Megaworld group-sponsored real estate investment trust (REIT) MREIT Inc. is gobbling up new property assets, valued at P9.1 billion, comprising four prime office buildings in Philippine Economic Zone Authority-registered zones in Iloilo and Taguig.
This infusion of new assets from sponsor Megaworld Corp. would beef up the value of its property portfolio by 19 percent to P58.5 billion, MREIT said in a press statement on Thursday.
The deal would fold into MREIT Two Techno Place, Three Techno Place and One Global Center, which are all located in Iloilo Business Park, and World Finance Plaza in McKinley Hill in Fort Bonifacio.
The four prime office properties have a combined gross leasable area of 55,700 square meters, increasing MREIT’s footprint by 25 percent to around 280,000 sq. m.
Growth journey
With an average occupancy rate of 99 percent, the new assets are expected to start contributing to MREIT’s revenues upon the deal’s closing before year-end.
This investment would be funded by new borrowings. MREIT’s board approved a 10-year term loan facility amounting to P7.25 billion with a local bank.
“This transaction marks the beginning of our significant growth journey. We do not have any debt on our balance sheet at the moment, so we decided to lever up in order to take advantage of the current favorable interest rate environment and enhance our returns. Consequently, the infusion of these prime assets will result in a 5.3-percent increase in our expected dividends for calendar year 2022 from P0.95 per share to P1 per share,” said MREIT president and CEO Kevin Andrew Tan.
To minimize volatility in interest costs, MREIT opted for a fixed-rate loan term. The balance of the acquisition cost would be covered by the company’s existing cash.
Upon full drawdown, MREIT’s total debt would translate to 12 percent of its deposited properties compared to the cap of 35 percent mandated by the REIT enabling law for an unrated borrower.
If MREIT would obtain a credit rating from a duly accredited or internationally recognized rating agency, the borrowing limit can go up to 70 percent of deposited property value.
MREIT aspires to be the country’s fastest-growing office REIT and build a total portfolio of 500,000 sq. m in gross leasable area by 2024 and grow this to 1 million sq. m before the end of the decade, making it one of the largest office REITs in Southeast Asia.