PSE President and Chief Executive Officer Hans Sicat said the bourse has yet to receive a single application for REITs after the three biggest issuers, namely, SM Prime Holdings Inc., Ayala Land Inc. and Robinsons Land Corp., expressed their lack of interest to pursue a REIT offering under its present framework.
“I guess the market has spoken in terms of saying that while the rules are out, these are not executable,” Sicat told reporters in a chance interview.
He said he no longer expects anymore applications “until there are new changes” involving the REIT law’s implementing rules.
Contentious issues include the tax rules approved by the Bureau of Internal Revenue in July, which contain a provision that one-time property transfers to REITs will be subject to the 12-percent value-added tax (VAT), which would mean greater costs for firms establishing REIT companies.
A second issue is the requirement for REIT owners to eventually sell to the public a majority stake, or at least 67 percent, in three years from the initial 40 percent upon listing. This provision was earlier approved by the Securities and Exchange Commission, but only after the Department of Finance (DOF) insisted that it be included.
The BIR and DOF are concerned with potential revenues losses associated with REITs, which provide tax incentives for issuers, and have been consistent in their stand that VAT should apply to one-time property transfers.
But that has not stopped the private sector from lobbying for its removal, which it said would put the success of Philippine REITs at risk as some may simply forgo holding a REIT offer.
“For the PSE and capital markets viewpoint, I think it’s a lost opportunity,” Sicat said.
The REIT law provides a framework for companies to establish and sell shares in public real-estate trusts for assets such as shopping centers and office buildings that will pay dividends to shareholders.
Internal Revenue Commissioner Kim Jacinto Henares said earlier that the agency implemented the tax measures for REITs fairly and any move to adjust these will be done only if lawmakers amend the REIT Act.
