Megaworld Corp., the property development arm of businessman Andrew Tan, on Thursday said its board has approved the infusion of four of its buildings worth about P9.1 billion in Iloilo and Taguig into its real estate investment trust (REIT) Mreit Inc.
Megaworld said these assets are Two Techno Place, Three Techno Place and One Global Center, all in Iloilo Business Park and World Finance Plaza in McKinley Hill in Fort Bonifacio, Taguig.
The transaction will increase Mreit’s property value by 19 percent to P58.5 billion, the company said.
The four office buildings have a combined gross leasable area (GLA) of 55,700 square meters, increasing Mreit’s portfolio GLA by a quarter to around 280,000 square meters.
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, the company said.
To fund the investment, Mreit’s board approved the closing of a 10-year term loan facility amounting to P7.25 billion with a local bank. To minimize volatility in interest costs, the loan will have a fixed rate. The remaining balance of the acquisition cost shall be paid using the company’s existing cash.
Upon full drawdown, Mreit’s total debt will translate to 12 percent of its deposited properties as against the limit of 35 percent provided by the REIT law. 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,” Mreit President and CEO Kevin Andrew L. Tan said.
“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.”
At present, Mreit’s portfolio is composed of 10 office buildings with a GLA of 224,431 square meters. These properties are in Megaworld’s Eastwood City, McKinley Hill, and IloIlo Business Park townships.
The company aims to have a total portfolio GLA of 500,000 square meters by 2024 and will grow this further to 1 million square meters before the end of the decade.