APREA criticises the Philippines’ government’s failure to implement REITs
09 August 2011
News, Asia, Philippines
The Asia Pacific Real Estate Association (APREA), which promotes and represents the real estate sector on a regional basis, has reacted strongly to the news that SM Prime Holdings has dropped its plans to launch a REIT because of insistence by government regulators on proposed rules 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 re-open certain issues, of particular note increasing the minimum level of public ownership from the level prescribed in the Act of 33% to a sliding scale of 40% rising to 67% in three years. 33% is already high by international standards and the sliding scale proposed has been widely criticised as being unworkable and risks killing off the REIT idea in the Philippines.
Peter Mitchell, CEO of APREA said: “It is now getting on for two years since the REIT Act was enacted. 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.
“The record over the last year looks very sorry compared to the way in which REIT laws have been welcomed in the other countries in the region.
“The minimum public ownership condition, even if accepted by a sponsor, would result in very sub-optimal products being offered, to the detriment of investors. Either way, if insisted upon it will ensure that REITs won’t successfully get under way in the Philippines.
“To be sure, there are aspects of the new law that won’t be perfect, but the experience of other countries shows that it is best to get it under way and consider enhancements on the basis of performance.
“The window won’t stay open for ever, and the obfuscating may kill a major potential benefit to the economy through, amongst other things, billions of extra dollars flowing in.”
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