MREIT Accelerates Growth Plans with P5.3-B Office Space Acquisition

Megaworld Real Estate Investment Trust (MREIT) will be acquiring four prime office properties within and outside Metro Manila, increasing its assets to P65 billion, as per Rappler

The offices are located in the accredited zones of the Philippine Economic Zone Authority (PEZA), offering a leasable area of 44,567 square meters. The acquisition will bring the total properties of MREIT to 18 and ramp up its portfolio to 325,000 square meters.

In a 2021 press release, MREIT president and CEO Kevin Tan said that they plan to reach half a million square meters by 2024 and become one of the largest office REITs in Southeast Asia. 

Focusing on High-Quality Office Buildings

The purchase of new prime offices worth P5.3 billion is part of MREIT’s P20-billion acquisition plan for 2022. These properties include Festive Walk 1B and Two Global Center in Iloilo Business Park and One West Campus and Five West Campus in Mckinley West, Taguig, all of which were reported to have an average of 96% occupancy rate. 

According to Tan, this is the first time that MREIT will acquire assets from McKinley West, the location of some of the country’s biggest business process outsourcing companies. The township in Taguig has one of the highest rental rates in the Greater Manila Area. 

Tan also said that MREIT’s strategy focuses on high-quality buildings with high-quality tenants. This is why they only include Grade A PEZA-accredited buildings with BPO and multinational tenants in their portfolio. After the firm’s office space acquisition, it will have 100% ownership of the two Iloilo Business Park properties and 80% economic interest in the two McKinley West office buildings.

MREIT plans to buy the properties through the issuance of 263,700,000 MREIT primary common shares with a price of P20 per share.

On Track with Delivering Returns 

According to a Manila Times report, MREIT’s net income for the first quarter of the year ended at P687.2 million, while its revenues hit P901.6 million. Upon reaching a portfolio value of P59.3 billion at the end of the first quarter, Tan remarked that they are on track to deliver on their targeted returns for 2022. This has been possible with the combination of rent escalation, steady occupancy rates, and the firm’s implementation of its acquisition plans. 

MREIT said that it is looking to declare dividends of P1 per share for the entire year of 2022, which is 6% higher than the initial amount contemplated by the company.

Further, MREIT hinted about higher returns because the target doesn’t consider the positive impact of acquisitions that the company plans for this year. Meanwhile, the easing of pandemic restrictions and return to offices may also benefit REITs. 

With the growing number of companies returning on-site, leasing activities are expected to pick up. For the first quarter of 2022, Lamudi saw signs of real estate industry recovery, citing strong commercial property demand in CBD-hosting cities like Makati, Pasig, and Quezon City.

Office Space Demand from IT-BPM Sector 

Earlier, property expert Leechiu Property Consultants (LPC) also projected that office space demand would grow in the next six months. In a report by BusinessWorld, LPC CEO David Leechiu said that there is a good chance of closing 650,000 square meters of office space this year throughout the country. 

He added that despite having tighter restrictions early this year, the office leasing transactions continued to grow. In particular, the information technology and business process management (IT-BPM) sector drove office space demand during the first three months of 2022, making up 39,000 square meters.

For the next six months, LPC said that IT-BPM firms are expected to take up 195,000 square meters. The firm also noted that Metro Manila’s vacancy rate is at 19%, with Makati and Bonifacio Global City having the lowest at 15% and 17%, respectively.

Sources: Rappler, MREIT, Manila Times, BusinessWorld 

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