Tycoon Andrew Tan-led Megaworld Corp. plans to raise as much as P27.3 billion from the sale of a 49-percent stake in a business process outsourcing industry (BPO)-focused real estate investment trust (REIT) called MREIT Inc., which the group is grooming to become Southeast Asia’s largest REIT in terms of portfolio scale.
At the maximum size, this is potentially the largest REIT initial public offering (IPO) to come to the local stock market, edging out curtain-raising AREIT Inc.’s P15.1-billion listing last year and DDMP REIT’s P14.7-billion stock debut last March. It is also potentially bigger than other REIT offerings in the pipeline, which includes RLC REIT’s proposed P26.7-billion offering and Filinvest REIT’s planned P14.9-billion offering.
Based on MREIT’s registration statement filed at the Securities and Exchange Commission on Wednesday, about 1.239 billion common shares, including the overallotment option, would be offered to the market at a maximum price of P22 per share. The base offer size is close to P24 billion.
At the maximum price of P22 per share, dividend yield is estimated at 4.1 percent for fiscal year ending June 2022 and 4.5 percent for fiscal year ending 2023. Assuming a lower offer price of P20 per share, dividend yield is estimated at 4.6 percent for 2022 and close to 5 percent for 2023.
MREIT would have in its portfolio 10 properties, worth P55.6 billion, covering 224,430 square meters of leasable space in three of Megaworld’s most valuable townships: cyberpark pioneer Eastwood City in Quezon City, McKinley Hill in Taguig City and Iloilo Business Park.
“We selected them for the quality of the buildings: the best in quality, best in class. We selected them for diversity, which includes the location, building types, the size. And we’ve also chosen only those with the best quality tenants, superior BPOs. There are no POGOs (Philippine offshore gaming operators), purely BPOs,” said MREIT president Kevin Tan, who is also chief strategy officer of REIT sponsor, Megaworld Corp.
BDO Capital, Credit Suisse (Singapore Ltd.), UBS AG Singapore and DBS Bank were mandated as joint global coordinators for the IPO. BDO Capital is the domestic lead underwriter.
Tan said MREIT was a way for Megaworld to partake of values to be unlocked from its mature townships, whose office towers had proven to be resilient during the prolonged COVID-19 pandemic. Eventually, he said MREIT could be bigger than any other REIT in the region in terms of leasable commercial property as more assets are infused into the portfolio.
“Today, these are 10 properties (folded into the REIT) but Megaworld has 70 buildings. We have 1.4 million square meters (of leasable space) and every year (prepandemic), Megaworld builds 100,000 square meters (of additional office space),” Tan said.
As an asset class, REIT gives investors the option to invest directly in finished products that are already earning money, such as offices, hotels, shopping malls, dormitories, infrastructure ventures like toll roads and power plants.
The Philippine REIT law of 2009 requires the distribution of at least 90 percent of income annually, giving investors an alternative yet attractive platform. For the property developer, it is a way to recycle capital to build more projects.