Firms need to prove commitment to REIT

The government wants to have the commitment of companies first before giving them the regulatory and tax adjustments that they claim they need before they can start with the issuance of Real Estate Investment Trust (REIT) assets.

REIT is a closed-end investment company to be listed in the stock exchange and will invest directly in real estate assets. What makes it ideal is that it has special tax considerations and high yields.

Seven years after the enactment of the REIT act in the country, no one has yet participated in the scheme because of regulatory and tax issues.

"[Government is willing to make the adjustments but] you have to show first the government that you are entitled to that preferential tax exemption and to show in return what you can return to the Philippine economy," SEC Chairperson Teresita Herbosa said in an interview.

"As of now, we've never met with the prospective issuers," she added.

Under the REIT law, the Bureau of Internal Revenue (BIR) imposed an additional cost of 12 percent for property owners who want to corporatize their income-generating assets into a REIT.

SEC, on the other hand, said the minimum public ownership of REITs should increase sharply from 33 percent to 67 percent in the third year after its listing.

Because of these provisions, REIT has failed to take off and no property developers wanted to participate in the issuance.

"We will conduct a forum with companies. We have to get their commitment," Herbosa said.

"That we should probably sit down with them and ask them how serious are you to go to REIT projects, list them in the stock exchange, and have people invest. And we will ask them what are the chances of these REITS being successful? I think it's the better procedure," she added.

As for the public float issue, Herbosa said the SEC will come up with a study on its possible adjustments.

"We can come up with a study that says that putting just the minimum would somehow entice people to invest," said the SEC chief.