A notice with regard to the proposed amendments to the Implementing Rules and Regulations or IRR of Republic Act 9856, otherwise known as the “Real Estate Investment Trust (REIT) Act of 2009” has been posted recently in the SEC website. This more or less confirms that the Secretary of the Department of Finance (DOF) Mr. Cesar V. Purisima and BIR Commissioner Atty. Kim Jacinto-Henares have concerns about the Philippine REIT as mentioned in a recent post by my wife, and they intend to address these through the proposed amendments.
The proposed amendments include the increasing of the minimum public ownership of REIT firms from the original 33.3% to 51%, with a justification that this aims to be consistent with the avowed policy of the law to make the REIT a public company. I wonder what would be the reaction from would be REIT players in the Philippines, let’s wait and see.
Furthermore, it was proposed that –
“… the initial 50% of a REIT’s capital shall be fully invested in the first year in new infrastructure projects and the remaining shall be fully invested in new infrastructure projects on or before the end of the third year of its establishment. Provided further, that none of its capital shall be used to payoff/down existing debts.”
The proposed ammendment on Section 5.1 (a) as stated above would –
“… ensure that the policy of RA 9856 to use the real estate investment trusts as means to develop infrastructure projects (not merely as means to convert ownership in existing infrastructure to liquid assets), and to prevent companies from deleveraging and by using established REIT merely to payoff existing debts.”
Lastly, the BIR proposed the deletion of Section 1 of Rule 4 of the IRR on the appointment of a Property Manager on the grounds that –
“… the REIT itself should be construed as a property company that is expected to be an expert in dealing with property management. Moreover, this expertise of a REIT in dealing with property is the major consideration of the public in investing with it. Aside from expertise, a REIT has a name and reputation that has positive effect on public perception. Thus, contracting the service of a property manager would be illogical and unreasonable for a REIT. Clearly, the property manager has no place in the REIT structure.”
Request for comments from the public
Pursuant to Section 8 of the REIT Act, the Commission invites the public, especially, the participants in the real estate industry, the stock market and other interested parties in the business sector, to give their comments on the above-mentioned proposed amendments on or before October 29, 2010.
The comments may be e-mailed or hand-delivered, respectively, to the following addresses:
Corporation Finance Department
SEC Bldg., EDSA, Greenhills, Mandaluyong City
(Re: Comments on REIT amendments)
The full text of the Notice
The full text of the notice as regards to the proposed amendments to the Implementing Rules and Regulations or IRR of the REIT Act of 2009 as posted in the SEC website can be accessed here, or you can get it directly at the SEC website.
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Text by Jay Castillo and Cherry Castillo. Copyright © 2010 All rights reserved.
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