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Sec eyes cut in REIT free float level.

THE Securities and Exchange Commission (SEC) is amenable to reducing the free float level of those applying for the Real Estate Investment Trust (REIT) to 33 percent, but is bent on increasing the minimum public float of listed firms straightt to 25 percent.

SEC Commissioner Ephyro Luis B. Amatong said there's no liquidity issue in the country today that prevents a listed company from raising cash from the system in order for it to increase its public float to 25 percent from the current rule of 10 percent. Some initial public offerings even have their public ownership straight to 40 percent of the company.

'We felt that they can do it but we'll give them a longer period to comply. Some of these companies are very big but they've indicated that if we require them [to increase public float], they'd be able to do it,' Amatong said.

While SEC commissioners have yet to discuss how this can be done, Amatong said he is inclined to allow listed firms to comply with the new minimum public float rule in five years, instead of increasing the rate incrementally in three years until the minimum requirement reaches 25 percent.

The 25-percent rate is already the standard among the 10-member Association of Southeast Asian Nations.

As for the REIT, the SEC is keen on cutting the minimum float to 33 percent, from the current rule of 40 percent upon listing; and bringing it up to two-thirds, or 67 percent, in three years. The current rule reportedly discouraged the industry from making initial public REIT offerings.

Amatong said the government is amenable to changes if the proceeds of the REIT will be reinvested in the Philippines, either in the property sector or infrastructure projects, within one year.

Amatong said the SEC is in talks with the Bureau of Internal Revenue (BIR) and the Department of Finance (DOF) for the new draft of the REIT measure, which may be released by the end of the month for public comment.

'We are confident that a REIT listing is still possible within the year,' he said.

While the two measures are important, Amatong said the SEC will first expedite the new framework on the REIT, as the industry has been waiting for it for years. After this, the SEC can tackle the minimum public ownership of listed firms.

The REIT law was enacted in 2009, under the Arroyo administration, with the main aim of broadening the participation of the public in the ownership of real estate in the Philippines and using the capital market as an instrument to help finance and develop infrastructure projects.

The implementing rules and regulations of the said law, however, were crafted by the Aquino economic team. The IRR included measures on public float and taxing the transfer of assets, which soured the deal for many of the players.The said law was designed to recycle real-estate assets by placing it in another REIT company which the public may invest in by purchasing shares. The shares of the company may also be traded at the Philippine Stock Exchange.

'It's already August and we need to release first the REIT [framework]. I don't have a clearer date [for the 25-percent minimum public float rule]. But the sooner that we bring it up, the better. The longer-term view is that the economy is doing better...and it should be a good time,' Amatong said.

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Publication:Business Mirror (Makati City, Philippines)
Date:Aug 13, 2019
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