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Bourse pushes reduction in REIT float

[ ] June 21, 2011

THE Philippine Stock Exchange (PSE) wants the Securities and Exchange Commission (SEC) to once again amend the implementing rules and regulations of the Real Estate Investment Trust (REIT) Act, particularly the provision on the minimum public ownership requirement.

In a letter to the SEC, Hans Sicat, PSE president and chief executive, said the original minimum public float requirement of 33 percent would “lessen the competitiveness” of the local REIT industry against its global counterparts.

“Section 8 of the REIT Act states that the Commission may provide a different set of requirements after public hearing, taking into account, public interest, the need to protect investors and develop the country’s real estate investment industry to make it globally
competitive,” Sicat said.

Data provided by the PSE showed that among the countries in the Asean region, the Philippines has the highest public float requirement for REITs at 33.3 percent and ranks second to the United Kingdom if data for the US, Australia and UK were included.

The imposition of a 67 percent requirement within three years from listing will make the Philippine REITs’ regulatory regime the most aggressive in the region, but the “least conducive for investments and cross-border trading.”

“We urge the Commission to also consider the interests of the industry players who play a crucial role in the successful launch of Philippine REITs, and the willingness and ability of the public to absorb a large-scale offering of a new investment product,” Sicat said.

When sought for comment, SEC commission secretary Gerard Lukban said, “We got the letter and it will be taken up by the Commission for appropriate action.”

Singapore requires at least 25 percent of the REIT units issued held by at least 500 shareholders to qualify for listing on the Singapore Exchange, but this may be reduced if the market capitalization is greater than the minimum listing requirement.

In Malaysia and Hong Kong, there are no minimum unit holder requirements, but they are subjected to the listing requirements in their respective bourses.

In Thailand, the number of shares that must be cumulatively offered to the public for sale depends on the paid-up capital of the REIT.

In South Korea, at least 30 percent of the REIT shares must be offered to the public within six months from official permission but until December 2012, only 20 percent of the shares must be publicly held.

The four jurisdictions rated by Ernst & Young as the four largest REIT markets, namely the US, Australia, Japan and the United Kingdom have either a lower or no minimum public float requirement.

Early last month, the SEC released revisions to the implementing rules of the REIT, which now require issuers to sell at least 40 percent of their outstanding capital stock at the initial year, higher than the original 33 percent but lower than the proposed amendment of 51 percent.

The Bureau of Internal Revenue intends to come out with the taxation rules by next month.

The REIT Act lapsed into law in December 2009 but its implementation remained in limbo amid a deadlock between fiscal authorities and corporate regulators over its implementing rules.

In the absence of clear tax rules, potential issuers were unable to come forward and pursue their REIT offerings.

Krista Angela M. Montealegre

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