Exchange inclined to reopen REIT talks

The Philippine Stock Exchange is planning to reopen talks on the Real Estate Investment Trust (REIT) framework, which property developers have shunned since it was implemented three years ago due to stiff taxation and public ownership requirements.

Speaking before participants of the Third Asia Pacific Real Estate Investment Summit on Thursday, PSE president Hans Sicat said the bourse would lobby for the relaxation of government restrictions on REIT, which has resulted in forgone investments of more than $3 billion.

The figure represents the amount of money that big developers like SM Prime Holdings, Ayala Land Inc. and Robinsons Land Corp. could have raised through REIT listings to finance more projects.

The law allows builders to sell shares in public real-estate trusts for specific assets like shopping malls and office buildings that will pay regular dividends to shareholders.

As noted, property developers that were keen on listing assets under the REIT law on the PSE shelved their plans after the Bureau of Internal Revenue imposed the value added tax on property transfers.

Moreover, the Securities and Exchange Commission said developers would need to eventually sell control of the REIT to the public within three years after listing.

Sicat said the improvement of the Philippines’s fiscal standing over the last few years should prod regulators to rethink those provisions.

“The fact that the Philippines is an investment grade country today, which wasn’t the case two years ago, may mean our tax authority and fiscal authority—when they look at the question of taxation of REITs—would probably have a less paranoid view,” Sicat said.

Sicat said the “multiplier effect” that an attractive REIT law would bring, mainly in spurring development in the real estate sector, remained “enormous.”

“That’s $3 billion worth of transactions. That, by the way, would be larger than the number for all PPP [ public private partnership] projects that have been [ awarded],” Sicat said.