Angara bats for listing of real estate investment trust funds

Sen. Edgardo Angara is backing a plan that will allow the listing of real estate investment trust (REIT) funds in the local bourse as part of efforts to strengthen the financial system and expand the financial products available to the investing public.

At the sidelines of the Philippine Real Estate Investment Trust Forum held yesterday, Angara said the concerned regulators should start laying down the framework on how to go about the listing of REITs and the necessary regulations to ensure the protection of the investing public.

"It’s better to start right now. It’s an excellent instrument. There’s around $80 billion sitting in banks that should be invested in other instruments," Angara said.

Angara said he will craft an enabling law for REITs but this, he said, would probably happen next year. "It’s a long way to go. The instrument has to be created through legislation."

Ayala Land president Jim Ayala, for his part, said the REIT facility will help inject liquidity in the property market.

REITs are companies that manage portfolios of property investments, earning money from rent and other fees – and paying out much of their annual income in the form of dividends to stockholders.

They seek to obtain a favorable long-term return through both capital appreciation and current income by investing primarily in the equity and fixed-income securities of companies involved in the real estate industry.

REITs are being offered in stock exchanges in Japan, Singapore and Australia.

Many studies have shown that investing in real estate provides investors with the potential for increased dividend income as well as the potential for reduced overall portfolio risk and higher returns.

For individual investors who want to put money into real estate, REITs offer perhaps the most accessible path without any of the expense and difficulty of buying properties directly.

REITs can invest in a wide variety of real property including shopping malls, office complexes, apartment buildings or hotels. They can also invest in mortgages on real estate properties.

For investment purposes, ownership of these properties is sliced up into shares and traded on the stock exchange. REITs invest directly in these properties and pass the income and capital gains on to the shareholders.

Philippine Stock Exchange president Francis Lim said the listing of REITs which are available to investors in Hong Kong and Singapore, would provide the public with more investment options other than equities.