PSE: REITs ok to boost asset market

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Wednesday, 04 March 2009 17:08

THE Philippine Stock Exchange (PSE) has lauded the Senate’s approval on third reading of the so-called REIC bill, which allows investors a wider participation in the ownership of real estate and related assets. REIC stands for Real Estate Investment Company. PSE president and chief executive officer Francis Lim said the REIC bill, when enacted into law, will be among the market-friendly legislations recently signed into law, such as the Personal Equity and Retirement Account Act and the Credit Information System Act. “The approval by the Senate of the bill brings the country a step closer to putting in place a system that will significantly enable ordinary Filipinos to share in the ownership of income-generating real estate,” Lim said. The REIC bill allows the establishment of a corporation for the purpose of owning income-generating real-estate assets and real-estate-related assets, whose shares of stock will be made accessible to small and large investors alike. The REIC bill will help develop the country’s infrastructure system, such as highways, airports, bridges and tollways; boost tourism with the construction of shopping centers, more hotels, condominiums, hospitals; and, at the same time, address the growing need for office spaces, especially with the boom of the busines-process outsourcing industry. The proposed law mandates the listing of these stocks in a stock exchange to enable the general public to participate, through equity ownership in the REIC and enjoy a stable source of dividend income. A REIC must be owned by at least 30 percent by the investing public and it must distribute annually at least 90 percent of its distributable income to its shareholders,” Lim added. “Under the law, ordinary Filipinos will not only own a part of a mall or hotel but will also share annually in the income of these establishments. I believe the REIC system is a win-win for our economy because it presents an attractive investment vehicle for local and foreign investors, thereby accelerating the growth of the local stock market,” he explained. Sen. Edgardo Angara, principal author of the law, earlier emphasized the significance of institutionalizing REIC, also known as Real Estate Investment Trusts (REIT) in other markets, as a medium by which the country can catch up toward the direction our neighbors are moving. He noted further, “If we fail to introduce REICs in our country, we might find our stock market further lagging behind our neighbors.” He said Asian REIT markets have shown strong growth potential with their combined market capitalization of $68.3 billion in 2008 from only $46 billion in 2006. Asian REITs’ contribution to the total global REIT market capitalization last year, likewise, grew to 11.3 percent from 7.6 percent in 2006. As of 2008 the number of listed REITs in Asia represents close to one-fifth of the total REIT companies listed across the globe. The law will also enhance shareholder value as the tax base for the income tax of the REIC is determined after the dividend distribution. The REIC is mandated to distribute at least 90 percent of its net income to its shareholders. “To give a concrete example, if the net income of the REIC is P100 million and distributes P90 million to its shareholders, it will be taxed only on the P10 million,” Lim said. Senators who joined the period for interpellations were Miriam Defensor Santiago, Joker Arroyo, Aquilino Pimentel Jr., Senate President Juan Ponce-Enrile, Pia Cayetano and Richard Gordon. Senators who introduced individual amendments were Santiago, Panfilo Lacson, Pimentel and Jinggoy Ejercito Estrada. The House version of the bill, authored by Rep. Sonny Angara, was earlier approved by the economic affairs committee of the House of Representatives, chaired by Rep. Red Durano ,and is awaiting consideration by the ways and means committee of the House.