08/10/2011 [ tribune.net.ph ]
The Asia Pacific Real Estate Association (APrea), which groups real estate groups in the region, reacted strongly to SM Prime Holdings decision to drop its plans to launch a real estate investment trust (REIT) because of the insistence of regulators on raising the public ownership rule that APrea and the industry in general have repeatedly stated to be unworkable.
The Philippines introduced a REIT Act as far back as December 2009. However, supporting regulations are required for the law to become operative.
Draft regulations were prepared in May 2010 but the new administration chose to reopen certain issues, of particular note increasing the minimum level of public ownership from the level prescribed in the Act of 33 percent to a sliding scale of 40 percent rising to 67 percent in three years.
Finance Secretary Cesar Purisima led the effort to ramp up the public ownership requirement which he said would guarantee that REIT firms will allow public participation instead of being set up just for incentives that they stand to get.
It stated 33 percent is already high by international standards and the sliding scale proposed has been widely criticized as being unworkable and risks killing off the REIT idea in the Philippines.
APrea CEO Peter Mitchell said it is now about two years since the REIT Act was enacted and there has been a lot of global institutional interest in investing in new REITs in the Philippines and the advent of REITs has been eagerly watched.
“The benefits that REITs bring to the broader economy are well documented and it is therefore very disappointing that the regulators in the Philippines are continuing to delay their introduction. There seems to be a failure to understand the economic benefit, what it takes to create a successful REIT market and how global institutions allocate funds to listed real estate,” he said.
Danessa O. Rivera
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