$MREIT’s Real Win: Growing Cash Flow Per Share—Not Just Counting Buildings

 

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Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.

If you’re buying MREIT for dividends, the latest numbers deliver the kind of comfort income investors like: a growing rental base, steady cash generation, and distributions that track distributable income almost to the penny. But therein lies the catch. When a REIT is already paying out nearly everything it can, future dividend-per-share growth becomes less about “discipline” and more about whether the business can expand distributable income per share—after interest costs, lease-linked expenses, and dilution. 

A strong quarter—driven by assets, not alchemy

MREIT’s nine-month story to September 30, 2025, is straightforward: bigger portfolio, higher revenues. Total revenues climbed to ₱4.129 billion, up 33% year-on-year, fueled by newly infused assets that expanded the income-generating base. Rental income alone reached ₱3.148 billion versus ₱2.399 billion a year earlier, while income from dues (net) rose to ₱0.981 billion from ₱0.711 billion—two lines that, together, show the REIT’s operating engine doing what it was designed to do: convert office and commercial spaces into recurring cash flows. 

On the profitability side, net profit came in at ₱2.888 billion, up from ₱2.189 billion in the same nine-month period of 2024, supported by the expanded portfolio and manageable operating costs. Management’s narrative echoes this: growth came from asset infusion and expense control, even amid a “temporary decline in occupancy.” 

The dividend looks safe—because it’s basically a pass-through

The core of MREIT’s income proposition isn’t just earnings; it’s distributable income—the REIT-friendly measure that strips out non-cash items and certain accounting adjustments. For the nine months ended September 30, 2025, MREIT reported ₱2.799 billion in distributable income. In the same filing, it disclosed dividends of ₱2.785 billion declared during the period. 

Read that again: the REIT declared dividends that are almost one-for-one with distributable income. That’s great for yield visibility, and it’s consistent with REIT design. But it also means there’s little room to “increase payout” to grow DPS. If distributable income per share doesn’t rise, DPS doesn’t have much room to rise either. 

The board also signaled continuity in quarterly cash payouts: it approved cash dividends of about ₱0.2505 per share in August 2025 (paid September 11, 2025), and later approved another ₱0.250478 per share in November 2025 (scheduled payment December 19, 2025). The cadence suggests a stable run-rate—yet stability is not the same as growth. 

The real pressure point: financing costs are no longer benign

One of the most material undercurrents in the quarter is interest expense. MREIT’s interest-bearing loan sits around ₱7.216 billion as of September 30, 2025. The loan was repriced to 6.47% per annum (from 3.64% until 2024) beginning in 2025, and that shift shows up clearly: interest expense for the nine months reached ₱397.1 million, a sharp increase attributed to the higher repricing. 

This matters because REIT dividends are ultimately funded by cash flow after financing costs. A higher-for-longer rate environment means the “easy” years of widening spreads between property yields and funding costs may be behind us—unless MREIT can grow net operating income faster than the cost of capital.

A second headwind: lease-linked costs that step up

Another item worth watching is the land lease structure disclosed in related-party notes. Under agreements with Megaworld (and similarly with Davao Park District Holdings, Inc.), MREIT’s land rent is tied to gross rental income: for office/retail/commercial, it was 2.5% until June 30, 2025, and 5% thereafter; for hotels, 1.5% until June 30, 2025, and 3% thereafter. 

There is a temporary cushion: MREIT disclosed an agreement deferring the escalation from 5% to 2.5% starting July 1, 202,5 through December 31, 2025. But the structural direction is clear—over time, the take-rate can rise, and that becomes a recurring drag on distributable income unless offset by higher occupancy, rent escalations, or accretive acquisitions. 

Occupancy: the “free” growth lever still exists

Not all growth requires new assets. As of September 30, 2025, MREIT reported portfolio occupancy of 92%, with a total GLA of 481,404 sqm and a leased area of 441,154 sqm. Inside that headline number are buildings with meaningful whitespace—such as World Finance Plaza at 63% and several others in the 70–80% range. 

If MREIT can lease up these under-occupied assets, that’s among the cleanest paths to DPS growth because it tends to be less dilutive than issuing new shares—assuming the incremental leasing comes at decent spreads and reasonable tenant improvement costs. 

The sponsor pipeline is real—but dividend growth depends on accretion, not announcements

The market’s biggest “DPS growth” catalyst is sponsor-led asset infusion. MREIT disclosed that it filed an application to increase authorized capital stock from ₱5 billion to ₱8 billion (October 20, 2025), linked to a planned share swap for “Target Growth Assets” from the sponsor. The arrangement includes an “average adjusted price” not less than ₱14.39 per share, intended to carry a premium to VWAP across a defined window.

Meanwhile, Megaworld’s own disclosures contextualize the sponsor’s capital recycling: it executed block sales of MREIT shares—84.8 million shares settled July 29, 2025, at ₱13.82 per share (net proceeds around ₱1.158 billion) and 168.6319 million shares settled September 19, 2025, at ₱13.28 per share (about ₱2.24 billion). Megaworld also disclosed progress on reinvestment and the remaining balances tied to these proceeds. 

But here is the central dividend investor’s test: will new assets be accretive to distributable income per share? If the swap issues too many shares (dilution) or brings in assets with yields that don’t clear the cost of capital and rising expense structure, total distributable income can rise while DPS stays flat.

So what should income investors watch next?

MREIT is doing what a REIT should: scaling a portfolio and returning cash to shareholders. The near-1:1 alignment of dividends to distributable income provides comfort—but also sets the growth constraint. 

The next chapter for DPS growth hinges on three measurable things:

1. Lease-up execution in under-occupied buildings (organic growth without dilution). 
2. Financing and cost management in a higher-rate regime and with stepped lease-linked expenses. 
3. Accretive sponsor infusions, where the property yield and deal pricing beat dilution and funding costs.

In other words: MREIT’s dividend is not just a yield story—it’s now a math story. And in REIT math, the winner is almost always the one who grows cash flow per share, not merely the asset count.