The Philippine law creating REITs or Real Estate Investment Trusts was Republic Act 9856 or the REIT Act of 2009. Its twofold aim is to help finance / develop infrastructure projects and democratize wealth by broadening Filipino participation in real estate ownership.

Important features of REITs under the law include:

-A REIT is a stock corporation and investment is by purchasing its shares of stock.

-At least seventy – five percent (75%) of the deposited property of the REIT must be invested in, or consist of, income – generating real estate.

-A REIT must distribute annually at least ninety percent (90%) of its distributable income as dividends to its shareholders.

-Cash or property dividends paid by a REIT shall be subject to a final tax of ten percent (10%).

Although the REIT Act was established in 2009, major corporations were discouraged from establishing REITs because its rules were disadvantageous. It wasn’t until 2020, under the administration of Pres. Duterte, when the Securities and Exchange Commission (SEC) revised the implementing rules and regulations.

The relevant changes include:

-Reducing the minimum public ownership requirement from 67% to 33%

-Requiring sponsors to submit a Reinvestment Plan for any proceeds realized from the sale of REIT shares. The reinvestment must occur within a year and must be towards a real estate / infrastructure project in the country.

-Enhanced protection for investors with rules on related party transactions, independent directors and so on.

In the same year, the Bureau of Internal Revenue (BIR) issued Revenue Regulation No. 3 which, among other provisions, exempted the transfer of property to a REIT from VAT and other taxes.

The rule changes were a success and 2020 saw the initial public offering (IPO) of AREIT from Ayala Land. The year after, we saw the IPOs of DDMP REIT from DoubleDragon; FILREIT from Filinvest; RL Commercial REIT (RCR) from Robinsons Land; and MREIT from Megaworld. In 2022, we saw the establishment Citicore Energy REIT (CREIT) and VREIT from Vista Land.

Although Philippine REIT is still in its infancy, I am very excited about its future and hope to encourage other Filipino investors to consider REITs in their portfolio as well.