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Hike REIT public float to 51% or lose perks, developers told

Posted on 08:48 PM, November 21, 2010 [ BusinessWorld Online ]
THE GOVERNMENT will not grant tax perks to property firms that do not want to sell 51% of planned real estate investment trusts (REITs), keeping its hardline stance on the lingering dispute.
The Philippine Stock Exchange (PSE), for its part, will continue to negotiate with the government for a compromise.
Analysts meanwhile said the Finance department’s insistence on a 51% public float for REITs might derail plans of the property industry to tap the new investment scheme for expansion.
Finance Secretary Cesar V. Purisima told reporters property firms can do “whatever they want.”
“No incentives,” he added. “I just want the spirit of recycling of capital realized. And recycling means more than 50% [float].”
Last week, Mr. Purisima met with Senator Edgardo J. Angara and Securities and Exchange Commission (SEC) Chairwoman Fe B. Barin to discuss the REIT law.
The SEC is reviewing the rules on REITs based on comments submitted by industry players. This stemmed from 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, up from the required 33.3% under the law.
“They just want to get their incentives,” Mr. Purisima said. “They are great companies, [but] they are just trying to make more money unfortunately at our expense,” he added.
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 going public.
But the law has yet to be implemented in the absence of tax rules from the BIR, which is under the Finance department.
“I hope we can discuss the positions in a venue in which all capital market development players are there to discuss with the secretary of Finance,” PSE President Val Antonio B. Suarez told reporters last week.
The Capital Market Development Council, which includes the Bankers Association of the Philippines and the PSE, will have a meeting today.
Mr. Purisima and the Financial Executives Institute of the Philippines head the body.
Rex C. Drilon II, former chief operating officer of Ortigas & Co. Ltd.
Partnership, said Mr. Purisima was only making sure fly-by-night companies do not take advantage of the tax perks.
But he said in a phone interview the law should be implemented “right away and let the market later on to dictate how to adjust.”
Astro C. del Castillo, managing director of brokerage firm First Grade Holdings, Inc., said the Philippines would be left behind without REIT perks.
“It is a setback for the government because this meant added revenues,” Mr. del Castillo said, referring to $1 billion in fresh capital expected to be channeled into new infrastructure projects. -- N. J. C. Morales
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