MREIT Inc. has sealed a P27.01-billion property-for-share swap with its sponsor Megaworld Corp., Travelers International Hotel Group Inc. and Southwoods Mall Inc., adding 12 income-generating properties to its portfolio.
In a disclosure, the real estate investment trust of Megaworld said the parties executed a deed of exchange on Sept. 2 covering 1.64 billion common shares in MREIT and 12 properties with a combined gross leasable area (GLA) of 303,936.21 square meters.
Megaworld subscribed to 1.21 billion shares in MREIT, Travelers International will get 309.37 million and Southwoods Mall, 118.04 million shares.
The shares were priced at P16.50 each, an 18.6-percent premium over MREIT’s 30-trading-day volume-weighted average price of P13.91.
The total subscription price was broken down into P1.64 billion in paid-up capital and P25.38 billion in additional paid-in capital.
In exchange, MREIT will receive 12 income-generating office, commercial, mall and hotel properties from the three asset owners.
“The transaction represents a key milestone to expand MREIT’s real estate portfolio, drive growth in gross leasable area and enhance the long-term distributable income of its shareholders,” the company said.
The properties are the Festive Walk Mall and Festive Walk Annex in Iloilo City; Lucky Chinatown Mall and Lucky Chinatown Annex in Manila; Venice Mall, Science Hub Tower 2, Venice Corporate Center Six West Campus in Taguig; Eastwood Mall and Global One in Quezon City; One Paseo in Pasig City; Holiday Inn Express Manila Newport City and Horizon Center in Pasay; and Southwoods Mall in Biñan, Laguna.
Most of the properties are being transferred with 100-percent ownership, except for Six West Campus, in which MREIT will acquire an 80-percent undivided interest.
MREIT said the properties would begin contributing to its revenues at the start of the quarter once the Securities and Exchange Commission (SEC) confirms their valuation.
The transaction remains subject to the SEC’s confirmation of the property valuation and the additional listing of the primary shares on the Philippine Stock Exchange (PSE).
FTI Consulting Philippines Inc. provided the fairness opinion and valuation report for the transaction. The properties were valued using the discounted cash flow and direct capitalization methods under the income approach.
The property-for-share swap will be pursued as a tax-free exchange under Section 40(C)(2) of the National Internal Revenue Code, MREIT said.
Upon closing of the transaction, Megaworld, Travelers International and Southwoods Mall will maintain joint corporate control over MREIT. As MREIT’s sponsor, Megaworld directly and indirectly owns 53.43 percent of the company.
The latest asset infusion is MREIT’s fifth wave as the company works toward its goal of reaching a GLA of 1 million square meters by the end of 2027.
“The transaction represents the fifth wave of asset infusions in accordance with its investment commitments, geared toward realizing the vision of transforming the company from an office REIT into a diversified REIT, anchored among the most iconic mall and lifestyle assets in the country,” MREIT said.
Shares of the company on Wednesday rose P0.02, or 0.15 percent, to close at P13.60 each amid a 0.67-percent drop for the benchmark PSEi.
