PSE bullish on prospects of REIT after revised rules

The Philippine Stock Exchange said it expects the Real Estate Investment Trust to finally take off after the government issued regulations covering the ownership and taxation requirements of the scheme.

PSE president and chief executive Ramon Monzon said he expects companies to start filing their REIT applications after the amended regulations becomes effective 15 days after publication.

REITs are a welcome addition to our product offerings as they will help our market become more competitive in the region,” Monzon said.

“Potential issuers and investors both retail and institutional have been looking forward to the introduction of REITs in the country given the benefits of both listing and investing in new asset class,” he added.

The Department of Finance, Securities and Exchange Commission, Bureau of Internal Revenue and the PSE launched the amendments to the regulations governing REIT in a joint signing ceremony held Monday.

The DOF and the BIR released a new revenue regulation updating the tax treatment of the REIT transactions, specially on tax incentives for REIT companies and the exemption from VAT on the transfer of the property to a REIT company for its shares of stocks, among others.

The SEC also reduced the minimum public ownership requirement to 33 percent from the previous 40 percent in the first year of listing and to 67 percent within three years.

In exchange for lower public ownership requirement, a REIT company must reinvest all the proceeds raised from the REIT offering in real estate or infrastructure projects within the country within a period of one year.

Finance Secretary Carlos Dominguez III said reinvestment was aimed to ensure the funds invested by Filipinos would stay in the domestic economy and contribute to the improvement of the country’s real estate and infrastructure sectors.

The REIT law allows real estate companies to sell through an initial public offering of 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.

Property and infrastructure developers have shunned REIT for the past 11 years because of the taxation issues, especially on the transfer of real estate assets to a REIT vehicle and the high minimum public ownership requirement.