Regulations Update: PSE Listing Rules for Real Estate Investment Trusts

The Philippine Stock Exchange recently adopted the Listing Rules for Real Estate Investment Trusts (REITS) which took effect on October 8, 2010. The Listing Rules were made in accordance with the requirement under Republic Act No. 9856 (the REIT Act of 2009) that the shares of stock of a REIT must be listed pursuant to the rules of the Exchange.

A REIT is a stock corporation established under the Corporation Code principally for the purpose of owning income-generating real estate assets. Under the Listing Rules, in addition to the criteria established under the Listing and Disclosure Rules of the Exchange, a REIT must also comply with the following criteria to qualify for listing:

1.     It must have a dividend policy of distributing annually at least 90% of its distributable income as dividends to its shareholders;

2.     It must have at least 1,000 public shareholders, each owning at least 50 shares and who in aggregate own one-third of the outstanding capital stock;

3.     It must have a minimum paid-up capital of P300 million;

4.     At least 75% of its property must be invested in income-generating real estate;

5.     At least one-third, and in no case less than two, of its board of directors must be independent directors; and

6.     It must appoint a fund manager and property manager in accordance with the law.

A REIT must also comply with the reportorial and disclosure requirements under the Corporation Code, the Securities Regulation Code, the Exchange and the REIT Act.

Once listed, a REIT must comply with the continuing listing requirements of the Exchange, such as the maintenance of its status as a public company, the distribution of at least 90% of its distributable income to its investors, and the valuation of its assets by an independent valuation company.  Otherwise, the REIT could be subject to delisting.