Regulator Issues Compromise Rules on REIT
May 2, 2011 (Knight Ridder/Tribune Business News) The implementation of the Real Estate Investment Trust (REIT) Act received a major boost after the corporate regulator amended certain provisions of its implementing rules and regulations, including the increase in the minimum public ownership requirement.
In a memorandum, the Securities and Exchange Commission (SEC) revised the provision requiring a REIT company to sell to the public a portion of its outstanding capital stock from the original 33 percent to 40 percent. The public float will be increased to 67 percent within three years from listing.
The SEC also approved a REIT company's appointment of an independent property manager, who should also not be related to the firm's promoters and sponsors.
"[This is] provided that the Commission may, upon application and for justifiable reasons, exempt the REIT from compliance with such requirement," the regulator said.
Issued on April 27, the memorandum circular will take effect 15 days following its publication in two newspapers of national circulation.
The implementation of the REIT Act, which lapsed into law on December 2009, is in limbo amid a deadlock between fiscal authorities and corporate regulators over its implementing rules.
As a result, potential issuers were unable to come forward and pursue their REIT offerings in the absence of the tax regulations of the Bureau of Internal Revenue (BIR).
Under the proposed amendments, the Department of Finance wanted REIT firms to sell at least 51 percent of their outstanding capital stock and further increase their public float to at least 67 percent in the next three years.
Property developers led by Ayala Land Inc., SM Prime Holdings Inc. and Robinsons Land Corp. had expressed interest in doing REIT offerings.
The government also wanted REIT companies to invest 50 percent of their capital in new infrastructure projects in the first year and the remaining funds to be invested before the third year.
The BIR also proposed deleting the section regarding the appointment of a property manager since the REIT company was "expected to be an expert in dealing with property management."