The Securities and Exchange Commission (“SEC”) issued SEC Memorandum Circular No. 1, Series of 2026 on 08 January 2026, introducing amendments to the Implementing Rules and Regulations of Republic Act No. 9856, or the Real Estate Investment Trust (“REIT”) Act of 2009. The Rules took effect on 25 January 2026.
A key feature of the amendments is the clarification and expansion of the definition of income-generating real estate, which now expressly includes assets capable of producing recurring and predictable cash flows, whether owned directly by the REIT or indirectly through an unlisted special purpose vehicle (“SPV”) or incorporated joint venture, provided the REIT owns at least two-thirds of the outstanding and voting capital stock of such entity. The rules recognize that income-generating assets may include infrastructure-related properties and facilities such as transportation, telecommunications, and energy infrastructure, as well as data centers, parking facilities, warehouses, and other real estate assets that generate regular income streams.
The circular also introduces clarifications on public shareholders and related party transactions to strengthen governance and transparency. A public shareholder is defined as an investor who does not belong to the sponsor, promoter, or management group of the REIT and who does not exercise substantial influence over its management or operations. For this purpose, substantial influence is generally presumed when a person directly or indirectly owns 10% or more of the issued and outstanding shares of the REIT.
The amendments further enhance disclosure requirements in REIT plans, requiring more detailed information on the underlying real estate assets, including occupancy rates, lease arrangements, material transactions, and the roles and compensation of the fund manager and property manager. The revised rules also reiterate that management fees must be clearly disclosed and must not exceed 1% of the REIT’s Net Asset Value, and that duplicate fees may not be charged where assets are held through SPVs or joint ventures.
Further, the circular reinforces the statutory requirement that REITs distribute at least 90% of their distributable income annually as dividends, and introduces a look-through rule requiring SPVs or joint ventures holding REIT assets to distribute at least 90% of their distributable income to the REIT prior to the declaration of dividends.
Lastly, the revised rules clarify the reinvestment requirement for sponsors or promoters contributing income-generating real estate to a REIT. Proceeds received from the REIT must generally be reinvested in Philippine real estate or infrastructure projects within one to two years, through equity investments, loans, debt instruments, or similar financing structures. The amendments also introduce additional reporting obligations for fund managers, including the submission of a three-year investment strategy and quarterly performance reports to the Commission and relevant regulators.
A copy of SEC Memorandum Circular No. 1, Series of 2026 may be accessed through: https://tinyurl.com/rxkmk38p
The amendments are expected to broaden the range of assets that may be included in REIT structures, facilitate capital recycling by sponsors, and enhance transparency and investor protection.
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