comparable 2025 figure | Growth |
|---|---|---|---|
| Earnings per share | ₱1.35 | ₱1.28 | 5.5% |
| First-quarter dividend | ₱0.62 | ₱0.58 | 6.9% |
| Second-quarter dividend | ₱0.63 | ₱0.59 | 6.8% |
| First two quarterly dividends | ₱1.25 | ₱1.17 | 6.8% |
The second-quarter dividend of ₱0.63 a share was approved on Aug. 10 and is payable on Sept. 9 to shareholders of record as of Aug. 25. It represents another one-cent sequential increase from the first-quarter distribution.
The first two 2026 dividends amount to roughly ₱4.92 billion, or about 88% of reported first-half earnings. Comparable 2025 distributions represented about 91% of first-half profit. Dividends per share therefore increased even as earnings coverage improved modestly.
Finance leases drive growth
The strongest revenue growth came not from traditional rent but from finance-lease receivables.
Interest income from finance leases more than doubled to ₱1.88 billion from ₱770.5 million, up 144%. Rental income rose a more moderate 11% to ₱4.73 billion, while net dues increased 26% to ₱1.10 billion.
The changing mix reflects AREIT’s treatment of certain mall and hotel master leases. Several properties transferred to the REIT are accounted for as finance-lease receivables rather than conventional investment properties producing rental income.
Expenses increased more slowly than revenue. Direct operating costs rose 19% to ₱1.83 billion, while general and administrative costs increased 34% but remained small at ₱37.9 million. As a result, pretax income climbed 36% to ₱5.62 billion.
AREIT also recorded a ₱214.2 million negative fair-value adjustment on investment properties, compared with a ₱157 million reduction a year earlier. The filing didn’t identify the individual properties responsible for the adjustment.
A few offices lag an otherwise full portfolio
AREIT’s portfolio is highly occupied overall, but the aggregate figure masks several weak office properties.
Using the gross leasable areas and occupancy rates in AREIT’s filing, the listed office assets were approximately 95.7% occupied on a weighted basis. Once the mostly fully occupied malls and hotels are included, occupancy across the disclosed income-producing portfolio was roughly 98.2%.
Seven properties fell below that broader portfolio average:
| Property | Type and location | Occupancy |
|---|---|---|
| BPI-Philam Alabang units | Office, Muntinlupa | 0% |
| Bacolod Capitol Corporate Center | Office, Bacolod | 60% |
| BPI-Philam Makati units | Office, Makati | 62% |
| Ayala North Exchange HQ | Office, Makati | 73% |
| Tech Tower | Office, Cebu | 80% |
| Ayala Center Cebu Office Tower | Office, Cebu | 86% |
| Ayala North Exchange retail floors | Retail, Makati | 88% |
The vacant BPI-Philam Alabang units are the weakest asset by percentage, but the financial effect is limited because the property contains only 212 square meters. The BPI-Philam Makati units are also small, with 1,072 square meters of leasable space.
The more meaningful leasing gaps are in larger buildings. Ayala North Exchange HQ, with 21,368 square meters, was only 73% occupied. It generated ₱115 million in rental income and ₱131 million in gross revenue during the first half.
Tech Tower, with 16,273 square meters, was 80% occupied and produced ₱50 million in rent. Ayala Center Cebu Office Tower, with 27,458 square meters, was 86% occupied and generated ₱95 million in rental income.
Bacolod Capitol Corporate Center was just 60% occupied, although its smaller size—11,313 square meters—limits its portfolio impact. The building generated ₱16 million in rental income and ₱27 million in gross revenue.
These assets represent potential internal growth if AREIT can fill their vacant space. They also show that the portfolio’s near-full average partly reflects malls, hotels, and master-leased properties reported at 100% occupancy.
The filing doesn’t provide comparable property-level occupancy and revenue for June 2025. It therefore doesn’t establish that these properties deteriorated year over year. They should be described as currently weak or below-average assets, not necessarily as assets with declining occupancy.
Receivables reshape the balance sheet
A bigger issue is emerging on the asset side of AREIT’s balance sheet.
Total receivables reached approximately ₱63.30 billion at June 30, comprising:
- ₱55.41 billion of finance-lease receivables
- ₱5.78 billion due from related parties
- ₱1.17 billion of billed trade receivables
- ₱936.5 million of accrued receivables
- A small amount of other receivables
Receivables represented about 37.5% of AREIT’s ₱168.80 billion in total assets. Finance-lease receivables alone accounted for approximately 32.8% of assets.
That is a significant change in the character of the balance sheet. AREIT is no longer simply a portfolio of directly operated buildings collecting rent from a diversified tenant base. A substantial portion of its value now consists of contractual claims under master leases, principally involving Ayala Land or other companies under common control.
The arrangement can produce stable and predictable contractual income. It may insulate AREIT from some short-term fluctuations in property occupancy because payments are governed by master-lease terms rather than the performance of each individual tenant.
But predictability isn’t the same as diversification.
AREIT’s economic exposure is increasingly concentrated in the sponsor group. A financial or operational problem affecting Ayala Land or affiliated companies could pressure several lease and receivable relationships simultaneously. The risk is correlated: counterparties that appear as separate entities can still be affected by the same parent, business cycle, and funding conditions.
The company also reported ₱3.42 billion due to related parties. Netting that amount against the ₱5.78 billion due from related parties would leave about ₱2.36 billion of net “due from” exposure, but simple netting understates the broader concentration because the ₱55.41 billion finance-lease book is also largely connected to the parent and entities under common control.
AREIT said the finance-lease receivables are secured by the related investment properties and are payable quarterly or annually. That security offers protection, but the concentration still deserves attention. Investors will need to follow counterparty quality, collection performance, lease duration, asset-level cash generation and the terms governing remedies if payments are delayed.
Low debt, but not low concentration
Traditional balance-sheet leverage remains modest. AREIT reported only ₱2 billion of interest-bearing debt, equal to roughly 1% of equity, and had ₱23.5 billion in available bank credit lines. Its current ratio improved to 1.14 from 1.07, while net asset value increased to ₱37.60 a share from ₱36.57 at the end of 2025.
The low debt burden gives the trust financial flexibility. Yet leverage ratios alone don’t capture the concentration embedded in the receivable structure.
The first-half results tell two stories. The first is favorable: acquisitions lifted profit sufficiently to deliver higher EPS and dividends per share, with no evidence so far of economic dilution. The second is more complicated: AREIT’s earnings and asset base are becoming increasingly dependent on finance-lease claims and related-party arrangements within the Ayala group.
Future results will need to show that the June share swap remains accretive after both the new assets and all newly issued shares are reflected for a full period. Investors will also want to see progress filling the portfolio’s weaker offices—and evidence that the rapidly growing receivable book remains collectible, well secured and capable of supporting continued dividend growth.
For now, AREIT has preserved the per-share proposition. The next challenge is preserving the quality and independence of the cash flows behind it.
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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.
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