PROPERTY developers are pushing for the revival of the Real Estate Investment Trust (REIT) to help unleash more capital.
Megaworld Corp. Executive Director Kingson Sian is positive the new administration will consider amending the REIT law.
“Based on their pronouncement that they will look into it, it is a good sign. Because if they can get the REIT amended in a form that is acceptable to issuers and fund managers and investors, that’s going to unleash a lot of capital,” Sian noted.
“Then you redeploy on construction and a lot of project which has a multiplier effect,” Sian said
By recycling capital, developers could then go into more more projects.
“Many would recycle capital. Of course, if the money is there . . . What? Are just going to place it in time deposit? Of course, not. We’ll use it to redeploy and then do more. Especially for developers us which already have the land, so it’s going to be more development,” Sian said.
REIT is the security converted by a trust company based on the income from real estate and is traded in the stock market. But the bone of contention in the Philippines is that companies find the RATE law of 2009 or Republic Act 9856 and its implementing rules quite stiff, requiring investment trusts to heed the limits on foreign investment under the Constitution.
In a separate interview, SM Prime Holdings Inc. President Hans Sy explained the benefits of tweaking the REIT law.
“Well, we wanted to something that is very clear that we can really benefit from, not only our company, but also the public. It cannot be a one-sided type of implementation. But I believe that is one area that the country can benefit a lot from also. And also the investing public,” Sy said.
Sy noted the REITs Implementing Rules and Regulations (IRR) provision on the 67-percent public float of the investment trust within three years upon listing is a bit of problem.
“I would also say that’s a bit of an issue. Quite frankly, you have to have some certain control over the management. If you go as much as 70 percent, I think you will have some serious problem. The success of this kind of business, you have to have a control to move forward.
“We can’t be too democratic about this type of business. If we have to listen to each and every… just like the government sometimes, you cannot implement things,” said Sy.
Yes, that’s one area that can help us expand further. We are very confident we will be able to draw in foreign investors also. Look at the success of Singapore. So we believe we can replicate that,” he said.
Earlier this year, 8990 Holdings Inc. CEO Januario Jesus Atencio noted that REIT will actually benefit the leasing sector by turning the rental cash flow into sellable securities.
“… So these are the malls, these are the commercial buildings. It’s another form of securitization… that the securitization cash flows come from installments on amortizations,” he said.
“… So if you are able to relax the REIT, especially in the definition of how taxes can be cascaded towards the buyers of the REITs, then the developers who have to do commercial buildings will get their cash flows sooner and continue building,” he added.