MANILA, Philippines — The Securities and Exchange Commission (SEC) has issued proposed amendments to the rules on real estate investment trusts (REIT), a move aimed at providing broader opportunities in the capital market for both issuers and investors.
The draft amendments released for public comment by the SEC seek to broaden the list of income-generating real estate assets that may comprise a REIT’s portfolio.
It also aims to provide flexibility for the REIT sponsor in reinvesting proceeds from the listing of the REIT as well as relax the minimum public ownership requirement, among others.
“The proposed reforms will help ensure that the REIT framework remains robust and responsive to evolving market needs, thereby enabling the real estate sector to unlock more capital that will further support their growth and to contribute more to the development of our economy,” SEC chairperson Francis Lim said.
Under the proposed amendments, the definition of income generating real estate assets is expanded by allowing a REIT to directly or indirectly own income-generating real estate through a shareholding in an unlisted special purpose vehicle wholly owned by the REIT and duly constituted to primarily hold or own real estate.
Also proposed for inclusion in the definition of income-generating real estate are real properties with regular streams of income, or those with recurring and predictable cash inflows derived from the lease of, or other similar arrangements involving such properties.
The SEC said that these properties may include rental properties from transportation, information and communications technology, and energy infrastructure assets; parking lots; buildings; malls; warehouses or storage facilities; immovable fixtures, machineries, facilities, and structures; and real rights over properties including but not limited to usufruct, easements, registered leases.
“Accordingly, more companies may be classified as REITs under the amended rules — effectively expanding the scope of real properties that may comprise a REIT’s portfolio,” the commission said.
The draft circular also extends the period for the utilization of reinvestment proceeds to two years from one year.
Reinvestment may take the form of investment in equity, the extension of loans or purchase of debt instruments or the repayment of loans or debt instruments in relation to any real estate or infrastructure project — both government and privately initiated — in the Philippines.
Meanwhile, the SEC is further relaxing the compliance with the minimum public ownership requirement for REITs by allowing for a temporary dip in instances when there is an issuance of additional shares to its sponsor/promoter or the latter’s affiliates in exchange for income-generating real estate or real rights over immovable property, subject to certain conditions.
The proposed draft is open for public comments until Dec 3.