THE Securities and Exchange Commission (SEC) has proposed to amend rules covering the property manager of a real estate investment trust (REIT), in time for the issuance of such a product within the year.
In a notice posted on its website, the SEC said the amendments will cover Rule 7 of the Implementing Rules and Regulation of Republic Act No. 9856, otherwise known as the REIT Law.
Under the rule, a REIT is tasked to appoint a property manager that should be “independent of the REIT, its promoter/s or sponsor/s.”
The SEC is seeking to add provisions that would ensure the independence of the property manager, saying that “majority of the members of the board of the REIT property manager must be independent directors with working knowledge of the real estate industry.”
“The directors (including independent directors) of the REIT and its sponsors/ promoters cannot occupy more than 49% of the board of directors of the property manager,” according to the proposed amendment.
The commission also added a section that defined the “related party transactions committee,” which will review such deals.
“Majority of its members must be independent directors who shall vote unanimously in approving such related party transactions.”
The commission is requesting all interested parties to comment on the proposed amendments until July 4.
SEC Commissioner Ephyro Luis B. Amatong earlier said they can finish the consultation process within 15 days, after which they can approve the guidelines.
Issues on the independence of the REIT’s property manager have been one of three factors that dissuaded real estate industry players from launching such a product. The other two factors are the high minimum public ownership requirement of 40-67%, and the 12% value-added tax on transfer of real properties into the REIT vehicle.
The taxation issue has been removed following the passage of the Tax Reform for Acceleration and Inclusion law last year. On the other hand, while some companies have complained of the high MPO requirement, Mr. Amatong noted that there are some who are willing to comply with this.
For instance, Ayala Land, Inc. said it is prepared to file for a REIT offering under existing rules. It earlier announced that it wants to raise P25-26 billion through a REIT anchored on its prime office assets in the Makati Central Business District.
Once rules on the REIT property manager have been resolved, Mr. Amatong is optimistic that the first REIT listing in the country may finally hit the ground this year. — Arra B. Francia