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Bourse insists on lower float for REITs

Posted on January 22, 2012 10:29:18 PM [ BusinessWorld Online ]

OFFICIALS behind the local bourse are looking to restart talks with the Finance department this year on the minimum public float rule for real estate investment trusts (REITs) rules.

“We want to minimize the current public float level for REITs, but not remove it. We already said we know there would be issues that would prevent institutions from participating in REITs,” said Hans B. Sicat, PSE president and chief executive officer, in a chance interview late Thursday.

Republic Act 9856, or the REIT Act, lapsed into law in 2009. It was seen to infuse new capital in the real estate market through broader participation among foreign and local investors.

Last July, the Bureau of Internal Revenue (BIR) ruled that REIT firms must have a 40% minimum public float, to be hiked to 67% within three years from its listing, the highest public float rate for REITs worldwide.

The United Kingdom comes in second at 35%.

New talks with the Finance department agencies would attract corporations to reconsider the REIT market, Mr. Sicat said.

“The imposition of extreme, very high public floats in developing a REIT market was very much of a negative, and has discouraged developers from participating,” he said.

“[The high public float] might be good in theory, but may not be the best thing from a practical perspective. [The PSE’s] own minimum public float is 10%. We have to start somewhere small first,” Mr. Sicat added.

“There are obviously going to be some more discussions, some push and pull along the way. But the argument we will push is simple: we have zero participants,” he said further.

Meanwhile, whatever the final rules may be, these should be made clear to investors, analyst Elizabeth S. Abadillo of brokerage Angping & Associates Securities, Inc. said in a text message. -- Franz Jonathan G. de la Fuente

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