Vol. XXII, No. 49 [[Business World Online ]
Thursday, October 2, 2008 | MANILA, PHILIPPINES
Banking & Finance
Francis Ed. Lim, Philippine Stock Exchange president and chief executive, inserted the provision in the proposed Real Estate Investment Trust Act of 2008 being discussed at the House of Representatives, saying investors would be protected if investments in complex securities were scrutinized by the Securities and Exchange Commission and the central bank.
"For highly complicated investment products, a special license should be sought from regulators. Such agencies will be able to assess the risks that these REITs are exposing their assets to, and will be able to prevent the possibility of soured investments," he said during a hearing called by the House economic affairs committee on Tuesday.
Under the substitute bill for House Bills (HB) 148, 3566 and 4182, at least 75% of a REIT’s deposited property must be invested in income-generating real estate. Only 25% of its shares can be invested in complex securities.
The committee adopted the provision.
A REIT is a corporation established for the purpose of allowing small and large investors to participate in the ownership of income-producing real estate assets and real estate-related assets.
REITs pools investors’ funds and invests these in real estate ventures. They acquire property and have independent fund managers.
The bill requires REIT firms to be listed on the stock exchange. A new provision that requires them to refund the money raised from investors if they fail to list within a year was also adopted yesterday.
They must also satisfy minimum public ownership requirements, must have a minimum paid-up capital of P1 billion, and distribute a dividend equivalent to 90% of their distributable income.
Aurora Rep. Juan Edgardo M. Angara, one of the authors of the bill, said lawmakers crafted the measure to take the global financial crisis into consideration and have put provisions to protect the investing public.
"There are rules on minimum public ownership to ensure that not only one group will dominate a REIT company and acquire its benefits, there are limited amounts that a REIT can borrow, that is, only up to 35% of its total assets," he said in an interview.
"REIT companies must hire independent fund managers for oversight purposes, and there’s a provision that REITs should fully disclose all party transactions."
The bill also seeks to grant tax incentives, including income tax exemption, to qualified companies. It also wants to exempt from certain taxes the transfer of real property to REITs.
However, Stela B. Montejo, Finance department economist, said REITs should not be exempted from the value-added tax (VAT).
"From a fiscal policy point of view, we can’t find a compelling reason why REIT companies should be treated differently from other investment vehicles. We have to align these investments. REITs should compete, not enjoy an advantage by providing them with exemptions from transaction taxes," she said. — Jhoanna Frances S. Valdez
________________________________________________________________________
