The Securities and Exchange Commission (SEC) has proposed amendments to the rules governing real estate investment trusts (REITs) in a bid to broaden investment opportunities and strengthen the country’s REIT framework.
Released for public comment on November 18, the draft changes to SEC Memorandum Circular No. 1, Series of 2020, aim to expand the range of income-generating real estate assets eligible for REIT portfolios, provide greater flexibility in the reinvestment of listing proceeds, and ease compliance with minimum public ownership requirements.
SEC Chairperson Francis Lim said the reforms are intended to keep the REIT system “robust and responsive to evolving market needs,” enabling real estate firms to unlock more capital and support economic growth.
𝗘𝘅𝗽𝗮𝗻𝗱𝗲𝗱 𝗔𝘀𝘀𝗲𝘁 𝗖𝗼𝘃𝗲𝗿𝗮𝗴𝗲
Under the proposal, REITs may own income-generating properties through wholly owned, unlisted special purpose vehicles. The definition of income-generating assets will also cover properties with predictable revenue streams, including assets in the transport, ICT, energy, and infrastructure sectors; parking facilities; warehouses; malls; buildings; machineries; and real rights such as usufructs, easements, and registered leases.
The broader definition is expected to increase the number of companies eligible to operate as REITs.
𝗥𝗲𝗶𝗻𝘃𝗲𝘀𝘁𝗺𝗲𝗻𝘁 𝗣𝗲𝗿𝗶𝗼𝗱 𝗘𝘅𝘁𝗲𝗻𝘀𝗶𝗼𝗻
The SEC also seeks to extend the reinvestment period for proceeds from one year to two years. Permitted reinvestments include equity investments, loans, debt instruments, or loan repayments tied to real estate or infrastructure projects—whether government-led or private—in the Philippines.
𝗥𝗲𝗹𝗮𝘅𝗲𝗱 𝗣𝘂𝗯𝗹𝗶𝗰 𝗢𝘄𝗻𝗲𝗿𝘀𝗵𝗶𝗽 𝗥𝘂𝗹𝗲𝘀
To provide flexibility, the draft rules allow temporary dips in minimum public ownership (MPO) when REITs issue additional shares to sponsors or their affiliates in exchange for income-generating assets, provided the transaction has SEC and exchange approval. REITs must also submit a plan to restore MPO levels and publicly disclose the breach and remedial steps.
The SEC is accepting stakeholder feedback before finalizing the amendments.
