The Securities and Exchange Commission issued the draft amendments to the implementing rules and regulations of the Real Estate Investment Trust law, a move that could finally see the new asset class take off 10 years after the law has been passed.
One of the salient amendments to the IRR of the REIT law is the reduction in the minimum public ownership to 33 percent from the current requirement of 40 percent in the first year of listing and an increase to 67 percent on the second year.
The SEC will also require REIT companies to reinvest in the Philippines the proceeds to be realized from the sale of REIT shares or other securities.
“The proposed amendments align with our mandate to promote the development of the capital market toward the democratization of wealth and broadening of participation in the ownership of enterprises,” said SEC chairperson Emilio Aquino.
“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,” he said.
Property and infrastructure developers have shunned REIT for the past 10 years because of taxation issues, especially on the transfer of real estate assets to a REIT vehicle and the high minimum public ownership requirement.
While the taxation issues have been resolved with the passage of package 1 of Tax Reform for Acceleration and Inclusion Act, it is now only that the SEC agreed to ease the public ownership requirement.
The SEC gave concerned parties were until Oct. 18 to give their comments on the draft rules before issuing the final amendments to the IRR of the REIT Law.
Ayala Land Inc. has expressed interest in conducting REIT offering even under the current rules, while some property firms are awaiting the reduction in minimum public ownership requirement before finalizing their plans.
Among the firms waiting for the amendments on the public ownership requirement are Double Dragon Properties Inc., SM Prime Holdings Inc. and Megaworld Corp.
The REIT law allows real estate companies to sell through an initial public offering shares of real-estate trusts that hold assets like shopping malls and office buildings. Since these assets generate a steady stream of income, they will pay regular dividends to shareholders.
REIT could also boost liquidity in the local stock market.