MREIT Inc., the real estate investment trust of Megaworld Corp., will likely generate "steady" earnings this year and the next on the back of above-industry occupancy levels and annual rental escalation rates.

In a report by the Maybank Investment Banking Group released on Wednesday, the Tan-led REIT landlord is expected to grow its earnings by 7 percent this year and 5 percent in 2025, driven by a steady occupancy rate of at least 94 percent.

"We forecast MREIT to post revenue growth of 5 percent and 4 percent in 2024 and 2025, [respectively]," the investment bank said. "MREIT should be able to distribute 97 percent of its distributable income through the fiscal year 2024 estimate."

MREIT booked a 13-percent growth in distributable income to P2.8 billion last year from P2.5 billion in 2022, supported by contributions from new grade-A office towers that began contributing at the start of 2023.

The real estate firm posted a 96-percent occupancy rate in 2023, higher than the 95 percent recorded a year earlier and the industry average rate of 81 percent in Metro Manila.

Maybank said MREIT's weighted average lease expiry of three years "mitigates the risks" posed by the high industry vacancy rate, while a gross leasable target of 500,000 square meters (sqm) would expand its current portfolio by 54 percent.

"MREIT's portfolio is primarily based in Bonifacio Global City, Eastwood Quezon City, and Iloilo City, where vacancies are below-average and rental rates are above-average," it noted.

Value-accretive acquisitions were also seen boosting the company's growth prospects, with Megaworld having approximately 1.2 million sqm of existing office assets that can be infused into MREIT.

On the other hand, downside factors include higher-than-expected vacancies, lower lease escalation rates, and a greater-than-expected degree of non-renewals and pre-terminations, Maybank added.

MREIT President and Chief Executive Officer Kevin Tan earlier said that they would remain focused on delivering growth and quality moving forward.

"We are actively working on expanding our portfolio through the strategic asset acquisition announced last year, allowing MREIT to remain at the forefront of the industry in delivering sustained value to our stakeholders."

Shares in MREIT improved by 0.15 percent to P13 each on Wednesday amid a 0.08 percent increase for the benchmark Philippine Stock Exchange index.