REIT rules out by next year

MANILA, Philippines — The Philippine Stock Exchange (PSE) expects to finally come out with the implementing rules of the Real Estate Investment Trust (REIT) Law by next year.

In a chance interview, PSE president Ramon Monzon said they are just waiting for the final IRR from the Securities and Exchange Commission (SEC).

Monzon said several REIT companies are already excited to list at the stock exchange and are just waiting for the rules.

The SEC, for its part, has already completed the final draft for the implementing rules of the Real Estate Investment Trust (REIT) Law which will reduce the minimum public ownership to 33 percent from 67 percent.

SEC associate commissioner Ephyro Luis Amatong said they are now coordinating with the different agencies to align the provisions on the minimum public float of REITs.

The SEC, in particular, is coordinating with the Bureau of Internal Revenue and the Department of Finance.

At present, the BIR Revenue Regulation on REIT puts the minimum public ownership at 67 percent for REITs to enjoy tax incentives.

However, the SEC said this would have to be reduced to 33 percent.

SEC chairperson Emilio Aquino said the proposed amendments align with the SEC’s mandate to promote the development of the capital market toward the democratization of wealth and broadening of participation in the ownership of enterprises.

“With the proposed amendments, we hope to develop a viable REIT market that will unlock a deep source of funding for more infrastructure projects in the country along with a lucrative investment opportunity for Filipinos,” Aquino said.

Under the draft amendments, the SEC adjusted the minimum public ownership requirement to the level prescribed by the REIT Act.

“Section 8.1 of the REIT Act provides that a REIT must have at least 1,000 public shareholders each owning at least 50 shares of any class of shares and, in aggregate, at least one-third of the outstanding capital stock.”

The SEC also included a reinvestment requirement for the REIT sponsor or promoter in line with the policy to promote the development of the capital market and Filipino participation in the real estate industry.

A sponsor or promoter that contributes income-generating real estate to a REIT will have to reinvest in any real estate and/or infrastructure projects in the Philippines any proceeds from the sale of REIT shares or other securities issued in exchange for income-generating real estate transferred to the REIT.

To protect the interests of investors, the SEC added a layer of review for related party transactions under Section 9, Rule 5 of the IRR.

In particular, the draft amendment requires the creation of a related party transactions committee.

“Majority of the committee members must be independent directors who shall vote unanimously in approving related party transactions,” the SEC said.