SEC eases rules for wider REIT market

The Securities and Exchange Commission (SEC) is proposing major changes to real estate investment trust (REIT) regulations to unlock new opportunities and expand the sector’s access to capital.

Released for public comment on 18 November, the draft amendments to SEC Memorandum Circular No. 1, Series of 2020, seek to expand the types of income-generating properties in a REIT portfolio, extend reinvestment periods, and ease minimum public ownership (MPO) requirements.

“The proposed reforms will help ensure that the REIT framework remains robust and responsive to evolving market needs, thereby enabling the real estate sector to unlock more capital that will further support their growth and contribute more to the development of our economy,” SEC Chairperson Francis Lim said Thursday.

The draft expands the definition of income-generating assets, allowing REITs to hold properties directly or through unlisted special purpose vehicles.

It also includes real estate with predictable cash flows—from rentals of malls, warehouses, parking lots, ICT and energy infrastructure, to immovable fixtures and real rights, such as easements or registered leases.

The regulator said the move is seen to open the door for more companies to qualify as REITs and diversifies the types of properties investors can access.

Once in effect, REIT sponsors will now have two years, instead of one, to reinvest listing proceeds. Investments can take the form of equity, loans, or repayment of debt tied to local real estate or infrastructure projects, both public and private.

The SEC will allow temporary dips in MPO when additional shares are issued to the REIT’s sponsor or affiliates in exchange for income-generating properties. Temporary breaches must be approved by the SEC and the Exchange, include a plan to restore MPO, and be publicly disclosed.

The SEC said comments on the proposed amendments are open until 3 December.