October 24, 2015 /
The Securities and Exchange Commission (SEC) is keen to have a dialogue with industry groups in order to set the ball rolling anew for the much anticipated amendment of Real Estate Investment Trust (REIT) law.
REIT is a closed-end investment company listed in the stock exchange and invests directly in real estate assets. What makes it ideal is that it has special tax considerations and high yields.
Six years after the enactment of the REIT act in the country, no one has yet participated in the scheme because of regulatory and tax issues.
SEC Commissioner Ephyro Luis Amatong said during the 4th Asia Pacific Real Estate Investment Summit that SEC intends to start a dialogue with institutions in order to make REIT a real option for companies who need to raise capital.
As of now, the local stakeholders are still hesitant to participate in REIT because of tax and public float issues, Philippine Stock Exchange chief operating officer Roel Refran said.
Under the law, the Bureau of Internal Revenue (BIR) imposed an additional cost of 12 percent for property owners who want to corporatize their income-generating assets into a REIT.
SEC, on the other hand, said the minimum public ownership of REITs should increase sharply from 33 percent to 67 percent in the third year after its listing.
“SEC hasn’t looked directly at REITs in particular but I would invite the industry to begin a discussion now with SEC. The reality is those two issues – public float and tax – and the risks are all interrelated. What the industry needs to understand is it is very difficult to balance that,” Amatong said.
“The product has not reached its full potential. We need dialogue in order to arrive into correct balance. Dialogue is the key term and balance is the key term. SEC is willing to sit down with the industry to get the thing going on. Everyone is waiting for this,” he further said.
Francisco Ed. Lim, senior partner at ACCRA Law, said that once the REIT law is already favorable to participants, the Philippines could be part of the growing Asian REITs, which now accounts for 16 percent of the global REIT market.
An Asia Pacific Real Estate Association (APREA) data showed that as of 2014, there are currently 110 Asian REITs, spread across eight countries, with a total market capitalization of around US$170 billion.
Asked if the amendment of Philippine REIT law could happen before the next administration takes over, Amatong only said “even if it’s not, it’s going to be very useful to start the conversation now”.
He also pointed out that the country is not necessarily behind within the region in terms of building its REIT market. “For instance, in China, it doesn’t have a REIT law, they are still experimenting first. So I’m saying there’s still a big room to get better. It’s good to have a dialogue first,” Amatong further said.
Comprehensive tax reform may cover REIT industry revival
By Krista A. M. Montealegre, Senior Reporter/October 25, 2015/
REAL ESTATE investment trusts (REIT) may get a new lease on life as the government evaluates the adoption of a comprehensive tax reform program, an official of the Securities and Exchange Commission said.
“Tax reform is in the air. It’s usually in the context of income tax, but you know, tax rin ito (REIT is also tax and it could be part of the reform),” Commissioner Ephyro Luis B. Amatong told reporters last Oct. 22, referring to the changes in the REIT Law.
The Aquino government had imposed stringent REIT rules to limit revenue losses caused by laws that grant generous tax perks. The REIT Act lapsed into law in December 2009 with none of the major property developers coming forward with their prospective offerings.
Taxation on asset transfers and issues on ownership have prompted property giants such as Ayala Land, Inc., SM Prime Holdings, Inc. and Robinsons Land Corp. to shelve proposed REIT listings.
Asked if there is still time to introduce changes to the law before the election, Mr. Amatong said: “Even if it’s not, it might be useful to start the conversation now so that when the next administration or the new Congress comes into office, mayroon nang pinag-uuspaan (discussions may resume). We hit the ground running.”
While the Philippines’ REIT Law has been in place since 2009, Indonesia and Thailand have forged ahead and saw their first REIT listings in 2013 and 2014, respectively, according to data from the Philippine Stock Exchange (PSE).
REIT listings have increased to 145 with a total market capitalization of $134.5 billion, from 118 listings valued at $65.1 billion in 2009, according to data from the exchange, citing property consultancy firm CBRE.
“It’s a wake-up call for our regulators. We need to reconsider how we can make it work,” PSE Chief Operating Officer Roel A. Refran said in an interview.
The government wants to revive talks with the real estate industry to achieve a compromise that may allow the country’s REIT market to finally take off six years after the law was passed.
“It’s difficult putting your best foot forward. There’s really a process. There’s room to evolve,” Mr. Amatong said.
Financial regulators are taking a precaution in the aftermath of the Asian financial crisis that hit the real estate industry, the commissioner said.
“We don’t want that to happen again but at the same time we don’t want to unnecessarily pull back the growth of the real estate industry,” Mr. Amatong said.
PH losing out in REIT race amid strict rules
October 23, 2015/ By: Doris Dumlao-Abadilla/http://business.inquirer.net/201167/ph-losing-out-in-reit-race-amid-strict-rules#ixzz3pdKep0ZD
Six years after an enabling law for real estate investment trust (REIT) was passed, the Philippines is still struggling to strike the right balance to get this new asset class off the ground by offering sweeteners to property developers without jeopardizing the government’s fiscal stability.
During the 4th Asia Pacific Real Estate Investment Summit Thursday, private sector proponents noted how the Philippines was losing out in the REIT race. They said it’s still the same two regulatory restrictions that killed the REIT industry at infancy: the required minimum public ownership of REIT at an initial 40 percent before being raised to 67 percent and the imposition of value added tax on the initial asset transfer.
“We might miss the boat in terms of REIT,” said Philippine Stock Exchange (PSE) chief operating officer Roel Refran.
REIT gives investors the option to invest directly in finished products that are already earning money—such as residential and office units, hotels or shopping malls or even infrastructure ventures like toll roads and power plants. The REIT Law of 2009 requires the distribution of 90 percent of income annually.
The farther the Philippines veers away from REIT norms across the globe, the more difficult it would be for this new asset class to attract investors, Refran said.
Francis Lim, former PSE president and now the managing partner of Accralaw, said Thailand had come up with a REIT legislation only in 2012 and yet was able to launch this new asset class ahead of the Philippines. He said getting this product off the ground may require some form of “sacrifice” from the government.
Peter Verwer, chief executive of the Asia Pacific Real Estate Association (APREA), said governments would naturally be reluctant to let go of some of their tax takes. He noted, however, every single country that has launched the REIT was able to drive growth, create jobs and broaden its tax base.