[Table of Contents and Introduction / Salient Points.; Rules 1-3; Rule 4; Rule 5; Rule 6; Rule 7; Rule 8; Rule 9; Rules 10-11]

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Securities and Exchange Commission 

SEC MEMORANDUM CIRCULAR NO. 1

SUBJECT: REVISED IMPLEMENTING RULES AND REGULATIONS OF REPUBLIC ACT NO. 9856, OTHERWISE KNOWN AS THE REAL ESTATE INVESTMENT TRUST (REIT) ACT OF 2009 

Pursuant to Section 22 of Republic Act No. 9856, An Act Providing the Legal Framework for Real Estate Investment Trust, the following Implementing Rules and Regulations are hereby promulgated. 

Rule 1 – Title of Rules 

These Rules shall be referred to as the “Implementing Rules and Regulations of Republic Act No. 9856, otherwise known as the Real Estate Investment Trust (REIT) Act of 2009” or the “REIT Rules.” 

Rule 2 – Objectives 

These Rules are promulgated consistent with the declared policy of the State to promote the development of the capital market, democratize wealth by broadening the participation of Filipinos in the ownership of real estate in the Philippines, use the capital market as an instrument to help finance and develop infrastructure projects, and protect the investing public. 

The implementation and application of these Rules shall adhere as closely as possible to the attainment of the foregoing policy objectives. 

Rule 3 – Definition of Terms Used in the Rules 

When used in these Rules and Regulation, the term – 

a. “Act” means Republic Act No. 9856 otherwise known as the Act Providing the Legal Framework for Real Estate Investment Trust. 

b. “Adviser” means a lawyer, accountant, auditor, financial or business consultant, and such other persons rendering professional advisory services to the REIT. 

c. “Affiliate” means a corporation that directly or indirectly, through one or more intermediaries, is controlled by, or is under the common control of, another corporation, which thereby becomes its parent corporation. 

d. “Associate” of a person includes: 

• i. Any relative of such person within the fourth (4 ) degree of consanguinity or affinity; and 

• ii. Any company in which he/she and his/her relative within the fourth (4 ) degree of consanguinity or affinity, directly or indirectly, has an interest of twenty-five percent (25%) or more. 

e. “BIR” means the Bureau of Internal Revenue. 

f. “BSP” means the Bangko Sentral ng Pilipinas. 

g. “Cash Equivalent Items” means instruments or investments that are highly liquid and marketable and are considered good as cash, including savings and/or time deposits (peso or foreign currency denominated) maintained with any duly licensed universal, commercial or thrift bank that has passed the accreditation process of the Fund Manager. 

h. “Code of Corporate Governance” refers to the applicable Code of Corporate Governance and such other relevant regulations as may be defined by the Commission. 

i. “Commission” or “SEC” means the Securities and Exchange Commission of the Philippines.

j. “Constitutive Documents” means the Articles of Incorporation and By-Laws of a REIT. 

k. “Control” exists in favor of a parent corporation when it has the power to direct or govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. Control is presumed to exist when the parent owns, directly or indirectly, through subsidiaries, more than one half (1/2) of the voting power of an enterprise, unless, in exceptional circumstances, it can clearly be demonstrated that such ownership does not constitute control. Control also exists even when the parent owns one half (1/2) or less of the voting power of an enterprise when there is power: 

• i. Over more than one half (1/2) of the voting rights by virtue of an agreement with investors;

• ii. To direct or govern the financial and operating policies of the enterprise under a statute or an agreement; 

• iii. To appoint or remove the majority of the members of the board of directors or equivalent governing body; or 

• iv. To cast the majority votes at meetings of the board of directors or equivalent governing body. 

l. “Deposited Property” means the total value of the REIT’s assets reflecting the fair market value of total assets held by the REIT. 

m. “Distributable Income” means net income as 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 the REIT’s assets that are re-invested in the REIT within one (1) year from the date of the sale. 

n. “DST” means Documentary Stamp Tax imposed under Title VII of the NIRC 

o. “Exchange” means any entity registered with the Commission as a stock exchange pursuant to the Securities Regulation Code. 

p. “Fund Manager” refers to the person engaged by the REIT to perform such functions enumerated in these Rules. 

q. “Income-generating Real Estate” means real property which is held for the purpose of generating a regular stream of income such as, but not limited to, rentals, toll fees, user’s fees, ticket sales, parking fees and storage fees. 

r. “Independent Director” means a director who has the qualifications and none of the disqualifications of an independent director as specified in the Securities Regulation Code and its Implementing Rules and Regulations. 

s. “Infrastructure Projects” as defined in R.A. No. 6975, as amended by R.A. No. 7718, and in the Constructors’ Performance Evaluation System Implementing Guidelines for Infrastructure Projects, refers to construction, improvement or rehabilitation of roads and highways, airports and air navigation facilities, railways, ports, flood control and drainage, water supply and sewerage, irrigation systems, dams, buildings, communication facilities, dredging and reclamation, power generating plants, power transmission and distribution facilities and other related construction projects. 

t. “Investible Funds” refers to funds of the REIT that can be placed in investment vehicles other than income-generating real estate, as allowed under these Rules. 

u. “Investor” means the owner of Investor Securities. 

v. “Investor Securities” means shares of stock issued by a REIT or derivatives thereof. 

w. “Managed Funds” means any arrangement whereby funds are solicited from the investing public and pooled for the purpose of investing in securities duly registered and/or approved by the appropriate regulatory agency of the government for investment and/or reinvestment by the REIT. 

x. “Material Contract” refers to an agreement or arrangement where the amount involved is at least five percent [5%] of the Deposited Property of the REIT or which is not entered into in the ordinary course of business of the REIT: Provided, however, That the following shall be deemed a Material Contract regardless of the amount: 

• i. Related Party Transactions as defined in these Rules; 

• ii. Agreements between the REIT and Fund Manager; 

• iii. Agreements between the REIT and Property Manager; 

• iv. Agreements between and among shareholders relating to the transferability of the shares of stock of the REIT, control of the REIT and voting rights over shares of stock of the REIT, such as but not limited to, voting trust agreements, pooling agreements, joint venture agreements, option agreements, and agreements granting rights of first refusal or conversion rights; 

• v. Any acquisition or disposition of real estate by the REIT; 

• vi. Contracts relating to investments of the REIT; 

• vii. Any contract creating mortgages, encumbrances, liens or rights on the real estate of the REIT; 

• viii. Contract of any nature that limits the declaration or distribution of dividends by the REIT;

• ix. Any contract relating to joint venture, spin off, consolidation or merger, take-over or change in Control involving the REIT; 

• x. Any contract that may be expected to materially affect the market activity and/or the price of the Investor Securities.

y. “Net Asset Value” or “NAV” means the adjusted net asset value reflecting the fair market values of total assets and investible funds held by the REIT, less total liabilities. NAV per share shall be computed by dividing NAV by the total outstanding shares of the REIT. 

z. “Net Income” means net income as determined under the Philippine Financial Reporting Standards (PFRS).

aa. “NIRC” means the National Internal Revenue Code of 1997, as amended, and the pertinent amendments introduced by the Tax Reform for Acceleration and Inclusion (TRAIN) Act. 

bb. Overseas Filipino Investor” refers to an individual citizen of the Philippines who is working abroad, including one who has retained or re-acquired his Philippine citizenship under Republic Act No. 9225, otherwise known as the “Citizenship Retention and Reacquisition Act of 2003”. 

cc. “PAS” means Philippine Accounting Standards. 

dd. “Parent” means a corporation which has control over another corporation, directly or indirectly, through one or more intermediaries. 

ee. “PFRS” means Philippine Financial Reporting Standards. 

ff. “Principal Officer” means the chairman of the board of directors, president, chief executive officer, chief operating officer, treasurer, chief financial officer, corporate secretary, vice president, executive vice president, senior vice president, compliance officer, chief accounting officer, chief investment officer and their equivalent positions, including consultants with similar rank or position. 

gg. “Property Valuer” means an independent entity engaged by a REIT to value its real estate in accordance with these Rules. 

hh. “Principal Stockholder” means a stockholder who is, directly or indirectly, the beneficial owner of more than ten percent (10%) of any class of Investor Securities of the REIT. 

ii. “Public Shareholder” means a shareholder of a REIT other than the following persons (non-public shareholders):

• i. The Sponsor/Promoter of the REIT; 

• ii. A director, Principal Officer or Principal Stockholder of the Sponsor/Promoter of the REIT; 

• iii. A director, Principal Officer or Principal Stockholder of the REIT; 

• iv. An associate of a director, Principal Officer or Principal Stockholder of the REIT or its Sponsor/Promoter; 

• v. A Related Corporation to the REIT or its Sponsor/Promoter; and, 

• vi. Any person who holds legal title to the shares of stock of the REIT for the benefit of another for the purpose of circumventing the provisions of this Act. 

jj. “Property Manager” refers to a professional administrator of real properties who is engaged by the REIT to provide the property management services defined under these Rules. 

kk. “Real Estate Investment Trust” or “REIT” is a stock corporation established in accordance with the Revised Corporation Code of the Philippines and the rules and regulations promulgated by the Commission principally for the purpose of owning income-generating real estate assets. For purposes of clarity, a REIT, although designated as a “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. 

ll. “Real Property” shall have the same definition as “Immovable Property” under Article 415 of the Civil Code of the Philippines. Real estate, when used in this Act, shall have the same meaning as real property. 

mm. “REIT Plan” refers to the plan, including its amendments, of the REIT registered with and approved by the Commission. 

nn. “Real Estate Appraiser” means a duly registered and licensed natural person who, for a professional fee, compensation or other valuable consideration, performs or renders, or offers to perform services in estimating and arriving at an opinion of or acts as an expert on real estate values, such services of which shall be finally rendered by the preparation of the report in acceptable written form. 

oo. “Real Estate Assessor” means a duly registered and licensed natural person who works in a local government unit and performs appraisal and assessment of real properties, including plants, equipment, and machineries, essentially for taxation purposes. 

pp. “Real Estate Consultant” means a duly registered and licensed natural person who, for a professional fee, compensation or other valuable consideration, offers or renders professional advice and judgment on: (i) the acquisition, enhancement, preservation, utilization or disposition of lands or improvements thereon; and (ii) the conception, planning, management and development of real estate projects. 

qq. “Real Estate-Related Assets” mean: 

• i. Debt securities and listed shares issued by listed property companies; or 

• ii. Other funds and assets, including personal property, incidental to the ownership of real estate. 

rr. “Related Corporation” means the Parent, Subsidiary or Affiliate of the REIT, 

ss. “Related Party” includes: 

• i. A director, Principal Officer or Principal Stockholder of the REIT or associate of such persons; 

• ii. The Sponsor/Promoter of the REIT; 

• iii. The Fund Manager of the REIT; 

• iv. The Adviser of the REIT; 

• v. The Property Manager of the REIT; 

• vi. A director, Principal Shareholder or Principal Officer of the Sponsor/Promoter of the REIT, Fund Manager or Property Manager, or associate of any such persons; and 

• vii. Related Corporation to the REIT, the Fund Manager or the Property Manager. 

tt. “Revised Corporation Code” refers to Republic Act No. 11232, otherwise known as the Revised Corporation Code of the Philippines. 

uu. “Securities Regulation Code” or “SRC” refers to Republic Act No. 8799, otherwise known as the Securities Regulation Code of 2000, and its Implementing Rules and Regulations as amended. 

w. “Sponsor/Promoter” means any person who, acting alone or in conjunction with one or more other persons, directly or indirectly, contributes cash or property in establishing a REIT. 

ww. “Subsidiary” means a corporation more than fifty percent (50%) of the voting stock of which is owned or controlled, directly or indirectly, through one or more intermediaries, by another corporation, which thereby becomes its parent corporation. 

xx. “Synthetic Investment Products” are derivatives and other securities created exclusively out of one or more financial instruments to simulate the returns of the underlying assets or indices of asset values, including, but not limited to warrants, options, interest rate derivatives, currency derivatives, equity derivatives and credit derivatives such as credit-linked notes, collateralized debt obligations, total return swaps, credit spread options and credit default options. 

yy. “Taxable Net Income” means the pertinent items of gross income specified in Section 32 of the NIRC, less all allowable deductions enumerated in Section 34, of the NIRC, less the dividends distributed by a REIT out of its Distributable Income as of the end of the taxable year as: (a) dividends to owners of the common shares; and (b) dividends to owners of the preferred shares pursuant to their rights and limitations specified in the Articles of Incorporation of the REIT. 

[Table of Contents; Rules 1-3; Rule 4; Rule 5; Rule 6; Rule 7; Rule 8; Rule 9; Rules 10-11]