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

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Group says Reit rules ‘unworkable’

by Jenniffer B. Austria

[ manilastandardtoday.com ] 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.

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