More REIT issuances expected as government relaxes rules
By Denise A. Valdez, Reporter
THE government has relaxed its requirements for real estate investment trusts (REITs) in hopes of attracting the Philippines’ first issuer nearly 11 years since the REIT law was passed.
In a launching event of the REIT Act’s implementing rules and regulations yesterday, the Securities and Exchange Commission (SEC) said it had accepted the proposal last year to reduce the minimum public float for REITs to 33% from 40% and to require the reinvestment of proceeds from issuances back to the Philippines.
In his presentation of the salient points of the guidelines, SEC Commissioner Ephyro Luis B. Amatong said REIT issuers must reinvest the proceeds of an issuance back to the country within one year from the receipt of proceeds, whether in the real estate sector or infrastructure sector.
The Bureau of Internal Revenue (BIR) also amended its revenue regulations to accommodate REITs. Companies registering as REITs may be exempted from value-added tax and will no longer be placed in escrow.
The Philippine Stock Exchange, Inc. (PSE) likewise changed its listing and disclosure requirements for REITs. The minimum paid-up capital is reduced to P300 million, annual dividends are set to at least 90% of distributable income, and quarterly investment reports and a final investment report are required to be filed.
PSE President and Chief Executive Officer Ramon S. Monzon noted REITs must only invest in real estate located in the Philippines. Any offshore investments may only be made through a special authority from the SEC.
“We finally resolved the issues that hindered the Philippine REIT to take off,” Finance Secretary Carlos G. Dominguez III said.
“This is really meant to be inclusive, to make sure that the entire country can participate rather than just Manila moguls,” he added, referring to the possibility for REIT issuances to attract provincial mall and apartment developers because of the P300-million capital requirement.
Listed property developers Ayala Land, Inc., DoubleDragon Properties Corp., Megaworld Corp. and Century Properties Group, Inc. have previously expressed interest in issuing REITs. Mr. Monzon said he expects the first REIT issuance to take two months at the earliest.
The final implementing rules and regulations for the REIT Act is set for publication this week, after which it will take 15 days to be effective.
Republic Act No. 9856 or the REIT Act was enacted in 2009 but drew zero REIT issuances over the past decade because of its tight rules.
Philstocks Financial, Inc. Research Associate Piper Chaucer E. Tan said the release of the REIT guidelines now is expected to attract companies, noting specifically the minimum paid-up capital of P300 million.
“With these amendments, most especially the adjustment (of the minimum paid-up capital) from P500 million to P300 million, we think more companies will be attracted to be listed in REIT,” he said in a text message.
He added investors are expected to “build excitement” because REIT listing is a new product offering in the PSE.
But Regina Capital Development Corp. Head of Sales Luis A. Limlingan noted some investors may worry about exposure before getting into REITs.
“Those that have a cap will probably reduce (their exposure) if they’ve reached their max to get into REITs,” he said in a mobile message.
After the release of REIT guidelines, SEC Chairperson Emilio B. Aquino told reporters the commission will now focus on finalizing its guidelines for cryptocurrencies, which he hopes will be finished within the first half of the year.
“We have the draft. We gathered all the comments. Yun na ang next [That’s next]. Expect very, very soon,” he said, referring to the release of the guidelines on digital offerings.
