Property players prepare to participate in REIT industry

MANILA, Philippines — Some of the Philippines’ biggest property players are preparing to participate in the real estate investment trust (REIT) industry that may soon be taking off in the country.

They said they are now keenly awaiting the final implementing rules and regulations of the REIT Act to see if it would be viable for their respective companies.

Megaworld Corp., the Andrew Tan-listed property giant said it wants to participate, but would have to see first the final taxation structure.

“We would be interested to eventually participate, but we would really need to see first the final IRR and the incorporation of the positive changes recently made by the Securities and Exchange Commission (SEC),” Alliance Global Group Inc. chief executive officer Kevin Tan told The STAR.

Alliance Global, the conglomerate of Andrew Tan, is also the parent company of Megaworld.

The younger Tan said they welcome the positive changes made by the SEC such as the ownership structure and the exemption on value added tax.

The SEC has agreed to cut REITs’ minimum public ownership (MPO) to 33 percent and the Bureau of Internal Revenue (BIR) has clarified that initial transfers of property to REITs are exempt from VAT as provided by Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Act.

Thus, corporate regulators will amend the existing IRR of the REIT Act of 2009.

Ayala Land Inc. (ALI), the property giant of Ayala Corp., said the company is also waiting for the final IRR.

“We are waiting for the final terms and conditions,” said ALI president and CEO Bernard Vincent Dy.

Robinsons Land Corp. president and CEO Frederick Go told The STAR that the Gokongwei-owned developer is also interested in participating in the REIT.

“But we have to look at the regulations and friction costs first,” Go said.

Philippine Stock Exchange president and CEO Ramon Monzon is optimistic that there would soon be a lot of REIT listings after the government already resolved the major stumbling blocks to the REIT implementation.

The bourse would soon issue guidelines for REIT issuers to ensure that the funds raised from the REIT would stay in the country.

REIT is deemed an important vehicle to generate more investments especially for real estate companies.

However, this was stalled since 2009 by a tight taxation framework.

In December 2009, Congress passed the REIT Act, but none of the major property developers participated with their prospective offerings amid issues on ownership and taxation on asset transfers.

For instance, the government subjected the transfer of assets into REITs to taxation and slapped a 12 percent rate on additional income generated.

It also set the minimum public ownership of such trusts at 40 percent for the first two years of their listing and 67 percent thereafter.

The Aquino government had imposed stringent REIT rules to prevent entities from taking advantage of the tax incentives.

Monzon said REIT listings would definitely help improve liquidity in the market especially now that the local bourse needs more volume.