Robinsons Land drops plan to form Reit firm

[ ] September 30, 2011
by Jenniffer B. Austria

Robinsons Land Corp., the property unit of conglomerate JG Summit Holdings Inc., has joined other listed companies that have abandoned plans to list their assets through a real estate investment trust because of unattractive rules.

Robinsons Land vice chairman Lance Gokongwei said in an interview at the sidelines of the Asean 100 Forum held at the Makati Shangri-La Hotel that it did not make financial sense to do a Reit given the current rules approved by the government.

“Given the constraints, given the current implementing rules, I think it does not make financial sense to do a Reit,” Gokongwei said. “Definitely we are not pushing with our Reit plans,” he added.

SM Prime Holdings Corp., the Philippines’ biggest mall developer, in August said it was no longer pushing through with its plan to raise $500 million through Reit after the government doubled the public ownership requirement for property trusts.

The rules require a minimum public float of 40 percent for a Reit company and 67 percent within three years after listing.

Most real estate companies, however, want to retain majority ownership of the Reit.

Ayala Land Inc., meanwhile, is open to possible talks with the government in amending some of the rules on Reit law.

“The private sector is always willing to dialogue so we can get this thing implemented and moving as soon as possible,” Ayala Land president Antonino Aquino said.

Aquino said he expects “some tension” given the government’s drive to increase revenue collection and the incentives to be given to real estate firms under the Reit.

Aquino said the Reit was one program that could spur the growth and development of the country besides the public-private-partnership projects of the Aquino administration.

Robinsons Land, Ayala Land and SM Prime are three of the biggest real estate companies that earlier expressed interest in Reits for listing in the Philippine Stock Exchange.

PSE president Hans Sicat said the exchange had not received any single application for Reit listing. Bloomberg, AP

Robinsons Land balks at REIT minimum float

Posted on August 14, 2011 10:13:53 PM [BusinessWorld Online ]
ROBINSONS LAND Corp. may be the next developer to shelve plans for setting up a real estate investment trust (REIT), with a ranking official hinting last week that recently passed rules for the investment vehicles were deterring big industry players.

Robinsons Land’s REIT sentiments reflect the general mood of the real estate industry at present, Robinsons Land President and Chief Operating Officer Frederick D. Go said at the sidelines of the two-day 20th National Retail Conference and Stores Asia exposition.

Top developers SM Investments Corp. and Ayala Land, Inc. had already deferred their own REIT plans this month, citing difficulties in meeting the mandated 40% public minimum float, the world’s highest, to be raised to 67% in three years.

He described the rules as not conducive to investment, adding he is not surprised major players are “not keen” to invest in REITs. Robinsons Land previously disclosed that it intended to raise $500 million via REIT.

“When the rules are created that way, you do not attract the big players to create REITs,” Mr. Go said, explaining that major industry players with clear expansion goals are the firms that should be investing and benefiting from REITs.

In a press statement last week, the Asia Pacific Real Estate Association (APREA) has similarly hit the Finance department’s insistence to implement REIT rules despite industry assessments deeming them be “unworkable,” adding that potential economic benefits to the country are largely at risk.

“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,” said APREA Chief Executive Officer Peter Mitchell. “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,” he said.

In the meantime, the Gokongwei-led developer has so far posted a strong performance with net income for the nine months ending June this year increasing by 18% to P3.048 billion, data from a financial report filed with the local bourse on Friday showed.

Combined real estate and hotel revenues were up by 17% to P9.269 billion from P7.947 billion recorded in the same period last year.

The commercial centers division, which account for nearly half of total revenues, posted an 8% growth to P4.6 billion from P4.274 billion last year from new Robinsons malls in Dumaguete, Ilocos Norte, General Santos City, Tacloban, and Davao City.

Residential revenues, which account for 32% of total revenues, jumped by 33% to P3.111 million from P2.331 million due to “an increase in completion level of existing projects.”

Higher rentals from office complexes Cybergate Center 3 and Cybergate Plaza brought in P976.3 million in revenues for the office buildings division, up 15% from P865.6 million last year.

As such, costs similarly rose 17% to P5.768 billion.

Robinsons Land shares were up by 0.50% to P12.28 on Friday versus P12.22 from its previous close. -- FJGDLF

Group says Reit rules ‘unworkable’

by Jenniffer B. Austria
[ ] August 10, 2011

A group of real estate companies on Tuesday criticized the Aquino administration for drawing up impractical rules on the Real Estate Investment Trust law.

The Asia Pacific Real Estate Association, which promotes and represents the real estate sector on a regional basis, said in a statement the 40-percent minimum public float in the initial offering and increasing it to 67 percent on the third year could make Reit unsuccessful.

“The 33 percent [the minimum public offering proposed by real estate companies] is already high by international standards and the sliding scale proposed has been widely criticized as being unworkable and risks killing off the Reit idea in the Philippines,” Aprea said.

SM Prime Holdings Inc., the country’s largest shopping mall operator and developer, last week said it would no longer pursue a $500-million Reit offering because of the unfavorable rules.

Ayala Land Inc. said it remained committed to doing a Reit offering provided that the government would come up with “acceptable and mutually beneficial” rules.

“We remain hopeful a productive dialogue will continue with regulators to address the issue that surfaced and come up with an acceptable and mutually beneficial rule so we can proceed with the offering,” Ayala Land chief finance officer Jaime Ysmael said.

“At this point we still believe in the [Reit] product. But for now, we will continue to manage and operate malls as efficiently as possible so they remain in Reit-ready mode,” Ysmael added.

The Bureau of Internal Revenue last month issued rules regulating the establishment of Reits, stock corporations that pool investor funds to manage income-generating real estate assets. Among others, it required Reits to have a 40-percent minimum public float and increase it to 67 percent within three years after listing.

“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,” Peter Mitchell, chief executive of Aprea, said.

“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,” he added.

BIR comes out with REIT rules

[ ] July 27, 2011

Real estate investment trust (REIT) will be subject to 30 percent income tax, 12 percent value-added tax, and a 50 percent discount on documentary stamp tax (DST), the Bureau of Internal Revenue has ruled.

The decision is embodied in the revenue regulation covering REIT which the BIR yesterday issued after a lengthy debate and lobbying from the private sector.

The BIR said income tax for REITs will be computed after the deduction of allowable deductions and dividends paid. The regular tax rules require companies to pay 35 percent on income, less the allowable deductions.

REITs, however, are required to have their public ownership set at 40 percent in the first two year, and increase this to 67 percent in the third year to continuously avail of the incentive.

"Provided however, the REIT shall place in escrow in favor of the Bureau with an Authorized Agent Bank acceptable to the Bureau the income tax collectible from the REIT on the dividend it declared and deducted from its taxable income for the first and second year of the REIT prior to its attaining the minimum ownership of 67 percent had it been disallowed," the BIR said.

"The escrowed income tax amount shall be released to the REIT only upon showing of proof of compliance to the increase of minimum ownership to 67 percent within three years from its listing, otherwise, it shall be released in favor of the government…. By the end of the third year from its listing, at the latest and thereafter, the REIT shall maintain the minimum public ownership of 67 percent. Otherwise, dividend payment shall not be allowed as a deduction from its taxable income," the bureau added.

REITs will be subjected to 50 percent of the applicable documentary stamp tax for all the transfer of real property to REITS.

The "transfer" refers to real property, the BIR said, with the DST imposed on the document transferring the real property NIRC at P7.50 for every P1,000.

In transactions involving shares of stocks representing interest in the real property, the DST shall be at P0.375 for every P200 and fractional part thereof of the par value of the stock.

"In case the stock transferred is without par value, the amount of the DST prescribed shall be equivalent to 12.5 percent of the DST paid upon original issuance of said stock," the BIR said.

DST on the assignment of mortgage or pledge meanwhile shall be based on the outstanding balance of the original loan at the time of the transfer particularly: P10 for the first P5,000; and P5 for the fractional excess of the initial P5,000.

In transferring properties to REIT, the transaction shall be subject to income tax/ capital gains tax and value-added tax, the BIR said.

Disposal of assets shall likewise be subject to VAT.

"A REIT shall not be considered as a dealer in securities and shall not be subject to VAT on its sale, exchange or transfer of securities forming part of its real estate-related assets," the BIR said.

BOI eyes compromise on socialized housing

BY IRMA ISIP [ ] June 21, 2011

The Board of Investments (BOI) is poised to ease the low-cost mass housing component of vertical projects for developers to be entitled to incentives, BOI managing head Cristino Panlilio said recently.

Panlilio said that from the current 20 percent, the BOI is planning to lower to 10 percent the minimum allocation for socialized housing.

But he said the BOI bent on reducing the price of units to be deemed socialized housing from the current P3 million to P2.5 million.

Panlilio said the changes in the rules will be incorporated in the general guidelines on housing in the 2011 Investment Priorities Plan (IPP).

Panlilio said developers found the 20 percent allocation too stringent. They claimed the requirement takes away whatever incentives they are supposed to enjoy.

He added that the BOI may introduce alternative modes of compliance by allowing donation of land to non-government organizations (NGOs), which would in turn undertake the socialized housing component of the project.

Under the general guidelines of the 2010 IPP, all low-cost mass housing projects must comply with the socialized housing requirement by developing an area for socialized housing equivalent to at least 20 percent of the total subdivision area or total subdivision project cost for horizontal housing and 20 percent of the total cost of building construction and site preparation for vertical housing projects whether within or outside the same city or municipality.

Compliance may be done through any of the following modes: development of a new settlement; slum upgrading or renewal of areas for priority development either through zonal improvement programs or slum improvement and resettlement programs; and joint-venture projects with either the local government units or any of the housing agencies.

Under the proposed guidelines, Panlilio said, either the developer itself builds the socialized housing as long as it is outside the metropolitian area, or donates the land to BOI-accredited NGOs such as Gawad Kalinga, Habitat for Humanity, Angkop Pabahay, Maryville Urban Development, and the Rotary Club.

"Definitely, we will not agree to bond issuance as an alternative compliance," said Panlilio, referring to a proposal by the Subdivision and Housing Developers Association.

Panlilio said most developers, including the big ones, are able to comply with the requirements but the BOI is nonetheless looking at ways to ease the rules in the face of a debate on the hurdle cost of a low-cost mass housing unit.

In insisting on a lower hurdle cost of P3 million, the BOI said 90 percent of units sold are below P2.5 million anyway.

Panlilio said developers can afford the lower hurdle because their return on investments (ROI) is very good at 20 percent or better.

Panlilio supports the grant of income tax holidays to housing developers as these enable them to bring down the cost of a housing unit by as much as 5 percent to 10 percent.
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