MREIT to acquire P13.15-B in office buildings through share swap

MREIT [MREIT 12.80, down 1.2%; 380% avgVol] [link] announced that it has applied to the SEC to approve a property-for-share swap transaction with its parent company, Megaworld [MEG 1.79, up 0.6%; 136% avgVol], where MREIT will acquire six “Grade A buildings” from MEG in exchange for 926,162,000 primary MREIT shares. The transaction is valued at P13.15 billion (~P14.20/share). The properties that MEG will inject into MREIT are One Fintech Place and Two Fintech Place in Iloilo Business Park, Davao Finance Center in Davao Park District, and Two West Campus, Ten West Campus, and One Le Grand in Fort Bonifacio. The transaction will increase MREIT’s gross leasable area (GLA) by 48% to 482,000 square meters.    

MB bottom-line: This property-for-share swap structure is how the framers of the REIT Law imagined REITs would grow. I’ve seen some comments talking about how the issuance of primary shares by MREIT to MEG dilutes MREIT shareholders; this is true from a voting perspective, but not from a dividend or yield perspective. Starting from the point when the SEC approves the transaction, MREIT will begin generating revenue from these properties, and that revenue will flow into the dividends that MREIT will declare in future quarters. According to my calculations with the PSE’s data, this swap would push MREIT’s public float below the REIT Law’s one-third minimum public ownership threshold to 32.29%, so perhaps MEG will look to sell a small batch of shares in a private placement to prevent the possibility of suspension. Who knows when the SEC will approve the transaction? All I know is that it’s not a good look to get caught flat-footed by a surprise approval, like what happened to Leandro Leviste back when he still owned SP New Energy [SPNEC 1.13, down 0.9%; 45% avgVol]. I’m interested to see how MREIT will react to the shifting fundamentals of the office market. Anyone here tried GPT-4o? Things are changing at a rapid pace. A year ago we were laughing at having text translated into Jar-Jar speak. Today, I had a full 10-minute conversation with GPT-4o (“Sky”) about how to use Google Looker to produce a financial dashboard using my Google Sheets data. 

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