MREIT slashes IPO price to P16.10 a share; dividend yield up

Megaworld Corp.-sponsored MREIT Inc. has priced its initial public offering (IPO) at P16.10 per share, bringing to public hands as much as P15.3 billion worth of shares in a business process outsourcing (BPO)-focused office property investment vehicle.

At this IPO price, the real estate investment trust (REIT) is expected to deliver a dividend yield of at least 5.65 percent for 2022 and 6.1 percent for 2023.

The final IPO price had been slashed by 27 percent from the maximum price of P22 stated in the earlier prospectus.

“The company has decided to price the deal at an attractive level to provide more upside to IPO investors who will be its long-term partners in this new journey,” MREIT president Kevin Tan said in a press statement on Friday. “At the same time, we will be giving them exposure to high quality, fast-growing portfolio of assets.”

The institutional tranche of the offering was oversubscribed by nearly two times the base offer.

“Demand was strong from institutional investors, both foreign and local,” said Eduardo Francisco, president of BDO Capital, one of the joint bookrunners. “Local demand is expected to build up further as retail [market is] waiting for final price.”

Upsize option

About 844.3 million common shares of MREIT will be offered to the public, with an option to upsize by an additional 105.54 million common shares. This means that Megaworld can recycle at least P13.6 billion in new capital and channel the money to new projects. The equity deal can increase to P15.3 billion if the overallotment shares would be taken up within 30 days from listing.

By reducing the final offer price, Papa Securities chief strategist Manny Cruz noted that MREIT’s dividend yield for 2022 and 2023 had improved from just 4.14 percent and 4.5 percent, respectively. This could further improve given MREIT management’s report that occupancy rate as of August was already at 100 percent versus 96 percent to 98 percent in the projections, Cruz said.

“Furthermore, MREIT also disclosed a change in the number of shares to be offered amounting to only P15.3 billion (from P27 billion), bringing implied float upon listing to only 37.5 percent (from 49 percent),” Cruz said. “Our view is that the offering is attractive given the yield that is slightly higher than AREIT’s 5.4 percent,” he added.

Fifth REIT

MREIT’s public offering period will run from Sept. 14 to 20, while listing on the Philippine Stock Exchange will be on Sept. 30. This is the fifth REIT to come to market after Ayala Land’s AREIT Inc., DoubleDragon Properties Corp.’s DDMP REIT, Filinvest REIT Corp. and Robinsons Land’s RL Commercial REIT Corp.

Immediately after the IPO, Tan said Megaworld would retain a 62.5-percent stake in MREIT to capture more near-term and long-term valuation upsides for its shareholders as it actively grows its portfolio while the overall local REIT industry matures.

“MREIT expects both its market cap and float to grow over time as it successfully executes on its aggressive growth trajectory,” Tan added.

Megaworld expects to unlock more values with the impending injection of three buildings into MREIT by early 2022. Proceeds would in turn fund Megaworld’s 21 projects all over the country during the next 12 months, Tan added.