Posted on 08:32 PM, October 17, 2010 [ BusinessWorld Online ]
REGULATORS expect to complete a review of the rules on real estate investment trusts (REIT) next month, following warnings from industry players the country would lose out to China and Thailand because of delays in the REIT Law’s implementation.
The completion of the review on the REIT Law’s implementing rules should encourage the government to finally issue separate tax rules, the head of the Securities and Exchange Commission (SEC) said.
“Ideally [the review should be finished] at the middle of November,” Fe B. Barin, SEC chairman, told reporters late on Friday. “It is our interest that we finish that within the month.”
Last week, the SEC sought comments from real estate firms and stock market players on the Bureau of Internal Revenue’s (BIR) proposal to revise the rules, particularly to force REITs to sell 51% of their shares when they go public to raise capital. The SEC will receive comments until Oct. 29.
As of last week, the SEC has yet to receive inputs from industry players, Ms. Barin said.
“It is only after we have worked on [the review] that tax regulations will come out. What is the use of having the regulations? Investors will also be interested on the tax aspect,” she said.
The REIT law, which took effect last December, establishes the framework for REITs -- corporations that use a pool of investor funds to purchase and manage real estate assets. REITs, which will be given tax perks, can raise money by conducting an initial public offering.
However, the government wants REIT companies to sell 51% of shares to the public, up from the required 33.3% under the REIT rules. The public float should increase to 67% before the end of the third year of a REIT firm’s establishment under the BIR’s proposal.
The government also wants REIT firms to invest 50% of fresh capital on infrastructure projects in the first year and the rest of the funds until the end of the third year of establishment.
“Hopefully on or before the end of the year, the tax regulations will be out but that is outside of our control,” Ms. Barin said.
The Philippine Stock Exchange no longer expects any public listing of REIT companies this year due to delays in the implementation of the law.
Investors are eager to jump on the bandwagon of the new investment vehicle, an analyst said.
“A lot of clients are really waiting for that,” Claire S. Quiray, analyst at Regina Capital Development Corp., said in a phone interview yesterday.
“Having the REIT is having additional listings in the market. The concept looks promising for investors because of dividends from income,” she added.
Property giants have expressed interest in REITs. Late last month, Ayala Land, Inc. set up AyalaLand Commercial REIT, Inc. for its $300-million REIT venture.
SM Prime Holdings, Inc. wants to secure $500 million from the new investment scheme for project expansion. Gokongwei-led Robinsons Land Corp. also wants to tap the REIT law to raise funds.
Ms. Quiray said potential REIT listings early next year might still merit the attention of investors. “It will help if the market is still bullish but [the REIT] is lucrative if the price is right and REIT companies are profitable,” she added. -- Neil Jerome C. Morales
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