Andrew Tan consolidating property firms

Property tycoon Andrew Tan is consolidating key property-related businesses into flagship brand Megaworld Corp.

The three companies that will be folded into Megaworld under a group-wide restructuring are leisure estate unit Global-Estate Resorts Inc. (GERI), middle-income residential development unit Empire East Land Holdings Inc. (ELI) and Suntrust Properties Inc. These companies have a combined market capitalization of about P135.23 billion based on Friday’s closing.

“Megaworld seeks to consolidate the real estate businesses of its affiliates under the Megaworld brand to better capitalize on real estate opportunities and capture the expected growth momentum of GERI, ELI and Suntrust within the next five years,” Megaworld senior vice president Francisco Canuto disclosed to the Philippine Stock Exchange on Friday.

The consolidation process started with Megaworld’s purchase of additional shares in GERI and ELI. On Friday, Megaworld announced the infusion of P5.65 billion worth of shares in GERI and a separate P1.26-billion new equity investment in ELI.

Megaworld subscribed to 2.5 billion new common shares of GERI at a price per share of P2.26 . This represents about 29.4 percent of GERI’s outstanding shares. At present, GERI is directly controlled by Alliance Global Group Inc. with a 63.7 percent interest.

At the same time, Megaworld subscribed to 1.2 billion common shares of ELI, a pioneer in transit-oriented developments, township and mixed-use developments, at P1.05 per share. This represents an additional stake of 9 percent in ELI, where Megaworld already has an interest of 78.8 percent as of the end of March.

In the meantime,  Megaworld earlier increased its stake to 100 percent in Suntrust, which develops affordable homes and master-planned communities in Cavite, Laguna and Manila.

The group-wide restructuring was preceded by speculation a few months ago of a consolidation exercise similar to that currently being undertaken by the SM group with its property units, which will be folded into listed SM Prime Holdings.

But Eagle Equities president Joseph Roxas said the Megaworld move was not the same as that of SM. “I don’t think there are plans to delist any of these units,” he said.

The motivation for consolidation is likewise seen different. The SM group is consolidating its property units to create a leading market position, boost fund-raising capability and harness synergies from rental and property development revenues.

In the case of Megaworld, Roxas said: “I think they’re just trying to gain larger share in something which will make money in the future.” Doris C. Dumlao