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First REIT issuance expected in two months

January 24, 2020 | 12:04 am []

THE new guidelines for real estate investment trusts (REITs) are set to take effect in the first week of February, after which any possible applicant may take at least two months for the country’s first REIT issuance.

The Securities and Exchange Commission (SEC) published in newspapers of general circulation yesterday the new implementing rules and regulations (IRR) of the REIT Act, three days after it was launched to the press on Monday.

Section 8 of the IRR said the rules will take effect 15 days after the publication, or on Feb. 7.
Ramon S. Monzon, president and chief executive officer of bourse operator Philippine Stock Exchange, Inc. (PSE), said on Monday a company that wants to do a REIT listing may take two months at the earliest to complete all documents needed for such issuance, or by the second quarter of the year.

The REIT guidelines presented earlier this week is expected to drive up interest from property developers to tap the investment vehicle, as the government relaxed the provisions of the REIT Act (Republic Act No. 9856) as enacted in 2009.

This covers the adjustment of the minimum public float for REITs to 33%, lower than the previous requirement of 40% public float within one year and 67% within three years.

The new rules also allowed the exemption from value-added tax for the transfer of property into a REIT vehicle. Minimum paid-up capital for a REIT issuance is set at P300 million.

However, proceeds from any REIT issuance are required to be invested to any real estate and infrastructure project in the Philippines within one year.

The IRR said if the real estate is located offshore, the investment of the REIT must not exceed 40% of its deposited property and must be done only through a “special authority” from the SEC.

Among other allowable investments are in real-estate related assets, corporate bonds of non-property and privately-owned domestic corporations, commercial papers and offshore mutual funds.

In his speech at the launch of the REIT IRR on Monday, Finance Secretary Carlos G. Dominguez III said the new investment vehicle is expected to become a “powerful financial instrument to fund property development and drive the economy forward.”

“We democratize wealth by opening access for thousands of small investors wanting to be shareholders in secure and profitable real estate projects,” he added.

Companies that have previously expressed interest to launch REITs are Ayala Land, Inc., DoubleDragon Properties Corp., Megaworld Corp. and Century Properties Group, Inc. — Denise A. Valdez

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