REAL ESTATE INVESTMENT TRUST ..

II. FUNCTIONS
TABLE OF CONTENTS
I. Definition
II. Functions
III. Investing in the REIT
Q: What are Real Estate Investment Trusts (REITS)?
A: A stock corporation established principally for the
purpose of owning income-generating real estates1.
“Trust” does not have the same technical meaning as
trust under existing laws and regulations but is used
herein for the sole purpose of adopting the
internationally accepted description of the company in
accordance with global best practices.
I. REQUIREMENTS
1. MINIMUM PUBLIC OWNERSHIP. A REIT
shall be a public company and to be considered as
such, a REIT shall:
a. Maintain its status as a listed company; and
b. Upon and after listing, have at least one
thousand (1,000) public shareholders each
owning at least fifty (50) shares of any class
of shares, and who, in the aggregate, own at
least one-third (1/3) of the outstanding
capital stock of the REIT.
2. CAPITALIZATION. A minimum paid-up capital
of Three Hundred Million Pesos (Php 300,000,000.)
at the time of incorporation which can either be in
cash and/or property.
3. INDEPENDENT DIRECTORS. At lease one third
(1/3) or at least two (2), whichever is higher.
4. ORGANIZATION & GOVERNANCE. As a
public company, the REIT shall have such
organization and governance structure that is
consistent with the Revised Code of Corporate
Governance (prior to listing) and its pertinent
provisions of the SRC and its IRR.
Q: What are Functions of the Real Estate Investment
Trust?
A: The REIT shall have all the powers of the
corporation under the Revised Corporation Code, and
shall perform all of the functions of a corporation, except
those expressly delegated under these Rules to the Fund
Manager and the Property Manager, and those that are
necessary such as but not limited to the following:
 Appoint a Fund Manager, a Property
Manager and a Property Valuer
 Ensure that the financial and economic aspects
of the REIT are professionally managed
 Formulate the annual investment strategy and
policy; determine annual borrowing limit; and
determine the acquisition and disposition plan of
real estate properties of the REIT in accordance
with the REIT Plan.
 Implement appropriate policies and conduct due
diligence reviews such that investments are
made only after careful and diligent
investigations by the REIT.
 Formulate dividend payment schedules of the
REIT
 Maintain or cause to be maintained proper
books and records of the REIT and cause the
preparation of the REIT’s financial statements
 Ensure that all documents in relation to the
REIT (excluding documents containing
commercially sensitive information) are made
available for inspection by the shareholders and
creditors of the REIT in the Philippines, during
normal office house, at the place of business of
the REIT and ensure that copies of such
documents are available upon request by any
shareholder or credit upon payment of a
reasonable fee;
 Ensure compliance with any applicable laws,
rules, codes or guidelines issued by
governmental departments, regulatory bodies,
exchanges or any other relevant organizations
regarding the activities of the REIT or its
administrations; and
 Maintain and implement investor relations
procedures whether online or otherwise to hand
queries and complaints.

To qualify, a REIT must be:

III. INVESTMENT IN THE REIT
 At least seventy five percent (75%) of
1 deposited
“Income-Generating property
Real Estate” meansmust be which
real property income-
is held Q: How do I invest in Real Estate Investment Trusts?
generating real estate
for the purpose of generating a regular stream of income such as, but
not limited
 to,
Atrentals, toll fees,
least user’s fees,
ninety ticket sales,
percent parking fees
(90%) of
and storagedistributable
fees. income must be paid out as
cash dividends to investors
 It must be listed in the Philippine Stock
A: Investment in a REIT shall be by way of subscription
to or purchase of uncertificated shares of stock of the
REIT.
No shares of stock of the REIT shall be offered for
subscription of sale to Public Shareholders except in
accordance with a REIT Plan registered with and
approved by the Commission.
Q: What is a REIT PLAN?
A: The REIT Plan takes the place of a prospectus. This
is the defined as the plan, including its amendments, of
the REIT registered with and approved by the
Commission2. It contains:
1. The Investment policy, restrictions, & strategy
of the REIT;
2. Discussion on the business plan for property
investment and management covering the scope
and type of investments made or intended to be
made by the REIT, including the type(s) of real
estate;
3. General character and the competitive
conditions of all real estate now held or
intended to be acquired by the REIT and how
such real estate meets the established criteria for
selection.
4. Nature and risks of making property
investments in each of the relevant locations,
including:
a. Demographics,
b. State of the economy,
c. Economic risks and foreign exchange risks
d. Political risks,
e. Legal risks & tax considerations.
f. Policies that affect property investments,
g. Overview of the property market,
h. Analysis of the specific properties;
i. Competitive dynamics in the rental market;
j. Operational requirements,
k. Rules and regulations governing property
ownership and tenancy matters
5. Terms and conditions of the arrangements or
agreements that have been entered into by the
REIT for it to own legal and beneficial title over
specific property, and the benefits and risks of
such arrangements including but not limited to,
any agrarian-related issues, if any;
6. Transaction history of the relevant property in
the three (3) years immediately preceding the
2
Implementing Rules and Regulations of the Real Estate
Investment Trust (REIT) Act of 2009.
date of the valuation report included in the REIT
plan.
7. Any proposed program with timetable for
renovation or improvement to the real estate,
including estimated costs thereof and the method
of financing to be used;
8. Operating date of each of the real estate;
including –
a. Occupancy rate;
b. No. of tenants and mix in terms of
occupation and business,
c. Principal provisions of the leases;
d. Average annual rental per sq. m; schedule of
lease expirations for the next 3 years
9. Borrowing policy and the method or proposed
method of operating and financing the real estate
investments of the REIT.
10. Where real estates to be financed to be acquired
are to be financed (wholly or in part) through
borrowings, the details of the borrowings/s
such as but not limited to:
a. Source,
b. Type
c. Term/Period
d. Nature of borrowing/s
e. Interest rate to be paid by the REIT
f. Risks involved with respect to borrowings
11. Measures in place to mitigate or minimize
risks relating to the investment and management
of real estate owned by the REIT,
12. Dividend Policy
13. Insurance arrangement for the assets or the
REIT.
14. Exit strategy in the event of divestment,
(including the exit from any joint ownership
arrangement), factors and risks which may
impact or act as an impediment to an exit, and
the contingency plan.
15. Details of transactions or agreements entered
into with related parties;
16. Full particulars of the nature and extent of the
interest, if any, of –
a. Any director of the REIT
b. Fund Manager
c. Property Manager
d. Or any Related parties to the REIT, in
the property owned or proposed to be
acquired by the REIT
 e. And where the interest of such director
consists in being a partner in a firm, the
nature and extent of the interest in the
firm, with a statement of all sums paid
or agreed to be paid to him or the firm
for services rendered to the REIT.
17. Functions, duties and responsibilities of the
Property Manager and the Fund manager and,
where applicable, shareholding of the Property
Manager and/or the Fund Manager in the REIT
18. Corporate information on Property Manager
such as:
a. No. of years in real estate/ property
management or alternatively,
information on 2 responsible officer
who have at least 5 years track record in
real estate/ property management;
b. Total assets under management
c. Staff strength
d. Resources
e. Internal controls and risk management
system
19. Information on the directors and principal
officers of the property manager, highlighting
the academic and/or professional qualification as
well as experience possessed by their respective
personnel
20. Corporate information on the fund manager
including –
a. No. of years in fund management
b. Total assets under management
c. Staff strength
d. Internal controls
e. Risk management system
21. Information on the directors and principal
officers of the Fund Manager, highlighting the
academic and/or professional qualification as
well as experience possessed by their respective
personnel
22. Details on substantial fees to be paid by the
REIT, such as property management fees and
fund management such as:
a. Percentage rate to be paid by the REIT
b. Basis on which the property
management fee is calculated
c. An illustration on how the fee is
calculated
23. Names, designation and the direct and indirect
shareholdings in the REIT of-
a. Promoters
b. Principal Shareholders
c. Directors
d. Principal Officers
e. Principal Officers of the Property and
the Fund Manager
24. Disclosure on how the proceeds of the public
offering and any other funds raised in
connection the public offering will be utilized
with timetable; and
25. Pro-forma financial statements which shall
include information on Net Asset Value and Net
Asset Value per share before listing and after the
proposed public offering
Q: Are REIT shares public listed?
A: Yes. The shares of stock of the REIT shall be
registered and listed in accordance with the SRC and
listed in accordance with the rules of the Exchange.
Q: Does the REIT have to comply with nationality
restrictions on land ownership?
A: Yes. A REIT that owns land located in the
Philippines must comply with foreign ownership
limitations under Philippine Law.
Q: When and how are REIT dividends declared??
A: Dividends are declared as follows:
1. Annually, not later than the last working day of
the fifth (5th) month following the close of the
fiscal year of the REIT.
2. Dividends are payable only from the unrestricted
retained earnings of the REIT as provided for
under Section 42 of the Revised Corporation
Code.
Retained earnings of the REIT may only be
restricted and not available under the following
circumstances pursuant to
1. Sec. 42 of the Revised Corporation Code
1. Justified by definite corporation
expansion project or programs
approved by the board.
2. Corporation is prohibited under any
agreement with any financial
institution, whether foreign or local,
without its consent;
3. Retention is necessary under special
circumstances such as when there is
a need for special reserve for
possible contingencies; and
 2. When approved by at least a majority of the
entire membership of the Board of
Directors, including the unanimous vote of
all Independent Directors of the REIT
3. The percentage of dividends with respect to any
class of stock to be received by the Public
Shareholders to the total dividends with respect
to that class of stock distributed by the REIT
from out of its distributable income must not be
less than such percentage of their aggregate
ownership of the total outstanding shares of the
REIT with respect to that class of stock.
4. The income distributable as dividend by the
REIT shall be based on the AFS for the recently
completed fiscal year prior to the prescribed
distribution. The AFS shall present a
computation of its distributable dividend taking
into consideration requirements under the law
and this rule.
However, the AFS shall not be required before
the REIT can distribute quarterly and/or semi-
annual dividends, provided, the REIT has
reasonable grounds to believe that the maximum
dividends that it may distribute in such fiscal
year shall not be more than its Distributable
income based on its AFS for such fiscal year.
5. A REIT may declare either cash, property, or
stock dividends which must be approved by at
least a majority of the entire membership of
the Board of directors, including the unanimous
vote of all Independent Directors and subject
to approval of the Commission within five (5)
working days from receipt of the request for
approval. If the Commission does not act on said
request within such period, the same shall be
deemed approved.
6. Distributable income excludes proceeds from
sale of REIT’s assets that are reinvested by the
REIT within one (1) year from the date of the
sale. Gain from the shale shall, however, form
part of the distributable income.
7. The income distributable by the REIT shall be
adjusted by deducting the following unrealized
or non-actual gains and losses:
a. Unrealized foreign exchange gains,
except those attributable
b. to cash and cash equivalents
c. Far value adjustment or the gains arising
from marked-to market valuation which
are not yet realized
d. Fair value adjustment of investment
property resulting to gain
e. The amount of recognized deferred tax
asset that reduced the amount of income
tax expense and increased the net
income and retained earnings, until
realized
f. Adjustment due to a deviation from any
of the prescribed accounting standard
which results to gain;
g. Other unrealized gains or adjustment to
the income as a result of certain
transactions accounted for under the
Philippine Financial Reporting
Standards (PFRS)
8. Non-actual expenses/losses that are allowed to
be added back to distributable income shall be
limited to the following items:
a. Depreciation on revaluation increment
(after tax)
b. Adjustment due to or from any of the
prescribed accounting standard which
results to a loss;
c. Loss on fair value adjustment of
investment property (after tax)
Q: How are REITs executives compensated?
A: The total annual compensation of all directors and
Principal Officers of the REIT shall not exceed ten
percent (10%) of the net income before regular corporate
income tax during the immediately preceding taxable
year and shall be governed by the disclosure
requirements of PAS24.
The fees received by the Fund Manager and the Property
Manager from REIT shall not exceed one percent (1%)
of the Net Asset Value of the assets under their
respective management.
[insert table comparison]
IV. ALLOWABLE INVESTMENTS OF THE
REIT
Investments of the REIT shall be recognized and
measured in its financial statements in
accordance with the requirements of the PFRS
and other applicable interpretations and
amendments thereto
Q: What are allowable investments of the REIT?
A: Below are the types of investments allowed for the
REIT:
1. Real Estate
a. In the Philippines (freehold or leasehold)
 i. At least seventy-five (75%) of the
Deposited Property of the REIT
shall be invested in, or consist of,
income generating real estate
ii. Deposited Property that should be
invested in Income-generating Real
Estate shall in no case be less than
35% of the Deposited Property
b. Outside the Philippines
i. Must not exceed forty percent
(40%) of its deposited Property
ii. Only upon special authority from
the Commission
c. Manner
i. Direct ownership or
ii. Shareholding in a domestic special
purpose vehicle constituted to
hold/own real estate
d. Acquisition - It includes the ownership of all
rights, interests and benefits related to the
ownership of the real estate
e. Additional Requirement – the real estate
must have a good track record for three (3)
years from date of acquisition.
2. Real estate-related assets, wherever the issuers,
assets, or securities are incorporated, located, issued,
or traded.
3. Evidence of indebtedness of the Republic of the
Philippines and other evidence of indebtedness or
obligations, the servicing and repayment of which
are fully guaranteed by the Republic of the
Philippines, such as, but not limited to, treasury
bills, fixed rate treasury notes, retail treasury bonds,
(denominated either in Philippine or in foreign
currency) and foreign currency linked notes.
4. Bonds and other evidence of indebtedness issued by:
a. The government of any foreign country with
which the Philippines maintains diplomatic
relations, with a credit rating obtained from
a reputable credit rating agency or a credit
rating agency acceptable to the Commission
that is at least two (2) notches higher than
that of ROP bonds; and
b. Supranational (or international organizations
whose membership transcends national
boundaries or interests, e.g. International
Bank for Reconstruction and Development,
Asian Development Bank
5. Corporate bonds of non-property privately-owned
domestic corporations duly registered with the
Commission with a current credit rating of at least
“A” by an accredited Philippine rating agency
6. Corporate bonds of foreign non-property corporation
registered in another country provided that said
bonds are duly registered with the Commission and
the foreign country grants reciprocal rights to
Filipinos
7. Commercial papers duly registered with the
Commission with a current investment grade credit
rating based on the rating scale of an accredited
Philippine rating agency at the time of investment/
8. Equities of a non-property company listed in a local
or foreign stock exchange, provided that these stocks
are:
a. Issued by companies that are financially
stable
b. Actively traded
c. Possess good track record of growth
d. Have declared dividends for the past three
(3) years
9. Cash and Cash Equivalent Items
10. Collective investment schemes (CIS) duly
registered with the Commission or organized
pursuant to the rules and regulatons of the BSP
provided however that:
a. The CIS has a track record of performance
at par with or above the median performance
of pooled funds in the same category as
appearing in the prescribed weekly
publications of the Net Asset Value Per Unit
of the CIS units; and
b. New collective investment schemes may be
allowed provided that its fund manager has
at least three (3) year track record in
managing pooled funds.
11. Offshore mutual funds with ratings acceptable to the
Commission
12. Synthetic Investment Products, provided that:
a. Synthetic Investment Products shall not
constitute more than five percent (5%) of the
Investible Funds of the REIT;
b. Solely for the purpose of hedging risk
exposures of the existing investments of the
REIT
c. Accounted for in accordance with the PFRS
 d. Issued by authorized banks or non-bank
financial institutions in accordance with the
rules and regulations of the BSP and/or the
SEC; and

e. The use of synthetic Investment Products

shall be disclosed in the REIT plan and
under special authority from the SEC.

Q: What are the limitations in Property Development

by the REIT?

A: A REIT shall not undertake property development

activities whether on its own, in a joint venture with
others, or by investing in unlisted property development
companies unless:

1. It intends to hold in fee simple the

developed property for at least three (3)
years from the date of completion

2. The purchase agreement of said property is

made subject to the completion of the
buildings with property cover for
construction risks;

3. SLIDE 75

The total contract value of property

development activities undertaken and
investments in uncompleted property
developments should not exceed ten percent
(10%) of the Deposited Property of the REIT.