AYALA LAND, Inc. (ALI) said that it is still pushing through with its real estate investment trust (REIT) offering this year.
“Our REIT plans remain as previously communicated,” ALI Chief Finance Officer Augusto Cesar D. Bengzon said in an e-mail to BusinessWorld.
He also said that the company will do the REIT filing and seek all necessary approvals “once the SEC [Securities and Exchange Commission] and BIR [Bureau of Internal Revenue] IRRs [implementing rules and regulations] are finalized.”
The listed property developer said in April that it will be placing its prime Makati Business District office assets under a REIT valued at $500 million. It is targeting to raise about $300 million from its REIT offering.
“Amounts [are] still being finalized but roughly in the range,” Mr. Bengzon said.
If the listing will be materialized, this will be considered as the first REIT vehicle in the country 10 years after the enactment of Republic Act (RA) No. 9856, or the Real Estate Investment Trust Act of 2009.
The SEC is targeting to release the final guidelines for REITs in early 2020.
In 2010, the SEC approved the implementing rules and regulations of the said law, which states that a REIT must have 40% minimum public ownership on its initial year of listing, which should increase to 67% the following year.
However, stakeholders have raised concern over the high level of public ownership as required by REITs, as well as issues on taxation.
The company regulator then pushed for a lower public ownership at 33%, which is also contained in its draft rules released in October. Tax on transfer of real properties at 12% was also removed through RA 10963, or the Tax Reform for Acceleration and Inclusion Act (TRAIN), which was implemented January 2018.
Under the draft rules, all proceeds of a REIT are required to be reinvested into the Philippines to enhance the capital market and to boost participation of Filipinos in real estate.
The regulator is also pushing for the creation of a special committee that will review related party transactions (RPT) for REITs to tighten the agency’s review process. All transactions under this should also be disclosed within three days from execution.
For fund managers, they are required to secure a license from the SEC. They should also have a minimum paid-up capital of P10 million for both domestic and foreign companies, which reduced the latter’s paid-up capital from P100 million at present.
On the other hand, property managers should have a track record of three years from five years at present.
If REITs are found to have violated any of the rules, the SEC is considering to impose administrative sanctions. ALI booked 12% growth in its earnings in the first nine months of 2019 to P23.2 billion backed by robust growth of its real estate business. Revenues grew 2% year-on-year to P121.7 billion, with its real estate business adding P119.7 billion, driven by its office, commercial, and industrial lot sales. — Denise A. Valdez and Vincent Mariel P. Galang