Consider investing in REITs - Real Estate Investment Trusts

INVESTING ON THE GO - Iggy Go (The Freeman) - December 1, 2020 - 12:00am

The Republic Act 9856, also known as the REIT Act of 2009, and the IRR (implementing rules and regulations) of the Securities and Exchange Commission on May 13, 2010 established REIT. There was resistance to the IRR from industry players as they saw some aspects of it to be too limiting/strict/unfavorable.

Then last January of 2020, the Securities and Exchange Commission (SEC) issued the revised IRR of the REIT Act of 2009, clearing the hurdles for local developers to enter the REIT market.

As a result of the revised IRR, the REIT market gained traction and Ayala Land Inc., through its subsidiary AREIT Inc., took the initiative and filed its REIT application to the SEC. Other firms then followed suit.

What are REITs?

REITs refer to Real Estate Investment Trusts. They are companies that own and operate real estate properties to generate income. REITs include hotels, data centers, cell towers, hospitals, commercial areas, office spaces, shopping centers, apartments, warehouses and other buildings. Investors prefer REITs because of diversification, lower risk and higher returns.

How does REIT work?

The law and guidelines provide a way for businesses to place their real estate assets in a stock corporation, the REIT, where the public can invest. The corporation owns income-generating real estate assets and has to abide by strictly enforced rules. Such as: Must be listed on the Philippine Stock Exchange; 70% investment in real estate assets or at least 35% of total assets invested in real estate; 90% of the net income is distributed as dividends; The company shall not invest in companies that are not publicly listed just to name a few.

With the money pooled from the investors, the company can lease, manage, invest, purchase or sell real estate properties.

REIT advantages

Why would you want to invest in REIT? Here are the many benefits.

P REITs are affordable - It relieves the pressure in coming up with huge capital or resorting to debts just to become part-owners of real estate.

PConvenience - No need to hire contractors and construction firms, etc. You would also not be involved in managing the properties, so you are saved from overseeing repairs, looking for tenants, providing security, paying for insurance, etc.

P Dividends - Investors are entitled to 90% of the net income. There’s also the chance that this goes up through hikes in rent and tariff/tolls, low vacancy rate, etc.

P Value appreciation - The price of the stock may increase due to growing demand, increase in the value of the lot, development of vicinity around the location, etc.

P Productive Assets - They are finished and already generating income.

P Professional Management - Expert managers oversee the company and its assets.

P Diversification - The REIT stock contain mixture of real estate projects.

P Liquidity - REITs can be traded on the exchange on any trading day.

P Transparency - Companies are required to disclose the financial status of the company.

P OFW tax-exempt - Overseas Filipino workers can enjoy tax-free dividends for seven years starting in 2020.

So far we only have one available REIT by Ayala Land’s AREIT, Inc.. It is the first and only listed REIT in the Philippines. A second REIT listing will be offered starting in the fourth quarter of 2020 by DoubleDragon Properties Corp.

How to Start Investing REITs in the Philippines?

P Open a trading platform that offers REITs (online brokerage platforms)

P Through https://easy.pse.com.ph/

P Go for REIT Funds (ManuLife's ASPAC REIT Fund of Funds USD-Share Class A)

P International brokers (like eToro to trade in International REITs or REIT ETFs)

Consider investing in REITs today!

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