SEC eyes lower REIT public ownership threshold
The Securities and Exchange Commission (SEC) is lowering the minimum public ownership requirement for firms seeking to enlist using the Real Estate Investment Trust (REIT) framework in the proposed amendments to the law’s implementing rules and regulations (IRR).
Among other changes to the IRR of Republic Act 9856, or the REIT Act of 2009 released for public comment, the SEC relaxed the public float, or the portion of the stake of a company owned by public investors, to 33 percent in the first year from the current 40 percent deemed too high by several property developers. The REIT shall then raise its public float to 67 percent in the third year.
The REIT act requires companies to have at least 1,000 public shareholders each owning at least 50 shares of any class of shares, and in aggregate at least one-third of the company’s outstanding capital stock.
Other changes to the IRR include a reinvestment scheme for proceeds secured from the sale of REIT shares or other securities, enhancement of control over related party transactions and administrative sanctions for the violation of applicable laws, rules and regulations.
Under the reinvestment scheme, firms who have enlisted their income-generating real estate to a REIT are required to reinvest in any real estate or infrastructure projects in the country the amount equal to its proceeds from the issuance.
Meanwhile, the SEC under section 9, rule 5 of the IRR required the formation of a related party transactions committee in order to protect investors’ interest.
Majority of of the committee members must be independent directors who shall vote unanimously when approving related party transactions, the SEC said. Firms must also follow SEC memorandum circular no. 10 series of 2019 which requires publicly-listed firms to disclose policies on material related to party transactions three days from the execution.
Moreover, the commission will require entities seeking to serve as REIT fund managers to secure a license from the SEC. It plans to relax the required three-year track record for fund managers by considering its experience in the real estate industry. The SEC is also imposing lower minimal paid-up capital requirement for foreign and domestic corporations at P10 million, from the P100 million the current IRR requires.
Source : https://tribune.net.ph/index.php/2019/10/05/sec-eyes-lower-reit-public-ownership-threshold/
