SEC releases IRR on REIT

MANILA, Philippines (Updated 10:16 p.m.) — The Securities and Exchange Commission has issued its proposed amendments to the implementing rules and regulations of Republic Act 9856 or the Real Estate Investment Trust (REIT) Act of 2009.

According to the draft amendments, the minimum public ownership (MPO) requirement will be lowered to 33 percent as what the law provided.

Under the current rules, MPO on REITs must reach 40% in year one and increase to 67% by year three.

The proposed amendments will also require the reinvestment in the Philippines of proceeds realized from the sale of REIT shares or other securities, enhance controls over related party transactions and impose administrative sanctions for violation of the rules.

SEC chairperson Emilio Aquino said the proposed amendments align with the agency’s mandate to promote the development of the capital market toward the democratization of wealth and broadening of participation in the ownership of enterprises.

“With the proposed amendments, we hope to develop a viable REIT market that will unlock a deep source of funding for more infrastructure projects in the country along with a lucrative investment opportunity for Filipinos,” Aquino said.

Under the draft amendments, the SEC  adjusted the minimum public ownership requirement to the level prescribed by the REIT Act.

Section 8.1 of the REIT Act provides that a REIT must have at least 1,000 public shareholders each owning at least 50 shares of any class of shares and, in aggregate, at least one-third of the outstanding capital stock.

The SEC also included a reinvestment requirement for the REIT sponsor or promoter in line with the policy to promote the development of the capital market and Filipino participation in the real estate industry.

A sponsor or promoter that contributes income-generating real estate to a REIT will have to reinvest in any real estate and/or infrastructure projects in the Philippines any proceeds from the sale of REIT shares or other securities issued in exchange for income-generating real estate transferred to the REIT and any money raised from the sale of income-generating real estate to the REIT.

To protect the interests of investors, the SEC added a layer of review for related party transactions.

“Majority of the committee members must be independent directors who shall vote unanimously in approving related party transactions,” the SEC said.