By Danessa O. Rivera
10/13/2010 [ tribune.net.ph ]
The Bureau of Internal Revenue (BIR) has proposed a 51 percent public ownership instead of 33 percent for a Real Estate Investment Trust (REIT) under the amendments it is seeking with the Securities and Exchange Commission (SEC) on the REIT law implementing rules and regulations.
Internal Revenue Commissioner Kim Jacinto-Henares, on instructions of Finance Secretary Cesar Purisima, also sought other changes in the implementing guidelines for the REIT law.
Under the proposal, Section 5.1 on minimum public ownership should provide that “public shareholders should own at least 51 percent of the outstanding capital stock of the REIT initially, and at least 67 percent on or before the end of the third year of its establishment.”
The proposal noted that justification for such amendment was to be consistent with the avowed policy of the law to make the REIT a public company.
It was also recommended that Section 5.1 (b) provision on capitalization should retain a minimum paid-up capital of P300 million at the time of incorporation “provided the initial 50 percent of its capital shall be invested in the first year in new infrastructure projects and the remaining shall be fully invested in new infrastructure projects or before the end of the third year of its establishment. Provided further, that none of its capital shall be used to pay existing debts.”
The BIR said the proposed amendment will ensure that the policy of RA 9856 or the REIT Act of 2009 to use real estate investment trusts as means to develop infrastructure projects is followed and to prevent companies from deleveraging by using established REIT merely to pay off existing debts.
The BIR has also proposed to delete Section 1 of Rule 4 of the IRR on the appointment of a property manager.
The BIR said “the REIT itself should be construed as a property company that is expected to be an expert in dealing with property management.”
It added that the expertise of a REIT in dealing with property is the major consideration of the public investing in it.
It added a REIT has a name and reputation that has a positive effect on public perception thus contracting the service of a property manager would be “illogical and unreasonable” and “has no place in the REIT structure.”
Meanwhile, the SEC said it will accept comments of participants in the real estate industry, the stock market and other interested parties in the business sector on or before Oct. 29 on the REIT law’s implementing rules.
Earlier, the Philippine Stock Exchange (PSE) said the minimum paid-up capital should be raised to P1 billion or higher from the P300 million capital requirement under the guideline but the 33 percent public ownership provision should be retained.
PSE president Val Antonio Suarez said the law is in place and the bourse will get feedbacks from economic managers on how to protect the country and the government but at the same time allow the REIT proposal to take off.
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