Megaworld dumped ~80-M shares of MREIT in block sale

Megaworld [MEG 1.81, up 0.6%; 18% avgVol] [link] disclosed that it sold 79.7 million shares of its REIT subsidiary, MREIT [MREIT 12.58, up 0.2%; 2586% avgVol], in a private placement deal that raised P980 million for Andrew Tan’s real estate development company. The average price of the transaction was P12.30/share, which represented a 2% discount to MREIT’s market price. The sale pushed another 1.5% of MREIT’s outstanding shares into the public float, which increased to 42.98%. The minimum public float for REITs is 33.33%, giving MREIT approximately P3.38 billion in share-swap value that it can spend on acquisitions before needing to use debt or increase its public float. 

MB bottom-line: The quiet private placement has become the preferred method for REIT sponsors (that’s what the REIT’s parent company is called by the REIT Law) to sell secondary shares of their REITs. Prior to this, REITs would either conduct a follow-on offering (as in the case of AREIT [AREIT 33.60, up 1.2%; 67% avgVol]), or do nothing at all (as in the case of DDMP [DDMPR 1.15, down 0.9%; 108% avgVol]). Now, sponsors like AREIT, MREIT, and RL Commercial REIT [RCR 4.99, down 0.2%; 286% avgVol] are able to conduct these stealthy sales to institutional investors. Citicore Renewable Energy REIT [CREIT 2.84, up 0.7%; 64% avgVol] even saw its sponsor sell a significant block to a strategic investor, SM Investments [SM 853.00, down 1.9%; 90% avgVol]. Whatever the case, I think this is just an evolution in how sponsors maintain their REIT asset holdings. The use of private placement block sales to raise money for the sponsor or raise the public float for the REIT subsidiary (or both, who can tell?) has become common enough that investors are no longer shocked by the move and now wait for any pricing opportunities that might arise as a result of one of these sales. 

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