By Danessa O. Rivera
07/18/2011 [ tribune.net.ph ]
Real estate industry firms and investors are seeking a dialog with the Department of Finance (DoF) and Bureau of Internal Revenue (BIR) to tackle the required minimum public ownership (MPO) of a Real Estate Investment Trust and the imposition of the value-added tax (VAT) on the initial asset transfers to bring about a successful and viable REIT environment in the country.
Philippine Stock Exchange (PSE) president Hans Sicat said the PSE welcomed a review of the commercial implications of the rules on both the VAT and the MPO, which the DoF is reportedly considering, as a very positive development.
“The PSE as well as the real estate industry and affected organizations are all willing to dialog with the Department of Finance to have a viable and investment-friendly REIT in order to send the right signals to the potential investors. The PSE is also evaluating the minimum capitalization requirement for REIT listing purposes, for a possible increase to avoid potential abuse,” he said.
While the new 40 percent MPO rule applicable during the first three years of a REIT’s operation is acceptable to the private sector, it is widely believed that the increase of the MPO requirement to 67 percent by the end of the third year from listing (which would require a significant mandatory sell-down by the REIT sponsor) will make it difficult for there to be a viable REIT market in the Philippines. Sicat said the rules should consider that a market overhang of that size could affect even the small individual investors.
Asia Pacific Real Estate Association (APREA) chief executive officer Peter Mitchell echoed a similar view, saying the requirement for a 67 percent MPO within three years remains a very difficult issue and is in fact, the subject of a motion for reconsideration filed with the Securities and Exchange Commission by the private sector property players, including the different associations affected by this requirement. “The MPO requirements in Singapore (10 percent), Australia (25 percent in certain cases), Hong Kong (25 percent) and Malaysia (25 percent) are significantly lower than the 67 percent MPO requirement for Philippine REITs,” he added.
Mitchell further added that in previous conferences hosted or participated in by APREA, there continued to be a very strong interest in a REIT market in the Philippines. In fact, at APREA’s most recent annual Property Leaders Forum in Beijing in April, it was noted that a number of other markets, including China, were interested in passing a REIT law.
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