THE Securities and Exchange Commission (SEC) is drafting amendments to the real estate investment trust (REIT) rules to expand and clarify what qualifies as income-generating assets, allowing more companies, including those in the power, infrastructure, and telecommunications sectors, to list under the framework.
“Well, it’s a work in progress. In fact, I was just talking to one of the participants following up. Because we have our own ideas on how to liberalize the REIT Rules,” SEC Chairperson Francisco Ed. Lim told reporters on Wednesday last week.
Mr. Lim said that among the proposed amendments is the enumeration of asset types to avoid confusion and disputes over what constitutes an income-generating property.
“For example, we will define what the income-generating assets are. We will enumerate them in order to minimize issues — what is really an income-generating asset. For example, the electric towers attached to the ground — that’s income-generating. That can be a REIT-able asset,” he said.
“The toll roads — although the company is not the owner, but it has a real right to operate the highway in that long piece of land — that’s a REIT-able asset,” he added.
Power plants and cell towers are other examples cited by the SEC as qualifying assets.
“For example, power plants and cell towers can be characterized as REITs because, under the law, they are considered immovable properties. Real estate assets are immovable properties; therefore, by definition, under the Civil Code, they are real property,” Mr. Lim said.
“Therefore, if they generate income on a regular basis, that’s a REIT-able asset,” he added.
Republic Act No. 9856, or the REIT Act of 2009, provides tax incentives to REITs, which are companies that invest in income-producing properties. REITs allow investors to participate directly in completed, revenue-generating projects.
Under the REIT framework, at least 75% of a REIT’s deposited property must consist of income-generating real estate, including those held under freehold or leasehold arrangements.
The SEC said the broader interpretation aims to encourage more companies to list their income-generating properties, offering greater investment and growth opportunities in the sector.
“We are expanding the definition so that more companies will be able to list,” Mr. Lim said.
In July, the SEC chair said the commission was planning to revise REIT rules to bolster the Philippine capital market by widening the range of eligible assets, extending the reinvestment period, and encouraging broader participation. — Alexandria Grace C. Magno
