PSE approves listing rules for REITs

MANILA, Philippines - The Philippine Stock Exchange has approved the rules governing real estate investment trusts (REITs), setting the stage for the listing of this type of product.

The REIT listing rules will be submitted to the Securities and Exchange Commission for approval, in line with the bourse’s bid to expand its product offerings to equities investors.

“We are optimistic that the launch of REITs in the Philippines will generate significant interest from investors both here and abroad as real estate prospects are looking good given that the economic recovery is expected to promote commercial activity and restore investor confidence. The retail property market is seen to benefit from the low inflation that will keep the prices of goods stable and keep the patronage of retail malls steady,” said PSE chief operating officer Val Antonio B. Suarez.

REITs are companies that own and operate income-generating real estate assets which include offices, apartment buildings, hotels, warehouses, shopping centers and highways.

Former PSE president Francis Lim lauded the approval of the REIT listing rules, saying this would spur the growth of the capital market. “The approval by the PSE board of the REIT listing rules is a big step in the right direction for our stock market. The REIT has grown into a $600-billion industry and our stock market is a step closer to sharing in this huge global industry,” he said.

“The lack of investment products in our market has pushed our people to invest their money in investment scams. Hopefully, the launching of a REIT product in our market will help insulate our investors from these scams which has managed to grow to a whopping P80-billion industry,” he added.

The REIT listing rules are aligned with Republic Act. 9856, otherwise known as the REIT Act of 2009, and its implementing rules and regulations (IRR) which were issued by the SEC.

To be admitted for listing, a REIT must be a stock corporation established in accordance with the Philippine Corporation Code for the purpose of owning income-generating real estate assets. It must also have a dividend policy of distributing annually at least 90 percent of its distributable income as dividends to its shareholders in accordance with the REIT Act of 2009 and its IRR.

A REIT must also be a public company with at least 1,000 public shareholders each owning at least 50 shares of any class of shares and collectively own at least one-third of the outstanding capital stock. It must also have a minimum paid-up capital of P300 million.

Moreover, at least 75 percent of the deposited property of the REIT must be invested in, or consists of, income-generating real estate.

The REIT Act of 2009 provides tax incentives to the REIT and the investors of REITs. Among these incentives are the following: REITs are allowed to claim an additional deduction based on the dividends distributed to its stockholders; the transfer of real estate to a REIT shall be subject to a discount of 50 percent of the applicable documentary stamp tax, registration and annotation fees.

Furthermore, the REIT Act of 2009 exempts overseas Filipino investors from dividend tax for a period of seven years from the effectivity of the REIT revenue regulations.