No POGOs in Megaworld REIT portfolio
MANILA, Philippines — Property giant Megaworld Corp. said its real estate investment trust (REIT) offering will feature a portfolio free of Philippine offshore gaming operators (POGOs), in a bid to offer less risks to investors.
In an interview with The Star, Megaworld chief strategy officer Kevin Tan said there are currently no POGO locators across its subsidiary MREIT Inc.'s portfolio of office buildings.
"There are zero POGOs in our REITs because it is very risky," said Tan, who is also the president and chief executive officer of MREIT.
Tan emphasized that even a minute percentage of POGO can greatly influence the outcome of any REIT since there's still a lot of volatility in the sector.
"Whenever they pull out, there’s a significant amount of downtime involved, which affects the rental revenues of any building," Tan added.
As REIT investors consider the profile of a building's tenancy as well as the stability of its occupancy before buying into a particular office REIT, having zero POGOs in its buildings may boost the attractiveness of MREITs to investors.
In addition, this could also help MREIT capture investors who value environmental, social and governance (ESG), who would shy away from building with gaming operations.
Tan stressed that the shift away from POGO locators is not only exclusive to office buildings included in MREIT, but is also a strategy already being implemented across Megaworld's entire portfolio.
"In the case of Megaworld, we have definitely been reducing our overall exposure to POGOs. Now, there’s less than 5% exposure for the Megaworld portfolio, and it’s steadily going down," Tan explained.
He shared that the company recently replaced a POGO tenant in its Southwoods City township in Laguna with a larger Business Process Outsourcing (BPO) client that took 10,000 square meters.
"That’s just one example of our commitment to shift away from POGOs," Tan said.
This reduction in POGO tenants in Megaworld's entire office portfolio is a move that may also benefit MREIT investors in the long term, as these developments may be included in the latter's portfolio in the future.
Tan said that MREIT's current portfolio is merely 16% of Megaworld’s total assets, which means there's a significant runway for growth down the line.
"You can just imagine how we can grow this REIT in the years to come," Tan said.
MREIT's portfolio consists of 10 office assets with an aggregate gross leasable area of 224,430.80 square meters located in three prime townships of Megaworld—Eastwood City in Quezon City, McKinley Hill in Taguig City, and Iloilo Business Park in Mandurriao, Iloilo City.
Megaworld said the three townships are currently home to around 200,000 BPO and other office workers.
The MREIT portfolio of assets include 1800 Eastwood Avenue, 1880 Eastwood Avenue, E-Commerce Plaza, One World Square, Two World Square, Three World Square, 8/10 Upper McKinley, 18/20 Upper McKinley, One Techno Place, Richmonde Tower and Richmonde Hotel Iloilo.
"More than the size of this REIT, what is more important is to consider how big the public float is," Tan said, adding a high public float speaks volumes about the company's objective to be transparent.
"In the case of MREIT's initial public offer, the public float is about 49%," Tan said.
"Because of this, and with the size of MREIT’s offering, we need to be mindful of how big this REIT will be," Tan added.
Aside from being clean of POGOs and ensuring transparency, Tan emphasized that Megaworld's reputation as the leader in terms of office space—with a portfolio of 1.4 million square meters of office space-- as well as the strategic locations of the properties in REIT's portfolio are other reasons why investors should buy into MREIT.
"A great majority of MREIT’s assets are located within Metro Manila, which continues to be the center of the Philippine economy since 70% of the Philippines gross domestic product (GDP) is focused here. The BPO sector is also growing the most in Metro Manila," Tan said.
He added that eight out of our 10 of its MREIT assets are located in Metro Manila, five of which are in Fort Bonifacio—an area that commands the highest office rent in the country.
Tan also pointed out that MREIT’s assets are all located within three of Megaworld's most mature townships to date—which make it truly a ‘township’ in nature.
"All these factors tell you how we’ve put a huge emphasis on offering only our best assets on MREIT to make it a truly advantageous," Tan said.
"Our goal is to be one of the largest REITs in Southeast Asia in terms of floor area. We are very confident that we can do this because we have the assets and we have the portfolio to achieve it," Tan said.
On August 9, the Philippine Stock Exchange approved MREIT's application for an initial listing of 2.5 billion shares under the PSE's main board, including the shares subject to the company's initial public offering (IPO).
Under the IPO, REIT sponsor Megaworld will offer up to 1.078 billion existing common shares.
BDO Capital & Investment Corporation (BDO Capital), Credit Suisse (Singapore) Ltd., UBS AG Singapore Branch, and DBS Bank Ltd., were mandated as Joint Global Coordinators for the IPO and BDO Capital as Domestic Lead Underwriter.
Based on the preliminary offer term sheet, pricing of the IPO is expected on September 9.
The offering is expected to run from September 14 to 20, listing date is scheduled on September 30.
A week before the PSE approval, MREIT also secured approval from the Securities and Exchange Commission (SEC).
Megaworld said earlier that it plans to invest the proceeds from MREIT's offering to complete 21 new office and commercial projects across 11 townships in the country.
These projects include 15 office developments, particularly in Uptown Bonifacio and McKinley West in Taguig City, Arcovia City in Pasig City, Iloilo Business Park in Iloilo City, The Upper East in Bacolod City, Capital Town in Pampanga, The Mactan Newtown in Cebu, and Davao Park District in Davao City; five lifestyle malls in The Upper East and Northill Gateway in Bacolod, Capital Town in Pampanga, Maple Grove in Cavite, and Highland City in Rizal; and one hotel in The Mactan Newtown.
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