Real Estate Investment Trust (REIT) Philippines

Real Estate Investment Trusts (REITs) have been gaining popularity as an investment vehicle in the Philippines in recent years. REIT Philippines offers investors the opportunity to own a portion of high-value real estate assets, such as shopping malls, office buildings, and residential complexes, without actually owning the physical property. As a result, REITs provide a convenient and affordable way for both small and large investors to invest in real estate and diversify their investment portfolios.

In the Philippines, REITs have been growing in popularity since the country’s first REIT was launched in 2013. Since then, more and more real estate companies have opted to form REITs, offering investors the opportunity to invest in prime properties in key locations throughout the country. Some of the most successful and well-known REITs in the Philippines have delivered impressive returns, making them an attractive investment option for many investors.

But what exactly are REITs, and how do they work? How can investors benefit from investing in REITs? What are the risks and challenges associated with REIT investments, and how can investors mitigate them? In this guide, we will explore these questions and more to help you better understand the world of REIT investing in the Philippines. Whether you are a seasoned investor or a newcomer to the world of real estate investments, read on to learn more about REITs and how they can help you achieve your investment goals.

Table of Contents

What is a REIT?

The Real Estate Investment Trust (REIT) Act of 2009 provides a clear definition of REIT in the Philippines. According to the act, a REIT is a stock corporation that is established in compliance with the Corporation Code of the Philippines and the rules and regulations that are set forth by the Securities and Exchange Commission. The main purpose of a REIT is to own income-generating real estate assets, such as office buildings, shopping centers, and residential complexes.

It is important to note that while a REIT is designated as a “trust,” it does not have the same legal meaning as a traditional trust under current laws and regulations. Instead, the term “trust” is used to describe the company based on globally accepted standards and best practices. The term “REIT” has become a widely accepted term to describe a company that owns real estate assets and generates income from those assets.

The Difference between Trust and Corporation

To clear up any confusion, it is important to note that a Real Estate Investment Trust (REIT) is indeed a corporation. The term “Trust” in its name is only included to comply with the internationally accepted description of this type of investment vehicle.

In the Philippines, the legal definitions of a Trust and a Corporation are clearly outlined. According to Article 1440 of the CIVIL CODE OF THE PHILIPPINES (REPUBLIC ACT NO. 386), a person who establishes a trust is called a trustor, while the individual who holds property in trust for the benefit of another person is known as a trustee. The person for whose benefit the trust is created is referred to as the beneficiary. Trusts can either be express or implied, with express trusts being created by the intention of the trustor or the involved parties, and implied trusts coming into existence through the operation of the law.

On the other hand, a corporation is defined in Section 2 of the CORPORATION CODE OF THE PHILIPPINES (BATAS PAMBANSA BILANG 68) as an artificial being that is created by operation of law, with the right of succession and powers, attributes, and properties expressly authorized by law or incident to its existence. There are two types of corporations in the Philippines – stock and non-stock corporations. Stock corporations have capital stock divided into shares and are authorized to distribute dividends or surplus profits to shareholders based on the number of shares held.

Requirements to become an REIT

In the Philippines, the Securities and Exchange Commission (SEC) regulates REITs and has set certain requirements for companies that wish to operate as REITs. Below are the key requirements to become an REIT:

Minimum paid-up capital of ₱300,000,000.00
At least 1/3 or at least 2, whichever is higher, of the board of directors shall be independent directors.

Must be listed with the Philippine Stock Exchange and 1/3 or 33.33% of outstanding capital stock must be publicly owned with a minimum of 1,000 public shareholders each owning 50 shares.
Money earned by the Sponsor/Promoter from the sale of REIT shares or raised through the sale of income-generating real estate property to the REIT must be reinvested in the Philippines within one year from the date of receipt of the money.
Total annual compensation of all directors and principal officers must not exceed 10% of the net income before regular corporate income tax.

Fees paid by the REIT to the Fund Manager and Property Manager must not exceed 1% of the Net Asset Value of the assets under their respective management.

Properties Owned by REITs

Residential REIT

A Residential REIT is a type of REIT that focuses on owning and managing residential properties. This can include a range of properties such as apartments, condominiums, dormitories, and house & lots. The primary purpose of a Residential REIT is to lease these properties to tenants and generate rental income.

There are two ways a Residential REIT can acquire these properties – by either building and developing them or purchasing existing properties and improving them. If the REIT chooses to develop properties, it can either build new residential units from scratch or convert existing commercial properties into residential units. Conversely, if the REIT chooses to acquire existing properties, it may renovate and refurbish them to increase their value and appeal to potential tenants.

In addition to generating rental income, Residential REITs can also benefit from capital appreciation as property values increase over time. This type of REIT can provide investors with an opportunity to invest in the residential real estate market without the burden of direct property ownership. This allows for greater liquidity and diversification, as investors can buy and sell shares in the REIT as needed rather than being tied to a single property. Overall, Residential REITs can be an attractive investment option for those looking to diversify their investment portfolios with exposure to the residential real estate market.

Office REIT

An Office REIT, as the name suggests, is a type of Real Estate Investment Trust that invests in and manages office properties. These properties could include a wide range of commercial spaces, such as high-rise buildings, business parks, and industrial parks. The primary business of an Office REIT is to lease these office spaces to private companies and government agencies. The revenue generated by an Office REIT comes from the rental income earned from the lease agreements with its tenants.

As such, the success of an Office REIT depends on its ability to secure long-term tenants and maintain high occupancy rates. In addition to generating rental income, an Office REIT may also benefit from property appreciation, as the value of the office properties it owns may increase over time. An Office REIT provides investors with a convenient way to invest in a diversified portfolio of office properties and receive regular dividend payments from the rental income generated by the properties.

Industrial REIT

An industrial REIT is a type of REIT that primarily invests in and owns industrial facilities. These facilities can include warehouses and distribution centers used for the storage and distribution of goods, manufacturing facilities where goods are produced, refrigeration or cold storage facilities used for the preservation of temperature-sensitive products, as well as telecom and data hosting facilities used for storing and managing data, and research and development (R&D) centers used for scientific research and experimentation.

Industrial REITs typically generate revenue through the leasing of these facilities to tenants who require the space to operate their businesses. By owning and leasing these facilities, industrial REITs offer a diversified investment option for investors looking to invest in the industrial real estate market. Moreover, industrial REITs often offer attractive yields due to the steady cash flow generated by long-term leases with creditworthy tenants.

Investing in an industrial REIT can offer several benefits, such as portfolio diversification, consistent income generation, and potential long-term capital appreciation. These types of REITs may be particularly attractive for investors who are looking to diversify their portfolio with a stable and reliable source of income or those who are interested in investing in the growing industrial real estate market.

Retail REIT

In the Philippines, Retail REITs have gained popularity in recent years due to the country’s growing middle class and consumer spending. Retail properties, such as shopping malls and grocery stores, are in high demand as consumers seek out convenient, modern, and air-conditioned spaces to shop and socialize. Many of the country’s largest shopping malls and retail centers are owned and managed by Retail REITs, providing investors with an opportunity to participate in the country’s robust retail industry.

Similar to the United States, net lease arrangements are also used in the Philippines, where tenants may pay a portion of the expenses associated with managing the property, in addition to their rent payment. This can provide Retail REITs with a stable and predictable income stream, which is particularly valuable during economic downturns.

Retail REITs in the Philippines can provide investors with exposure to a diversified portfolio of high-quality retail properties, which can generate steady rental income and potentially benefit from long-term capital appreciation. As the country’s retail industry continues to expand, Retail REITs may present an attractive investment opportunity for those looking to gain exposure to this growing sector.

Healthcare REIT

A healthcare REIT is a type of REIT that specializes in owning and operating healthcare-related properties such as hospitals, clinics, medical offices, and nursing homes. Healthcare REITs acquire these properties and then lease them to healthcare providers, such as doctors, hospitals, and other medical facilities. By doing so, healthcare REITs generate income from rental fees paid by the tenants who occupy the properties.

The demand for healthcare-related services is expected to increase over time, particularly as the population ages and requires more medical attention. As such, healthcare REITs can be an attractive investment option for investors who seek exposure to the growing healthcare sector. Healthcare REITs can provide stable returns through regular rental income payments and potential capital appreciation in the value of their properties.

Investors interested in healthcare REITs should consider the quality of the properties owned by the REIT, as well as the financial health of the healthcare providers that occupy them. The success of a healthcare REIT can also be influenced by regulatory changes in the healthcare industry, as well as changes in healthcare policy and reimbursement rates.

Infrastructure REIT

An Infrastructure REIT is a type of REIT that invests in infrastructure properties. Infrastructure properties include physical assets that provide essential services such as cell towers, fiber cable networks, and energy pipelines.

By owning these assets, an Infrastructure REIT generates revenue from companies that lease the use of these properties to provide services to customers. For example, a telecommunications company may lease space on a cell tower owned by an Infrastructure REIT to provide wireless services to their customers. In return, the Infrastructure REIT generates rental income from the lessee.

Infrastructure REITs can provide investors with steady cash flows, long-term lease agreements, and inflation-protected returns. The demand for essential infrastructure services is expected to continue to grow, making Infrastructure REITs an attractive investment option for investors seeking exposure to this growing sector.

Lodging REIT

A Lodging REIT is a type of real estate investment trust that focuses on owning and operating hospitality-specific properties such as hotels, resorts, and other forms of lodging. The primary objective of a lodging REIT is to generate income from the operation of these properties, typically through leasing or management contracts, as well as through the sale of the properties themselves.

In the Philippines, the lodging industry is a significant contributor to the country’s economy, and there is a growing demand for high-quality accommodation among both domestic and international travelers. With a thriving tourism industry, lodging REITs in the Philippines have the potential to provide investors with an attractive investment opportunity, particularly for those seeking exposure to the hospitality sector.

Investing in a lodging REIT can provide investors with the benefits of real estate ownership, such as regular rental income, without the challenges associated with property management. Additionally, a lodging REIT can provide diversification to an investor’s portfolio, which can help reduce the overall risk of their investment holdings.

A lodging REIT is a specialized type of real estate investment trust that focuses on owning and operating hospitality-specific properties such as hotels and resorts. With the growing tourism industry in the Philippines, investing in a lodging REIT can provide investors with an opportunity to benefit from the country’s thriving hospitality sector, while diversifying their investment portfolio and potentially generating regular rental income.

Self-storage REIT

A self-storage REIT is a type of investment vehicle that owns and operates storage facilities, offering storage units to individuals and corporations for the safekeeping of their personal belongings or business assets. These facilities are typically secured with various features, including surveillance cameras, access controls, and secure locking systems, making them a reliable and secure option for storing valuable items.

In the Philippines, the self-storage industry is a growing market due to the increasing demand for extra storage space in urban areas where real estate prices are high. With a growing middle class and small business sector, the demand for self-storage units is expected to increase as well. As such, a self-storage REIT can provide an excellent investment opportunity for those looking to diversify their portfolio and gain exposure to this growing market.

By investing in a self-storage REIT in the Philippines, investors can benefit from the steady cash flow generated by the long-term leasing of storage units. Additionally, self-storage REITs offer potential for capital appreciation, as they typically acquire and develop properties in high-growth areas.

Data Center REIT

A Data Center REIT is a type of Real Estate Investment Trust that specializes in owning and managing buildings that are specifically designed to house computer servers and computing equipment. These buildings are equipped with independent cooling systems and power generators to ensure continuous, uninterrupted power supply, which is critical for the operation of computer servers. Data Center REITs are attractive to investors because they offer a relatively stable source of income with long-term leases and low vacancy rates.

In the Philippines, the demand for data center services has been growing due to the rapid expansion of the country’s digital economy. With more businesses relying on digital platforms to reach their customers and manage their operations, the need for secure and reliable data centers has become increasingly important. The COVID-19 pandemic has also accelerated the shift to digital channels, further driving the demand for data center services.

In response to this growing demand, several Data Center REITs have emerged in the Philippines, offering investors an opportunity to participate in this fast-growing sector. These REITs own and manage data centers that are designed to meet the stringent requirements of businesses that rely on digital infrastructure.

They provide a secure and stable environment for data storage, processing, and management, which is essential for the smooth operation of digital businesses. As the Philippines continues to embrace digital transformation, the demand for Data Center REITs is likely to continue to grow, making them a potentially attractive investment opportunity for investors looking to diversify their portfolios.

Specialty REIT

A specialty REIT is a type of real estate investment trust that invests in a particular niche or specialized sector of the real estate industry. Unlike traditional REITs that focus on owning and managing commercial or residential properties, specialty REIT focuses on investing in a specific type of real estate asset. These assets could be anything from casinos, billboard sites, farmlands, to data centers, healthcare facilities, and self-storage units.

Specialty REITs are becoming increasingly popular in the Philippines due to the country’s growing economy and rapid urbanization. With the country’s booming tourism industry, there is a rising demand for specialty properties such as resorts, hotels, and casinos. Moreover, with the expansion of the Business Process Outsourcing (BPO) industry in the country, there is a growing need for specialized real estate such as data centers and call centers.

Specialty REITs can provide investors with a way to capitalize on these trends by investing in specialized real estate assets that have the potential for higher returns. However, like any other investment, investing in a specialty REIT comes with risks, including the possibility of fluctuations in the demand for specialized real estate assets, changes in government regulations, and potential legal issues. Therefore, it is important for investors to conduct their due diligence and seek professional advice before investing in a specialty REIT.

Diversified REIT

A diversified REIT is a type of real estate investment trust that invests in a combination of different real estate properties. This type of REIT may hold a mix of properties, such as residential, commercial, industrial, and retail spaces. By investing in a variety of real estate assets, diversified REITs can mitigate risks and create a more stable income stream.

In the Philippines, diversified REITs have become increasingly popular among investors, particularly in the wake of the COVID-19 pandemic. The pandemic has created new trends in the real estate market, such as increased demand for logistics and warehousing spaces as more people turn to e-commerce. With a diversified portfolio, REITs can adapt to these changes and take advantage of new investment opportunities in different real estate sectors.

Investing in a diversified REIT in the Philippines also provides investors with the opportunity to participate in the country’s growing real estate market. The Philippine real estate sector has seen significant growth in recent years, particularly in the residential, commercial, and office space segments. Furthermore, the government’s infrastructure initiatives, such as the Build, Build, Build program, are expected to boost the real estate market further, creating new investment opportunities for REITs.

Earning Profit from REITs

Real Estate Investment Trusts (REITs) are a popular investment vehicle that provides investors with two ways to make a profit. The first is through the sale of REIT stocks, just like a regular publicly traded company. This means that shareholders can sell their stock holdings at a higher price than what they bought them for, making a profit through the Buy-Low, Sell-High strategy.

The second way to make a profit from REITs is through dividends. Unlike regular publicly traded companies, REITs in the Philippines are required by law to distribute a total of at least 90% of their distributable income to all shareholders annually. This means that shareholders are guaranteed to earn a share of the income, and the dividends in REIT companies are typically higher than that of regular publicly traded companies.

Investing in REITs can be a great way to diversify your portfolio and earn a stable income stream. As an investor, it’s important to do your research and carefully evaluate the potential risks and rewards of investing in a particular REIT. By understanding the different ways to make a profit in REITs and choosing the right investment, you can potentially earn a significant return on your investment.

How to invest in REIT Philippines

Investing in a real estate investment trust (REIT) in the Philippines is a straightforward process that is similar to investing in a regular publicly traded company. To invest in a REIT, you can easily and conveniently buy shares through your local stockbroker. There are no special requirements or qualifications needed to invest in a REIT, so anyone can do it.

Step 1: Open a brokerage account

To invest in a REIT, you first need to open a brokerage account with a licensed broker in the Philippines. You can do this online or by visiting the broker’s office in person. You will need to provide some personal information, such as your name, address, and contact details, as well as some identification documents.

Step 2: Fund your account

Once you have opened a brokerage account, you need to fund it with cash or other eligible securities. You can do this by transferring funds from your bank account to your brokerage account or by depositing a check or cash at your broker’s office.

Step 3: Research and choose a REIT

Before investing in a REIT, you should do your research and choose a REIT that aligns with your investment goals and risk tolerance. Look for a REIT that has a good track record of financial performance and is managed by a reputable team of professionals. You may also want to consider the type of real estate assets the REIT invests in and the potential risks and returns associated with those assets.

Step 4: Place an order

Once you have chosen a REIT to invest in, you can place an order to buy shares through your broker’s trading platform or by calling your broker. You will need to specify the number of shares you want to buy and the price you are willing to pay. Keep in mind that REITs are publicly traded, which means their prices can fluctuate throughout the trading day.

Step 5: Monitor your investment

After you have invested in a REIT, you should monitor your investment regularly to ensure it continues to meet your investment goals and risk tolerance. You can do this by checking your brokerage account statement, monitoring the REIT’s financial performance, and keeping up-to-date with any news or developments that may affect the REIT’s value.

5 tips that every new REIT investor should know:

1. Do your research before investing.

Before investing in a REIT, it’s important to do your research and understand the fundamentals of the investment. This includes learning about the REIT’s business model, management team, real estate assets, financial performance, and dividend policies. This can help you make informed investment decisions and manage your risk.

2. Diversify your portfolio. Investing in a single REIT can expose you to risks associated with a specific property or geographic location.

Diversifying your portfolio by investing in multiple REITs across different sectors and geographies can help mitigate these risks and provide more stable returns over the long term.

3. Consider your investment horizon.

Investing in a REIT is typically a long-term investment. Investors should consider their investment horizon and assess their liquidity needs before investing. REITs may not be suitable for investors with short-term investment goals or those who need immediate access to their funds.

4. Monitor the REIT’s performance.

Investors should regularly monitor the performance of the REIT they’ve invested in. This includes tracking the REIT’s financial performance, occupancy rates, rental income, and dividend payouts. This can help investors make informed decisions about when to hold or sell their shares.

5. Seek advice from a financial advisor.

Investing in REITs can be complex, and it’s important to seek advice from a financial advisor before investing. A financial advisor can help you understand the risks and rewards of investing in REITs, and can assist you in making informed investment decisions that align with your financial goals and risk tolerance.

Video: REIT INVESTING MADE SIMPLE! 5 TIPS ON HOW TO START!

The video features Ms. Jung Fernando, who is the SVP and Head of Sales, Marketing, and Distribution of Rampver Financials, as the main speaker. She will be discussing Real Estate Investment Trusts or REITs, which are financial instruments that allow investors to invest in real estate properties without actually owning them. The video aims to educate the audience about REITs and how they can invest in them through Rampver Financials.

Frequently Asked Questions

1. What is a Real Estate Investment Trust (REIT) in the Philippines?

A Real Estate Investment Trust (REIT) is a type of security that allows individuals to invest in real estate properties without actually owning them. In the Philippines, a REIT is a company that owns and operates income-generating real estate assets and distributes at least 90% of its taxable income to its shareholders.

2. What are the benefits of investing in a REIT in the Philippines?

Investing in a REIT in the Philippines allows investors to diversify their investment portfolio and gain exposure to the real estate market. REITs offer a regular stream of income through dividends, which are required by law to be distributed to shareholders.

3. How do I invest in a REIT in the Philippines?

Investing in a REIT in the Philippines can be done through a licensed stockbroker or through an online trading platform. It is important to conduct thorough research and due diligence before investing in a REIT to ensure it aligns with your investment goals and risk appetite.

4. What types of real estate assets can a REIT invest in?

In the Philippines, a REIT can invest in a variety of income-generating real estate assets, including office buildings, commercial centers, hotels, and residential properties, among others.

5. How are REITs regulated in the Philippines?

REITs in the Philippines are regulated by the Securities and Exchange Commission (SEC) and are required to comply with the REIT Act of 2009 and its implementing rules and regulations.

6. What are the tax implications of investing in a REIT in the Philippines?

Dividends received from REITs in the Philippines are subject to a final tax of 10% for individual investors and 20% for corporate investors. Capital gains from the sale of REIT shares are also subject to capital gains tax.

7. What is the minimum investment required to invest in a REIT in the Philippines?

The minimum investment required to invest in a REIT in the Philippines may vary depending on the specific REIT and the stockbroker or online trading platform used for the investment. However, some REITs in the Philippines have a minimum investment requirement of PHP 1,000.

8. What are the risks of investing in a REIT in the Philippines?

Like all investments, investing in a REIT in the Philippines comes with risks, such as market and economic risks, property-specific risks, and liquidity risks. It is important to conduct thorough research and due diligence before investing in a REIT and to consult with a financial advisor to ensure it aligns with your investment goals and risk appetite.

Final Thoughts

In conclusion, REIT Philippines is becoming an increasingly popular investment option in the Philippines, offering investors the opportunity to invest in high-value real estate assets without actually owning them. With the convenience and affordability they offer, REITs have become an attractive option for investors of all sizes, and have been delivering impressive returns in recent years. However, as with any investment, there are risks and challenges associated with REITs that investors should be aware of.

By conducting thorough research and seeking professional advice, investors can mitigate these risks and enjoy the potential benefits of investing in REITs. Whether you are looking to diversify your portfolio or add a real estate investment to your portfolio, REITs are certainly an investment option worth considering in the Philippines.