March 21, 2014

GERI forays into mall and office leasing operations

In its disclosure to the Exchange, Global-Estates Resorts Inc (GERI, Not rated) said its subsidiary Southwoods Mall Inc (SMI) has signed a deal that would pave the way for its foray into mall operations. SMI has entered into a memorandum of agreement to lease 1.9hectares of land from SouthwoodsEcocentrum Corp on which it will build a shopping mall and a commercial building for business process outsourcing companies and other retail establishments.

Our take: This is part of GERI’s 561-hectare Southwoods City township project that will be master-planned and designed by Megaworld Corp. Given GERI’s extensive landbank, it has the capacity to pursue similar projects that should provide a further boost to its recurring income base. We note that in 9M13, GERI derived 30% of its operating revenues from recurring sources such as rental income, hotel operations and service fees.

Any further enhancement to GERI’s earnings and valuations (we earlier estimated GERI’s net asset value at P2.81/sh based on conservative assumptions) as a result of greater asset utilization should also benefit Alliance Global Group Inc (AGI, which owns 49% of GERI) and MEG which has a 23% stake in the company. The group has earlier indicated plans to consolidate all of its property-related assets under MEG. – WealthSec