Government studying REIT amendments

The government is still studying carefully the possible amendments to Real Estate Investment Trust (REIT) law — whether it will implement the kind of adjustments that the companies are soliciting in order for them to participate in the scheme — to avoid possible abuse of the act.

Aimed to promote the development of the capital market by expanding the participation of the investing public in real estate developments, REIT is among the laws with contentious issues that Finance Secretary Carlos Dominguez had pledged to untangle.

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.

"We are reviewing the REIT very, very carefully. You know, we might get gamed. We just want to make sure we know all the possible problems that will come up, all the possible gaming that may occur," Dominguez told reporters on the sidelines of the 2017 EJAP Board Induction.

"Like for instance, they'll say, they will transfer the money and then we... the theory is they can reinvest it in real estate... but suppose if they don't? We are thinking about it carefully because we never know what might happen," he added.

This REIT law provides investors with the option to invest directly in finished products such as residential projects, hotels, hospitals, malls, power plants and even toll roads.

The existing law requires the Securities and Exchange Commission (SEC) to make sure REIT companies will have a minimum 40 percent public float for the first two years of their listing. By the third year, public investors should have already owned 67 percent of the trust’s outstanding shares.

The law, however, states that the minimum public ownership shall be limited to at least onethird of the outstanding capital stock of the REIT.

The Bureau of Internal Revenue (BIR) shall also impose an additional cost of 12 percent for property owners who want to corporatize their income-generating assets into a REIT. (MBM)