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Bourse approves REIT listing rules

Posted on 07:48 PM, June 25, 2010 [ BusinessWorld Online ]

THE PHILIPPINE Stock Exchange (PSE) has approved listing rules for real estate investment trusts (REIT), paving the way for the creation of these new investment instruments.
In a statement Friday, the bourse said the rules, which were approved Wednesday, should spur the interest of the investing public on REITs, which will use pooled capital of investors to buy and manage income-generating property and mortgage loans.
"We are optimistic that the launch of REITs in the Philippines will generate significant interest from investors both here and abroad as real estate prospects are looking good given that the economic recovery is expected to promote commercial activity and restore investor confidence," Val Antonio B. Suarez, chief operating officer of the PSE, said in the statement.
The REIT listing rules will be endorsed to the Securities and Exchange Commission (SEC) for approval.
Under the rules, a REIT company is required to have 1,000 shareholders holding 50 shares each and a minimum P300 million in capital.
Last month, the SEC approved the final rules that will implement the REIT, whose legal basis is Republic Act No. 9856 which lapsed into law last December.
Mr. Suarez said the property market will benefit from low inflation "that will keep the prices of goods stable and keep the patronage of retail malls steady."
"The residential property market shall also remain upbeat due to the steady increase in remittances of overseas Filipinos," Mr. Suarez added.
The listing procedures state that:
    * a REIT must be a stock corporation with income-generating real estate assets;
    * it must also have a dividend policy of distributing annually at least 90% of profits to shareholders;
    * at least 75% of the deposited property of the REIT must be invested in, or consist of, income-generating real estate; and
    * at least one-third of the board of directors of a REIT must be independent directors.
Property giants have already expressed interest to acquire funds through the new investment vehicle. SM Prime Holdings, Inc., the country’s largest mall operator, last week said it was looking to raise as much as $600 million through a REIT. Last month, Ayala Land, Inc. also said it wanted to raise $300 million from REITs.
Mr. Suarez said that in 2009, the aggregate market capitalization of listed firms engaged in real estate jumped by 56.5% as markets recovered and stock valuations increased. "The current economic conditions coupled with the appropriate legal and regulatory framework in place creates a very conducive environment for the launching and introduction of REITs in the Philippine market," he added. -- Neil Jerome C. Morales
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