‘REIT has potential to grow up to $11 billion’

MANILA, Philippines — The Philippines has the potential to develop a REIT (real estate investment trust) market as huge as Malaysia and Thailand’s which have a market capitalization of around $7 billion and $11 billion, respectively.

“There’s a lot of potential. Interesting proxies for this potential in the Philippine REIT market are Malaysia and Thailand, which have been growing their REIT markets for the past five to seven years, BPI head of corporate banking strategy, products, and solutions Reggie Cariaso said in a press briefing.

The REIT Act allows companies to list and trade its shares of stock in the Philippine Stock Exchange (PSE) as an alternative means to raise funds for property development and expansion initiatives.

Deemed an attractive investment for the investing public, REITs are required to distribute a minimum 90 percent of its distributable income as dividends annually to avail of certain tax benefits.

Dividends distributed operate effectively as a tax-shield for corporate income tax.

“REITs’ high dividends plus the potential for moderate to long-term growth makes REITs an attractive investment option with potentially high returns,” Cariaso said.

Companies with income-generating real estate assets such as offices, apartment buildings, hotels and warehouses, are considered REITs.

The SEC recently issued the implementing rules and regulations of the REIT Act of 2009, paving the way for the development of a REIT market in the Philippines.

Ayala Land Inc. subsidiary AREIT Inc. is gearing up to be the first REIT to list in the market.  It has filed an application with the Securities and Exchange Commission to raise up to P15.1 billion or $296 million in capital.

Cariaso said REITs  appeal to investors looking for yield and attractive total returns.

“It’s something that investors are very much looking forward to here in the Philippines,” he said.

In Asia, many countries have already established their respective REIT markets such as Hong Kong and Singapore.

Malaysia and Thailand started their REIT markets later, but were able to catch up with its peers. Investors in Malaysia and Thailand REITs include local government and private pension funds, insurance companies, asset managers, as well as individuals. There are also international institutional investors.

Cariaso said the Philippines could also catch up.  “We have a larger population and our GDP is growing faster than Malaysia and Thailand,” he said.

“BPO and shared services are bigger in the Philippines and our domestic consumption is strong. There is significant potential for office, retail, and commercial growth, as well as industrial, logistics, and infrastructure, if we execute successfully,” he said.