When the Department of Finance, Securities and Exchange Commission, Bureau of Internal Revenue and Philippine Stock Exchange approved the country’s new REIT rules, one of the biggest proposed benefits was that it would allow developers to reinvest proceeds in the property market. The timeline for that to happen remains uncertain.
The House of Representatives signed off on a bill that will require proceeds of REIT shares to be reinvested within a year. However, several leading experts have urged the government to give REITs more time to locate the best possible investment.
“It is the REIT’s mandate to provide increasing yield. To do so, every investment by the REIT must provide an accretive yield to the portfolio,” P. Ryan Isip, JLL Philippines Head of Capital Markets, told BusinessWorld. “Finding such types of investment are few and far between; therefore, REITs should have more time than one year.”
Colliers Philippines Associate Director for Research Joey Roi Bondoc Colliers agreed with the sentiment while noting many developers who have collected proceeds from REITs should act quickly with the real estate market trending upward.
“There is really a need for the developers to immediately launch new projects, especially as they really want to capture the gains in the market, as the office, retail and leisure sectors are rebounding,” pointed out. “I would say that there should be greater flexibility in terms of the period for reinvestment. I wouldn’t say a specific time period, but there should be greater flexibility for the developers, because the expansion will also hinge on the expansion of the economy.”
What is a REIT?
A REIT is a publicly listed stock corporation that owns income-producing real estate. Shopping malls, offices, hotels and buildings in the industrial or logistic sectors can be included in a REIT. For developers, REITs allow them to raise capital in exchange for providing shareholders with future dividends the properties generate. According to Santos Knight Frank, REITs are mandated by law to distribute 90 percent of their retained earnings as dividends, which makes them appealing to investors.
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