PSE seeks revival of REIT

The Philippine Stock Exchange plans to lobby the next administration to ease or remove restrictions on the Real Estate Investment Trust (REIT) framework, given its potential to spur significant activity in the local stock market.

PSE president and CEO Hans Sicat said the exchange was seeking to revive the REIT framework, which was crippled by steep taxation provisions and a requirement for developers to eventually sell control of the REIT entity. This caused big property developers to shun the existing REIT law—forfeiting at least $3 billion worth of capital raising activities at the PSE.

Those two provisions of the REIT implementing rules were added by the Finance Department and Securities and Exchange Commission under the Aquino administration, which feared that the REIT law might hurt the government’s revenue-generating efforts.

The REIT law allows real estate companies to sell via an initial public offering (IPO) shares of real-estate trusts that hold assets like shopping malls and office buildings. Since these assets generate a steady stream of income, they will pay regular dividends to shareholders.

Sicat said lobbying efforts would focus on removing tax barriers, which appeared after the Bureau of Internal Revenue imposed the value added tax on property transfers, which were thought to be exempted from VAT.

Separately, the SEC, which also answers to the Department of Finance, said the issuer should increase a REIT’s public float, or shares held by public investors, to 67 percent from the initial 40 percent in three years.

Sicat said those issues could be resolved if the BIR and SEC did away with the provisions. This would remove the need for time-consuming amendments to the REIT law.

“It can actually be as easy as both agencies revising their stand,” said Sicat, who received a fresh one-year term at the helm of the PSE over the weekend. “I think you can turn on the product very quickly.”

“Changing the law on REITs is a plan, but that’s the medium term plan,” he added.

The REIT Act became a law at the end of 2009. Companies that earlier said they would hold REIT offering were Henry Sy’s SM Prime Holdings, Ayala Land Inc. and the Gokongwei family’s Robinsons Land Corp.