MREIT buys four office towers from its parent for P9.1 billion

 

The MREIT [MREIT 18.32 0.11%] board approved the purchase of 4 office towers, with 55,700 sqm of gross leasable area (GLA), for P9.1 billion in cash from its parent company and sponsor, Megaworld [MEG 3.06 0.66%].

The new towers will bring MREIT’s portfolio up to 280,131 sqm of GLA and will enter the portfolio with 99% occupancy.

MREIT said that the purchase price will be paid in cash to MEG upon the completion of the Deed of Absolute Sale, which it expects to happen on December 29, 2021.

MREIT will fund the cash purchase using a 10-year fixed-rate loan for P7.25 billion, and even after full usage of this loan, MREIT’s total debt will only be at 12% of its deposited properties (much lower than the 35% REIT Law cap).

MREIT refers to this transaction as the “first wave” of acquisitions as part of MREIT’s goal to add over 100,000 sqm GLA to its portfolio before the end of next year. MREIT said that this transaction will provide an “increase in the distributable income of its shareholders”.

MREIT said that it expects the properties to cause its 2022 annual dividend to rise from P0.95 to P1.00, a 5.6% increase.

MB BOTTOM-LINE

Andrew Tan has always been aggressive in terms of MREIT’s size, and he appears focused on growing it quickly to be one of the largest REITs in SE Asia.

That’s a plan that sounds good on paper and MREIT shareholders are probably going to benefit from the result.

We’ll get a chance at the end of Q1 to see just how much this transaction impacts MREIT’s Q1 distributable income, and whether MREIT’s actual dividends will track MREIT’s estimate of a P1.00 annual dividend.

Playing with the numbers a bit, if we assume the market prices MREIT’s dividend stream at 5.24% (using yesterday’s closing price of P18.32/share), an annualized dividend of P1.00 would imply, at that same 5.24% yield, an adjusted price of P19.10/share, a 4.3% increase.

That’s just a quick estimate using yesterday’s market price and yield to try and reverse engineer what a new dividend rate would imply for MREIT’s stock price; that estimate would change dramatically if market forces pushed MREIT’s yield up or down from the placeholder 5.24% that we used in the calculation.

I just wanted to show how I use my own REIT Tracker data to consume REIT news and make predictions about what that news means. As always, it’s important to do your own research and come to your own conclusions. Double-check my work!

 

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