Megaworld Corporation’s Real Estate Investment Trust (REIT) company, MREIT Inc., will be obtaining four new prime property assets totaling P9.1 billion in an effort to boost their portfolio, as reported by Inquirer.
These assets comprise four prime office towers in Taguig and Iloilo with a combined gross leasable area of 55,700 square meters, bringing up MREIT’s total footprint by 25 percent to over 280,000 square meters.
Among the properties included in the acquisition are One Global Center, Two Techno Place, and Three Techno Place, all of which are in Iloilo Business Park; and World Finance Plaza in McKinley Hill located in Fort Bonifacio, Taguig City.
Megaworld will fund these investments through an MREIT board-approved 10-year term loan facility amounting to P7.25 billion financed through a local bank. In an effort to minimize volatile interest costs, MREIT chose a fixed-rate loan term, opting to cover the rest of the acquisition cost with the company’s existing finances.
With a reported average occupancy rate of 99 percent, these new properties are expected to significantly contribute to MREIT’s revenues once the deal closes before the end of the year.
Kevin Andrew Tan, President and CEO of MREIT, says that these purchases were made to enhance returns and take advantage of favorable interest rates. He says the firm expects a 5.3 percent increase in dividends for next year from P0.95 per share to P1 per share.
The rise of REITs
MREIT is striving to be the country’s premier office REIT with a total portfolio of 500,000 square meters in gross leasable area by 2024 and 1 million square meters before the end of the decade, securing its place as among the largest office REITs in the Southeast Asian region.
It’s just one of several companies that have listed REITs on the stock market since the COVID-19 pandemic began last year. Currently, there are five listed REITs: DDMP REIT, Inc., AREIT Inc., Filinvest REIT Corp., MREIT, and RL Commercial REIT, Inc., as reported by BusinessWorld.
REITs are considered practical tools for investing in the stock market and those interested in building and diversifying their investment portfolios.
A REIT is a company that’s set up for the purpose of owning income-generating real estate properties that may yield a return to investors from rental income. These real estate assets include shopping malls, office buildings, serviced apartments, hospitals, hotels, infrastructure projects, and warehouses. REITs must pay at least 90 percent of distributable income as dividends to its shareholders, allowing investors to own its assets at a fraction of the cost.
REIT as a practical investment vehicle
It should come as no surprise that REITs have become a popular investment vehicle for seasoned and novice investors alike. REITs offer high diversification potential, as well as promising yields and relative stability.
As covered in Lamudi Academy’s year-end round-up, among the trends dominating the real estate market at the moment are functional investments and properties located in CBDs, particularly in areas like Pasig, Taguig, and Quezon City. These cities are also where most of the currently listed REIT assets are located.
Furthermore, an article by The Manila Standard reports that the business process outsourcing industry (BPO) is at the forefront of office space demand, with the BPO industry anticipating a revenue increase of 8 percent to $28.8 billion this year alone.
For this reason, the future of REIT investment in the office sector looks quite promising. This is further supported by the fact that the economy is gradually reopening and experts are looking forward to a bullish property market in the near future.
Thanks to the easing of mobility restrictions and the ramping up of vaccination roll-outs in the past few months, the return to office spaces is imminent, making a REIT investment even more attractive in the eyes of investors.
Even with the threat of new COVID-19 variants looming, the Bangko Sentral ng Pilipinas is convinced that the real estate market will recover by next year and remain buoyant, based on an article by PhilStar. An article by Inquirer also notes that JLL Philippines predicts a new bull cycle that will last at least two decades.
Source: Inquirer, BusinessWorld, The Manila Standard, PhilStar