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Developers agree to 40% REIT float

by Jenniffer B. Austria
REAL estate companies are amenable to the planned changes in the implementing rules and regulations of the Real Estate Investment Trust law, including the proposed increase in the minimum public ownership of REITS companies to 40 percent from 33.3 percent, an official said over the weekend.
They had agreed in principle to increase the minimum public ownership as a compromise with the Finance Department and the Bureau of Internal Revenue, Securities and Exchange Commission chairman said.
But the commission was still waiting for clarification on other issues, particularly the 12-percent value-added tax on the initial transfer of property assets to REIT companies to be formed by real estate firms, she said.
The commission and Internal Revenue will need to sit down to iron out all the kinks before the SEC finally issues the new implementing rules.
The Finance Department withheld issuing the REIT law’s implementing rules and regulation last year, citing the need to revise certain conditions of the law’s implementation.
The department wanted the mandated minimum 33-percent public ownership increased to 51 percent initially and to 67 percent in three years, but the private sector balked.
The department also demanded that the investment of REIT funds be limited to infrastructure projects, that REIT funds not be used as debt repayments, and that the role of a property manager in the management of a REIT vehicle be abolished
The department said those provisions would ensure the development of the capital markets and discourage the recycling of capital.
But the department in February said it was open to reducing to less than 50 percent the minimum public float for REIT firms.
The companies that previously expressed interest in forming REIT firms included Ayala Land Inc., SM Prime Holdings Inc., Robinsons Land Corp. and Megaworld Corp.
REITs are entities that will own real estate assets that generate income such as malls, office buildings and hotels. The law provides certain tax incentives to encourage investments in REITs.
To qualify for incentives, a REIT company must be listed, maintain its status as a listed company, and give out at least 90 percent of its distributable income to shareholders annually.
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