Philippine property developer Ayala Land Inc. is looking for ways to raise $500 million, Phil Star reported. The local land developer is reportedly eyeing participation in the real estate investment trust (REIT) sector in the Philippines with its first REIT listing. The company has since filed a registration with the local Securities and Exchange Commission.
REIT has been an asset to most companies dealing in real estate because it can generate more investments. However, REITs are more difficult, as they can be stalled by taxation frameworks. REIT companies, or companies that operate income-generating assets, also include offices and apartment buildings, hotels, warehouses, shopping centers and highways with tollgates.
They are also attractive for providing investors with regular income as well as long-term capital appreciation. The Philippine Congress last passed an act regulating the REIT law, but as of that time, no one was interested enough to take part in REITs. Property developers begged off at the time due to issues in asset transfer taxation as well as ownership issues connected to the process.
The REIT business isn't a first for the Asian region, however, with China producing its own batch of REITs. The Shanghai Stock Exchange, according to the Asia Times, called a meeting to discuss the future of REIT projects with different fund managers and brokers in March. Wang Fang, a researcher from the Development Research Center of the State Council, was cited in the report.
The report also included several Chinese provinces in the list, The provinces of Hainan, Xiong' a (New Area) and the first tier municipalities of Beijing, Guangzhou, Shanghai, and Shenzhen will be included in the initial offering. The Chinese authorities have been rallying to introduce REITs to the public, according to Wang.
These public REITs will likely have an operating structure which is a mix of public funds, asset-backed securities, and others. It could also include properties such as infrastructure, commercial and residential properties, and public utilities. However, the fund will be publicly raised and traded, according to the report.
It is unknown what form REITs will eventually take on in the Philippine property sector, but it is a big development for the local market. REIT laws were severely punitive during their introduction in the country, particularly to stifle entities from taking advantage of tax incentives coming from these REITs. Under the Aquino government, these REITs were almost untouchable because of these strict laws.
