Megaworld Corp. is infusing into its real estate investment trust (REIT) unit MREIT Inc. its Philippine Economic Zone Authority-accredited buildings Two-Techno Place, Three Techno Place, and One Global Center located in Iloilo Business Park, and One Global Center in Fort Bonifacio, Taguig for P9.1 billion.
The transaction will increase MREIT’s property value by 19 percent to P58.5 billion.
The four office towers have a combined gross leasable area of 55,700 square meters, a combined 280,000 sq.m. addition to MREIT’s portfolio.
“With an average occupancy rate of 99 percent, the infused assets will start contributing to MREIT’s revenues upon execution of the Deed of Absolute Sale before the year ends,” Megaworld said.
The sale will be funded by a loan on MREIT’s part whose board of directors approved the tapping of a 10-year-term loan worth P7.25 billion.
“To minimize volatility in interest costs, the loan will have a fixed rate. Meanwhile, the remaining balance of the acquisition cost shall be paid using the company’s existing cash,” the company said.
Upon full drawdown, MREIT’s total debt will translate to just 12 percent of its deposited properties versus the limit of 35 percent as provided by the REIT Law, the company said.
It added should MREIT secure a credit rating from a duly accredited or internationally recognized rating agency, the limit goes up further to 70 percent.
“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,” said Kevin Andrew Tan, Megaworld chief strategy officer and MREIT president.
“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 P1.00 per share,” Tan added.
