Question & AnswerQ&A (Republic Act No. 9856)
Republic Act No. 9856 is known as "The Real Estate Investment Trust (REIT) Act of 2009."
The primary policy is to promote the development of the capital market, democratize wealth by broadening Filipino participation in real estate ownership, finance and develop infrastructure projects, and protect the investing public with a regulatory framework for REITs.
A REIT is a stock corporation established under Philippine law primarily to own income-generating real estate assets. Although called a 'trust,' it does not have the same technical meaning as a trust under existing laws.
A REIT must have at least 1,000 public shareholders each owning at least 50 shares and together owning at least one-third (1/3) of the outstanding capital stock to maintain its status as a public company.
A REIT must have a minimum paid-up capital of Three hundred million pesos (Php300,000,000.00).
A REIT may invest in income-generating real estate outside of the Philippines up to a maximum of 40% of its deposited property, but only with special authorization from the Commission.
At least seventy-five percent (75%) of the REIT’s deposited property must be invested in or consist of income-generating real estate.
A REIT must distribute at least 90% of its distributable income annually to shareholders no later than the last day of the fifth month following the fiscal year-end, and public shareholders must receive dividends proportional to their ownership.
Penalties include fines between Php200,000.00 to Php5,000,000.00, imprisonment from six years and one day to twenty-one years, or both, plus potential deportation for foreign offenders, and administrative, civil, and criminal liabilities.
Failure to maintain its status as a public company, failure to maintain the listed status of its investor securities, or failure to distribute at least 90% of distributable income can trigger loss of preferential tax treatment.
The fund manager must be independent from the REIT and sponsor/promoter, be a duly organized corporation, have a minimum paid-up capital of Php10 million, perform key business activities in the Philippines, comply with corporate governance requirements, and employ qualified professional staff.
Total borrowings and deferred payments must not exceed 35% of the deposited property, except for REITs with investment-grade credit ratings where the limit can go up to 70%.
Related party transactions must have full disclosure, be on fair terms, be approved by the board with unanimous independent director approval, and be supported by a fairness opinion from an independent appraiser.
REITs must comply with Corporation Code and Securities Regulation Code disclosures and additionally disclose material contracts, related party transactions, valuations, material changes, dividends, changes in control, and other key matters in quarterly and annual reports.
Tax incentives granted to the REIT are revoked, any incentives availed must be refunded, and penalties apply. If delisting is due to serious causes hurting investors, responsible persons must refund investors the value of their shares.