Editor’s note: Real estate investment trusts (REITs) is a relatively new investment asset class now available for Filipinos through the Philippine Stock Exchange. Megaworld is among the new and few that offer this investment vehicle that grants investors real estate exposure without the high capital conventional properties demand.
Megaworld REIT, Inc. (MREIT), the real estate investment trust vehicle of township developer Megaworld, will be the last of its class to be listed in the Philippine Stock Exchange (PSE) before the final quarter of the year, and everyone is buzzing around about how to join the initial public offering (IPO).
In case you missed the hype and you are getting hold of your stock broker this week, here is the rundown of the reasons why MREIT could be your next potential investment and become a part-owner of office buildings in Eastwood City, McKinley Hill, and Iloilo Business Park while you sit back and relax waiting for your quarterly rental earnings via cash dividends.
Among all other listed REITS, MREIT's assets injected by its sponsor company, Megaworld, have been carefully chosen and only consist of 10 Grade A office buildings with PEZA accreditation. All of these assets are owned by MREIT as a whole building - with no portions or floors of any building - making them prime assets for the REIT.
Moreover, the locations of these assets have been diligently selected in consideration of the immediate and long-term growth of these areas, and their proven track record for having the most stable, fast-growing rentals that will eventually ensure MREIT's organic growth.
With Megaworld having around 1.2 million square meters of remaining office assets after injecting 224,431 square meters into MREIT, and around 177,700 square meters are still being built as of this writing, MREIT has the most promising, longest runway for growth among the existing REITS in the country. MREIT president and CEO Kevin L. Tan has announced that it is expected to double MREIT's portfolio by 2024 to 500,000 square meters, and eventually reach one million square meters by 2030. By then, the company could be the largest REIT in terms of floor size, not only in the Philippines but in Southeast Asia. Research data show that large office developers in Singapore and Thailand only have around 800,000 to 1,000,000 square meters in their existing portfolio.
It is also good to note that as early as next year, MREIT is expected to acquire close to 100,000 square meters of new office assets from Megaworld, ensuring a dividend boost.
Occupancy rates of MREIT's existing office assets are now close to 100%. This ensures maximum rental revenues for the REIT assets, which can potentially even grow in the coming years.
Megaworld's office buildings are also known for the big names in the IT-BPO industry. This also reflects in the tenant base of its MREIT assets, many of them are tenured tenants or those companies that have stayed in the buildings for 10 to 20 years, just in the case of IBM in Eastwood City. Among the other existing tenants of MREIT's buildings are NTT Data (formerly Dell Systems Phils, Inc.) and WNS in Eastwood City, Refinitiv, Ericsson, Colgate-Palmolive Philippines, and Thomson Reuters in McKinley Hill, and Reed Elsevier in Iloilo Business Park.
MREIT's dividend yield of 5.65% for the fiscal year of 2022 is highly attractive that provides upside to IPO investors because of the high quality and fast-growing portfolio that it offers. By the fiscal year 2023, this can even grow to 6.1%. With a long expansion pipeline that MREIT can acquire from Megaworld, some analysts believe this can potentially be the highest-paying REIT on the Philippine Stock Exchange.
In the most recent report of Leechiu Property Consultants, Megaworld captures the largest inventory of leasable office spaces in the country today. With the company's plan to revive its pre-pandemic launches of 100,000 square meters every year, this can easily bring MREIT sponsor's GLA to 2 million square meters within the decade.
Moreover, Megaworld still retains industry leadership of having the most number of PEZA-accredited office buildings among major property developers today. – Rappler.com