Leading local office landlord and cyber park pioneer Megaworld Corp. has halved its exposure to Philippine offshore gaming operators (Pogo), an industry whose exponential growth was thwarted by a confluence of factors from local tax regime changes to a gambling crackdown in China and pandemic-induced travel restrictions.
The share of Pogos to Megaworld’s total office portfolio is now just 6 to 7 percent from a prepandemic peak of 11 to 14 percent, according to Megaworld executive vice president and chief strategy officer Kevin Andrew Tan.
None of the office properties with Pogo occupants has been included in the portfolio of MREIT Inc., the group’s real estate investment trust (REIT) applying for a P27.3-billion initial public offering (IPO), potentially the largest REIT listing in the country.
MREIT’s portfolio is mostly driven by office properties occupied by high-quality business process outsourcing (BPO) firms, according to Tan.
More clarity
As the properties were Philippine Economic Zone Authority (Peza)-accredited cyber zones, units vacated by the Pogos were easily taken up by BPOs, Tan said.
“So we’re confident that BPOs are continuing to expand because we’re seeing that firsthand,” Tan said. “We never felt concerns when they (Pogos) left.”
Tan said the group had capped exposure to Pogos from the time the government started discussing changes in the taxation scheme covering the sector.
The government had wanted to slap a 5-percent franchise tax on Pogos but the Supreme Court issued a halt order in January, favoring the legal petition of the Pogo industry.
“This new tax regime gives the entire sector more clarity and some of them are starting to come back,” Tan said. “There’s renewed interest.”
Moving forward, however, Tan said the Pogo industry would still be constrained by international travel bans, given that this industry needed Chinese workers to thrive. Pogos in the country mostly cater to online gamblers from mainland China.
Tan said Megaworld would henceforth deal with Pogos with greater caution, preferring to prioritize instead BPOs, including higher-value knowledge process outsourcing firms.
“We see that as an industry that we want to develop further,” he said. BPOs serving financial services, medical, technology and especially e-commerce sectors have continued to expand, he added.
Thanks to its BPO tenants, Tan said Megaworld’s office property sector was one of two Alliance Global Group Inc. businesses that have bucked the earnings downturn caused by the pandemic. The other pandemic-resilient business is liquor-maker Emperador Inc. INQ