Board Processes

The board ensures independence and diversity, focusing on the necessary knowledge, abilities, and experience. Collectively, the board possesses the required knowledge, skills and competencies, and experience in general business, real estate, industry, law, and finance.

Half of the AREIT board is composed of women, including both the Chairman and the President and CEO, strengthening its commitment to gender diversity. In recognition of this, AREIT was awarded with the Most Women Directors award at the 3rd Securities and Exchange Commission Gender and Development Awards.

The board regularly reviews its composition considering the evolving requirements of the company and best practices in corporate governance. It strives for a balanced board, composed of at lest two female directors. Nominees to the Board are selected based on merit, considering business experience, age, gender, ethnicity, culture, skills, competence, and knowledge. Four out of the six non-executive and independent directors have experience in real estate, investments, finance, or business management. The board members’ diverse professional backgrounds and expertise facilitate the effective execution and oversight of corporate governance in AREIT.

Independent directors, serving for no more than nine years, must not hold any interest or relationship with AREIT that may hinder, compromise, or interfere with their independent judgment and exercise of responsibilities as director.

In line with the REIT Law which requires at least 33% of the board to be independent, AREIT has three independent directors out of its eight-member board, or 38%.

Following the Code of Corporate Governance for Publicly Listed Companies, and the REIT Act, AREIT appointed Mr. Omar T. Cruz as lead independent director on April 23, 2024. The lead independent director serves as intermediary between the Chairman and the other directors whenever necessary, among other responsibilities.

As required by the REIT Law, AREIT engaged the services of AREIT Fund Managers, Inc. (AFMI) on February 5, 2020. AFMI is duly licensed by the SEC to act as a REIT Fund Manager and possesses all the qualifications without any disqualifications imposed by relevant laws, rules, and regulations. The majority of the Fund Manager’s board members are independent directors with expertise in real estate, fund management, corporate finance, and other relevant finance-related functions. AFMI is a wholly-owned subsidiary of Ayala Land, Inc.

The Fund Manager has general power of management over the company’s assets pursuant to the Fund Management Agreement, a five-year, renewable agreement defining the relationship between AREIT and the Fund Manager. The Fund Manager’s primary responsibility is to manage the company’s assets and liabilities for the benefit of the company’s shareholders, focusing on generating rental income and, where appropriate, increasing the company’s assets to enhance returns and distributions to the company’s shareholders.

The Board of Directors of the Fund Manager is responsible for its overall management. It is composed of highly qualified individuals with track records in real estate, fund management, corporate finance, and other relevant finance-related functions.

Pursuant to the REIT Law, AREIT engaged the services of AREIT Property Managers, Inc. (APMI) on February 5, 2020. APMI is an independent corporate entity qualified to perform the responsibilities of a REIT Property Manager. To ensure autonomy, most members of the Property Manager are independent directors, with expertise in the real estate industry and property portfolio management. The Property Manager is a wholly owned subsidiary of Ayala Land.

The Property Manager’s executive officers oversee the day-to-day management of AREIT properties, pursuant to the Property Management Agreement, a five-year renewable agreement. For services such as janitorial, technical, and security, the Property Manager may engage third-party companies. The Property Manager manages the execution of new leases, renewals, marketing, and promotion of the properties.

Additionally, the Property Manager oversees the overall management, maintenance, and repair of the structure and utilities; the building management policies and programs; maintenance and improvement; and routine management services that include security control, fire precautions, communication systems and emergency management; and building management operations.

The Board of Directors of the Property Manager consists of highly qualified individuals with track records in real estate and property portfolio management.

Directors may accept and hold directorships outside AREIT, provided that such roles do not detract from diligently performing their duties as AREIT director. Independent directorss and non-executive directors hold no more than five board seats in any group of publicly listed companies, while executive directors hold no more than two board seats in listed companies outside the Ayala Group.

Regular meetings of the Board of Directors are held at least six times annually, with the schedule set at the start of the year. Directors attend and actively participate in all meetings in person or through remote communication, such as videoconferencing, teleconferencing, or other alternative modes allowed under the Company’s By-Laws and relevant regulations of the Securities and Exchange Comission (SEC).

In 2024, the board held six regular and one special meeting, achieving a 100% attendance rate. As per the board charter and the Corporate Governance Manual, two-thirds of the Directors constitutes a quorum for transaction of corporate business. Further, a minimum attendance of 75% is required for each member to be eligible for re-election.

Non-executive directors held meetings on May 14 and November 13, 2024, without the presence of any executive director to discuss the conduct and improvements in board governance, investor relations, in-depth discussions of financial and risk management.

To ensure that the Board is adequately prepared and informed of the meeting’s purpose, relevant meeting materials were distributed to the board at least five business days before the relevant meeting.

Each AREIT independent director is entitled to receive a reasonable per diem allowance for attending Board meetings. Any additional compensation, other than per diems, require stockholders’ approval.

Pursuant to the REIT Act, the total annual compensation of all directors and officers of the company is within 10% of the net income before regular corporate income tax during the immediately preceding taxable year and will be disclosed in accordance with the relevant rules and regulations.

Each independent director receives a fixed per diem of P40,000 for every board meeting attended, and a fixed per diem of P20,000 for every committee meeting attended. This remuneration was approved during the 2019 Annual Stockholders’ Meeting.

No director, in a personal capacity, was contracted and compensated by the company for services beyond their role as director. Any additional compensation requires stockholders’ approval. AREIT has no other remuneration arrangement for its directors and officers.

AREIT officers and executive directors are seconded from Ayala Land and do not receive any compensation, salary or per diem from AREIT. Their compensation, paid by Ayala Land, includes basic salary and performance-based cash bonuses.

The total compensation of the CEO and the four most highly compensated officers is disclosed in the Definitive Information Statement (DIS) sent to all shareholders. The total annual compensation reported are paid by Ayala Land.

Each independent director submis a confirmation letter to the Corporate Secretary, affirming that at the time of his election, appointment, or re-election as director, they hold no interests affiliated with the company or in the management of its controlling shareholder. A director with any material conflict of interest determind to be permanent in nature is disqualified from the board.

If an actual or potential conflict of interest arises on the part of the directors, whether involving a related party transaction or not, a director is required to abstain from participating in the discussion and voting o nthe approval of the proposed transaction and any action to be taken to address the conflict. The board may implement additional processes to preclude such conflicts. No person who engages in any business that competes with or is antagonistic to the interest of the company is qualified or eligible for nomination or election to the board.

All AREIT offices must avoid conflicts of interest. Every January, all directors and officers are required to file a written disclosure on conflicts of interest. In 2023, AREIT adopted its Conflict of Interest Policy as part of its Business Integrity Program.

To uphold good governance and to ensure continued improvement, the Board conducts an annual self-assessment of its performance, including the performance of the Chairman, individual members, and committees. The exercise evaluates the Board’s performance and identifies areas for improvement. Each director is expected to assess themselves and the Board, and its commitees, through a questionnaire that covers a broad range of topics including governance, management, composition, role, compensation, management performance, overall perception, and individual performance.

The Chief Compliance Officer (CCO) tallies the results and sends them to the Corporate Secretary for presentation and action. The CCO likewise regularly reviews the questionnaire and ensures its relevance. Board and Committee self-assessments are vital for improving corporate governance practices and ensuring that the Board remains effective and accountable.

To strengthen the objectivity, the Board engages an external facilitator every three years to conduct the process. The facilitator can be an independent party such as a consulting firm, an academic institution, or a professional organization.

AREIT requires all board members to participate in continuing professional education. New directors undergo an orientation program to ensure that they have the necessary information needed to fulfill their duties and responsibilites. The orientation typically includes a presentation of AREIT’s operations, business performance, and financial results, as well as a discussion of disclosure obligations of directors, conflict of interest situations, relevant governance issues, and an optional tour of the company’s properties.

In 2024, all of AREIT’s directors and officers attended online and in-person seminars on Corporate Governance for at least four hours, including the 6th Ayala Integrated Corporate Governance, Risk Management and Sustainability Summit, “The Board’s Agenda: Accelerating Ambition through Action: Charting the Transition to Net Zero” organized by the Institute of Corporate Directors.

Additionally, AREIT’s officers participate in various training programs provided by the Ayala Land Group, covering topics such as corporate governance, business management, and professional development. These programs ensure that directors and officers are updated on latest business trends and issues, guiding them in making informed decisions in the best interest of the company and its stakeholders.