Market players gear up for REIT, await signing into law

Written by Dennis Estopace & Miguel Camus / Reporters
Wednesday, 30 September 2009 21:10

NEARLY three years after introducing a new investment option, players in the equities and property markets are positioning for the enactment of a Real Estate Investment Trusts (REIT) law very soon. Related story in Properties, page C3.

“When the REIT law is launched, the Philippines will joint the global market in the REIT industry,” said Philippine Stock Exchange (PSE) president Francis Lim in a press conference yesterday. “And with the property companies throwing in their crown jewels, we will be starting on the right track.”

The new measure  will allow companies to list their income producing property assets, such as a mall or even highways, on the stock exchange. This provides an alternative method for a firm to raise capital.
Likewise, Investors can buy shares in these REIT companies, thereby allowing an alternative form of investment. Lim said there must be at least 1,000 shareholders in the REIT company who hold 50 shares each.

Meanwhile, large developers are keen on the REIT and its implications.

In an interview yesterday SM Prime Holdings Inc. executive vice-president Jeffrey C. Lim signaled there is interest from SM Prime to explore this option.

“It’s another form of capital raising. This will allow us to [accelerate expansion] or to look at new business opportunities. We will also have more capital so we can trim debt,” noted Lim.

For his part, Robinsons Land Corp. president Frederick Go said: “The development of REIT is a very interesting development for the Philippine real estate market and it is something that we have to look at.”

Under the current rules, a REIT company will be in the form of a corporation that is mandated to distribute at least 90 percent of net income as dividends to shareholders while the corporate tax of 30 percent will be imposed on remainder of the net income.

Ayala Land Inc.(ALI) chief financial officer Jaime E. Ysmael also welcomed REIT calling it a “good” piece of legislation.

He noted however that nothing is definite as participation will depend on the final rules governing the law. “We will have to wait until detailed rules are clear but it is a good piece of legislation that will benefit the whole industry,” he said.

Meanwhile, PSE’s Lim said: “All the major issues we brought up were addressed in the final version of the bill.”

He expected the Lower House to ratify the bill on Wednesday. “After that, our real work begins.”

Lim added he’s optimistic the law would have implementing rules and regulation within 90 days upon signing.

“Unlike other laws, there’s a provision [in the proposed REIT law] that gives government agencies involved at most 90 days to clarify both the tasks and the regulatory aspects.”

Ysmael is president of the Asian Public Real Estate Association (Aprea) Institute, which launched the certificate program on Tuesday, the day the Senate approved a bicameral version of the REIT bill, according to PSE’s Lim.

The PSE, Aprea, SM Prime, ALI and two other companies broached three years ago the establishment of REIT in the Philippines. The two other firms that supported the entry of REITs in 2006 and the launch of the certification course program are Citigroup and First Metro Investment Corp.

According to the bill, REITs are listed stock corporations that will provide small and large investors with options to participate directly in the ownership, financing and management of large-scale real-estate projects at affordable rates of investment.

“There is a need to raise the level of skills in the finance and investment aspect of the real-estate industry, especially with the onset of REITs in the country,” Ysmael said during the launch.

Ysmael said the Aprea certification course program would arm the practitioners with the acumen required as REITs evolve into reality.