REITs may need more than one year to reinvest proceeds

By Beatriz Marie D. Cruz
REAL ESTATE Investment Trusts (REITs) will need more than a year to reinvest its proceeds in the Philippines following the market’s ongoing pandemic recovery, property consultants said at the weekend.
This after the House of Representatives last week approved on second reading a bill that seeks to require a sponsor or promoter to reinvest proceeds of their REIT shares in the Philippines within a year from receipt of the proceeds.   
P. Ryan Isip, head of capital markets at real estate consultant JLL Philippines, said that REITs should be given more than one year to reinvest their proceeds to ensure they generate more profits.
“It is the REIT’s mandate to provide increasing yield. To do so, every investment by the REIT must provide an accretive yield to the portfolio,” Mr. Isip said in an e-mail.
“Finding such types of investment are few and far between; therefore, REITs should have more time than one year.”
Joey Roi Bondoc, associate director for research at Colliers Philippines, said that instead of giving a fixed one-year period for reinvesting in the country, REITs should be given more leeway.
“I would say that there should be greater flexibility in terms of the period for reinvestment. I wouldn’t say a specific time period, but there should be greater flexibility for the developers, because the expansion will also hinge on the expansion of the economy,” he said in a video interview.
House Bill No. 7525 seeks to amend the Real Estate Investment Trust Act of 2009. Under the bill, REITs will be mandated to submit a reinvestment plan to the Philippine Stock Exchange and Securities and Exchange Commission upon registration and secure a certification annually to prove that it is compliant with its reinvestment plan.
Mr. Bondoc said the proposed measure would encourage REITs to reinvest in the Philippines as the economy is recovering from the coronavirus pandemic.
“There is really a need for the developers to immediately launch new projects, especially as they really want to capture the gains in the market, as the office, retail and leisure sectors are rebounding,” he said.
Some real estate companies are looking at infrastructure projects or injecting some of their projects into their REIT companies.
“They really want to take advantage of opportunities in the market because we believe that now is an opportune time to aggressively launch more projects and acquire more assets that eventually will be divested to REITs… So I think it will definitely be a plus for the retail market,” Mr. Bondoc said.
If enacted into law, the amendment is expected to help boost growth in the real estate industry, House Economic Affairs Committee Chairman and Negros Occidental Rep. Gerardo P. Valmayor, Jr. told lawmakers last week.
Republic Act No. 9856 or the REIT Act previously drew zero REIT issuances, until the government relaxed requirements under the implementing rules and regulations.
There are currently eight REITs in the country, namely AREIT, Inc., Citicore Energy REIT Corp., DDMP REIT, Inc., Filinvest Reit Corp., MREIT, Inc., Premier Island Power REIT Corp., RL Commercial REIT, Inc., and VistaREIT, Inc.