AN executive of an integrated real-estate service provider said the Philippines can be a sensation in Real Estate Investment Trust (REIT).
“REITs have the power to democratize the Philippine property market, allowing the individual investor on the street to invest in high-value real-estate assets along with the big players,” Santos Knight Frank (SKF) Chairman and CEO Rick Santos said in a press briefing on Monday in Makati City.
“We believe REITs will substantially boost the Philippines’s capital market. New capital for developers will enable expansion of the real-estate sector not only in Metro Manila, but also in the provinces,” Santos said.
Since the passing of Republic Act 9856 in 2009, Santos said the real-estate market has been anticipating the realization of the REIT. A REIT is a publicly listed stock corporation that owns income-generating real-estate assets, such as malls, offices and hotels.
Envisioned to promote the development of the capital market, REITs are instruments to generate capital. REIT companies are also mandated by law to distribute 90 percent of their retained earnings as dividends, which benefit investors. With the recent move by the government to amend rules on REITs, developers have been increasingly looking at listing their income-generating assets as REIT companies.
SKF said the potential in REIT is huge that the firm has estimated the prime and Grade A office market in Metro Manila’s four major central business districts (Bay Area, Makati, BGC and Ortigas) at P1.02 trillion.
Santos said REITs are not only limited to office assets.
With 4.3 million square meters in gross leasable area in Manila’s retail, Santos Knight Frank expects developers to convert mall assets into REIT companies. Assets, such as energy, infrastructure, transportation, hospitals, schools and tourism have also been converted into REITs in other countries.” SKF Senior Director for Research and Consultancy Jan Custodio said.
Santos said the current business environment is a good time to push REIT in the country. He pointed out REITs have outperformed their non-REIT and overall domestic market over the past one to five years in major Asia Pacific markets, according to Knight Frank’s analysis of REITs in Singapore, Japan, Hong Kong and Australia from Thomson Reuters Datastream.