THE Securities and Exchange Commission (SEC) is urging real estate companies to tap the capital market for their growth and funding needs, citing a streamlined registration process.
“Access to the capital market can provide a long-term, cost-effective financing alternative, unlocking new opportunities for expansion and innovation. At the same time, increased real estate activity within the capital market can attract a more diverse pool of investors and contribute to greater market liquidity and resilience,” SEC Commissioner McJill Bryant T. Fernandez said in an e-mail statement on Thursday.
“Given its scale and strategic importance, the real estate sector stands to benefit immensely from deeper participation in the capital market,” he added.
At a launch event on May 21, the SEC introduced the guidelines on Securing and Expanding Capital in Real Estate Investment Transactions (SEC RENT), implemented through SEC Memorandum Circular No. 12, issued on July 16, 2024.
SEC RENT streamlines the registration process for securities issued by real estate companies offering investment contracts through rental pool agreements.
Rental pool agreements are investment contracts in which a property developer sells or offers units in real estate projects — such as condominiums, hotels, or resorts — to the public, provided that buyers contribute the units to a rental pool managed and operated by the company or a third-party operator.
Under such agreements, buyers receive a share in profits based on agreed conditions, typically derived from renting out the units to third parties.
“The growth of the real estate sector and the development of the capital market are mutually reinforcing,” Mr. Fernandez said.
“Accounting for 5.6% of gross domestic product in 2024, the real estate industry continues to be a vital engine of economic development, with strong interconnections to construction, finance, retail, and tourism,” he added.
Under the Securities Regulation Code, the SEC Markets and Securities Regulation Department is mandated to complete its review of registration statements filed by covered companies within 45 days.
“We probably look at securities offering and all these types of capital market sourcing as for the big players alone. Small companies like us traditionally resort into borrowings as source of funds to continue operating our businesses,” Chamber of Real Estate & Builders’ Association, Inc. Vice-President for Housing Affairs Demetrio L. Posadas said.
“Our organization appreciates the efforts being extended by the SEC for now reaching out not only to big developers, but likewise for making us understand that we, small companies, probably have a chance to participate in this capital market,” he added. — Revin Mikhael D. Ochave
