COMPREHENSIVE REAL ESTATE APPRAISAL

SEMINAR

REAL ESTATE
INVESTMENT TRUST
Resource Speaker
Engr. Clarence Clark M. dela Serna, CE, REA, REB
PRC Accredited Lecturer No. 202

COMPREHENSIVE REAL ESTATE APPRAISAL

SEMINAR
THE REAL ESTATE INVESTMENT TRUST (REIT)
REPUBLIC ACT 9856 OF 2009
An ACT providing the legal framework for REIT and Other Purposes which passed
into law on December 17, 2009.
POLICY OF THE GOVERNMENT:
It is declared to be the policy of the State/Government to promote the
development of the capital market, democratize the wealth by broadening the
participation of the Filipinos in the ownership of Real Estate in the Philippines.
WHAT IS REIT?
REIT is a stock corporation established in accordance with the provisions of the
Corporation Code of the Philippines and the Securities and Exchange
Commission (SEC), principally for the purpose of owning income-generating real
estate assets.

COMPREHENSIVE REAL ESTATE APPRAISAL

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A REIT must

Have a minimum capitalization of P300,000,000.00 and must have,

Upon and after listing with the Exchange, at least 1,000 public shareholders,
each owing at least 50 public shares representing at least 1/3 of the REIT total
outstanding capital stocks
Investment in the REIT:

Shall by way of subscription to or purchase of shares of stocks of REIT,

The shares of stocks of REIT must be listed with appropriate Exchange in
accordance with the REIT plan and as prescribed by SEC,

The REIT must appoint Independent Fund Manager and Property Manager,

The Fund Manager manages the REITs investible funds, and

The Property Manager manages the physical assets (land, buildings, all
physical assets) of the REIT

COMPREHENSIVE REAL ESTATE APPRAISAL

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How are REITs funds invested:

REITs funds are invested in real estate located in the Philippines or if the real
estate is located outside the Philippines, the investment should not
exceed 40% of the deposited properties and should be authorized by
SEC;

75% of the REITs investment must be in income-generating real estate
REITs Dividend Contribution:

At least 90% of the REITs distributable income (unrestricted retained
earnings) must be distributed annually as dividends as provided for by
the Corporation Code of the Philippines and SEC.

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Elements of REIT Operations:

Adviser
- any person rendering professional advisory services (lawyer,
accountant, financial/business consultant, etc) to REIT

Cash Equivalent Items
- are instruments or investments that are highly liquid and marketable
and are considered good as cash as determined in accordance
with the rules and regulations prescribed by the Commission.

Control
- exist in favor of a parent corporation when it has the power or govern
the financial and operating policies of an enterprise so as to obtain
benefits from its activities. Control is presumed when parent
corporation owns more than of the voting power of an enterprise

COMPREHENSIVE REAL ESTATE APPRAISAL

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Elements of REIT Operations:

Deposited property
- means the total value of the REITs assets based on the latest
valuation determined in accordance with the rules and regulations
promulgated by the Commission

Distributable Income
- refers to net income adjusted for unrealized gains and losses/
expenses and impairment losses and other items in accordance with
internationally accepted accounting standards. Distributable income
excludes proceeds from the sale of REITs assets that are re-invested in
the REIT within one (1) year from date of sale

COMPREHENSIVE REAL ESTATE APPRAISAL

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Fund Manager
- refers to the person responsible for the allocation of the deposited
property to the allowable investment outlets and selection of incomegenerating real estate

Income Generating Real Estate

- means the real property which is held for the purpose of generating a
regular stream of income such as rentals, toll fees, users fees and the
like, as may be further defined and identified by the Commission

Investible Funds
- refers to funds of the REIT that can be placed in investment vehicles
other than income-generating real estate such as real estate-related
assets, managed funds, government securities and cash, and cash
equivalents

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Investor
- refers to the owner of investor securities or investor shares

Investor Securities or Investor Shares

- means the shares of stock issued by a REIT or derivatives thereof

Managed Funds
- refers to any arrangement whereby funds are solicited from the
investing public and pooled for the purpose of investing in securities
duly registered with and/or approved by the appropriate regulatory
agency of the government for investment by the REIT

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Net Asset Value (NAV)
- refers to the total assets less total liabilities as determined by the
implementing rules and regulations (IRR) of the commission

Net Income
- means the net income as determined under the Philippine Financial
Reporting Standards

Principal Stock Holder

- means a stock holder who is directly or indirectly the beneficial owner
of more than 10% of any class of security of the REIT.

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Property Manager
- refers to a professional administrator of real properties who is
engaged by the REIT to provide property management services, lease
management services, marketing services, project management
services. The property manager is independent from the REIT.

Real Property
- shall have the same definition as immovable property under Art.
415 of the Civil code of the Philippines. Real Estate when used in the
Act shall have the same meaning as Real property

Synthetic Investment Products

- are derivatives and other securities created exclusively out of one or
more financial instruments to simulate the returns of the underlying
financial instruments

COMPREHENSIVE REAL ESTATE APPRAISAL

SEMINAR
Since the enactment of the REIT Act of 2009, there is no actual
organization or operation of a duly registered REIT.
This is basically, because of the complex and ardous process of
managing REIT operations which requires the expert advice
of investment bankers, accountants, attorneys, not to
mention the participation of independent fund and
property managers.
Sponsors/promoters and investors are still hesitant at this time to
put their investments in REIT.

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