SEC wants to ensure independence of REIT property managers

MANILA, Philippines — The Securities and Exchange Commission (SEC) wants companies that will offer real estate investment trusts (REIT) to ensure the independence of a REIT property manager.

To achieve this, the SEC has issued a memorandum circular amending the requirements of a REIT property manager under Rule 7 of the implementing rules and regulations of Republic Act No. 9856 or the REIT ACT.

According to the SEC, REITs are required to appoint a property manager, but should be independent of the REIT, its promoter or sponsor.

In the proposed circular, the SEC tightened rules governing the appointment of a property manager.

“To ensure independence of the property manager from the REIT, the following shall be complied with: majority of the members of the REIT property manager must be independent directors with working knowledge of the real estate industry and that directors including the independent directors, of the REIT and it sponsors and promoters, cannot occupy more than 49 percent of the board of directors of the property manager.”

The SEC also laid down rules for a REIT fund manager. It said an entity may only engage in the business of a REIT fund manager once it has obtained the necessary license to act as such in accordance with the rules and regulations of the SEC.

A REIT fund manager can either be a registered domestic corporation, a trust entity with an existing BSP license or a foreign corporation duly licensed to do business in the Philippines, the SEC said.

On the other hand, it noted that if the fund manager is a trust entity, it shall be covered by existing rules and regulations of the Bangko Sentral ng Pilipinas.

REITs are seen generating more investments especially for real estate companies, but this was stalled because of tight taxation rules.

Companies that own and operate income-generating real estate assets are considered REIT companies. These companies include offices, apartment buildings, hotels, warehouses, shopping centers and highways.

In December 2009, Congress passed the REIT Act, but none of the major property developers participated with their prospective offerings amid issues on ownership and taxation on asset transfers.

The Duterte administration is working to revive the REIT by addressing the issues that previously stalled it.