• Investing in Philippine REITs: The Complete Guide

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    Philippines is one of the best countries to buy real estate when taking yields, taxes, prospects, ownership regulations, and long-term visas into consideration.

    It’s been ranked as one of the best countries to buy real estate in the Asia Property Index annually.

    With that said, there are certain property types that you cannot buy as a foreigner in the Philippines. Besides, some investors are simply too busy to manage properties or don’t have the capital required for commercial real estate investments.

    But there are other ways to invest in real estate markets, namely through REITs.

    By owning shares in trusts that are managed by companies and experts, you can enjoy high dividend yields at the same time as you sit on the other side of the globe.

    Topics covered:

    • Can foreigners buy REITs in the Philippines?
    • The Process When Buying REITs in the Philippines
    • What is the benefit of buying REITs in the Philippines?
    • List of REITs in the Philippines

    Can foreigners buy REITs in the Philippines?

    REITs are traded on stock exchanges and the regulations and process to start investing in the assets are similar to that of stocks.

    As such, the first question we need to be answered is whether foreigners and non-residents can buy securities on the Philippine Stock Exchange (PSE).

    Philippines is a developing country and there are restrictions to foreign ownership, the same as for stock trading in Vietnam, to give you an example.

    The first restriction you should be aware of is that foreigners can own a maximum of 40% of the shares in companies in the Philippines. Secondly, foreigners generally have to visit the Philippines to manage account openings.

    Trading ETFs as an option to individual stocks:

    If you cannot visit the Philippines due to travel restrictions or simply don’t have the time, you can also trade ETFs on foreign stock exchanges.

    Trading Philippine stocks on foreign stock exchanges can be an expensive endeavor due to the high transaction fees that sometimes can reach up to tens of US dollars per transaction.

    This might be bearable among large-sized investment firms, but not individual buyers.

    A better option can therefore be to visit the Philippines to open a local bank account and a brokerage account.

    The Process When Buying REITs in the Philippines

    As mentioned, you have two options when investing in securities on the Philippine Stock Exchange (PSE):

    • Trade Philippine securities on a foreign exchange (like the NYSE)
    • Trade securities directly through a local broker

    While the second option might be more time-consuming and costly in the short-run, it’s needed if you want to get access to individual stocks and REITs.

    To start trading REITs through a local broker you have to open a brokerage account and bank account.

    Opening a Brokerage Account in the Philippines

    There are many brokerage firms available in the Philippines and that help local and foreign investors. One of the most well-known is COL Financial, a company that was founded in 1999.

    Other REIT brokers include Philstocks Financial, Inc., Regina Capital Development Corporation, and Timson Securities, Inc. You typically have to invest at least PHP 5,000 – 100,000 (USD 100 – 2,000) to start trading.

    Examples of documents that foreign non-residents need:

    • Passport Copy
    • Application Forms (CAIF, OSTA, and Specimen Signature Cards)
    • Money for Investment
    • Customer Account Information Form (CAIF)
    • Foreign Account Tax Compliance Act (FATCA)

    Keep in mind that additional documents might be needed. For the latest information, you should contact a local brokerage firm in the Philippines.

    Funding Your Brokerage Account

    You have four options when funding your brokerage account:

    • Online bill payment
    • Over-the-counter bills payments
    • Brokerage firm’s business center
    • Overseas remittance

    Online bill payments can be made through the Bank of the Philippine Islands (BPI), Banco de Oro (BDO), Metrobank, Asia United Bank, and GCash, according to COL Financial, for example.

    Over-the-counter bill payments can be made through many of the banks mentioned as well.

    Third, you can visit the brokerage firm’s business center and they can help you with the transfer of the funds. The final option is to simply make the transfer as an overseas remittance. BDO Kabayan Bills Bayad, iRemit Remittance, and BDO Overseas Remittance can help with this.

    Opening a Bank Account

    To transfer funds through a local bank you have to get a bank account first.

    First, you have to get a so-called ACR I-card (Alien Certificate of Registration card). Some banks allow foreigners to open accounts without ACR I-cards and by just having your passport and an Immigrant Certificate of Registration (ICR) to prove your residency.

    Worth mentioning is that you have to visit the Philippines and the bank in person. If you don’t have an ACR I-card, you might have to book a meeting with the branch manager.

    Other documents needed:

    • Passport (or another photo ID)
    • One passport-sized photo
    • Proof of your address (e.g. utility bill or rental contract)

    It can be beneficial to contact a bank that has branches both in your home country and in the Philippines to manage some of the work beforehand and ask for advice.

    What is the benefit of buying REITs in the Philippines?

    Investing in REITs can bring different and additional benefits depending on how developed a country is.

    While REIT investments in Singapore or the US allow you to own a slice of expensive and high-income earning shopping malls, you might not be able to buy real estate in some countries.

    Below I have listed some of the outspoken benefits of investing in Philippine REITs.

    1. Overcoming Foreign Property Ownership Restrictions

    As mentioned, foreigners are only allowed to own 40% of the units in buildings with strata titles. These kinds of buildings are typically residential condominiums, but sometimes you can also find office buildings with strata titles.

    With that said, foreigners have few options when investing in the Philippine real estate market.

    If you invest in REITs, on the other hand, you can own a piece of everything from industrial real estate, office space, hotels, and retail property, just to give you some examples.

    2. Market Access

    This point goes hand-in-hand with the first one. If you plan to buy commercial property in the Philippines, you have to secure a large initial investment amount and set up a local real estate trading company/joint venture (JV).

    By investing in REITs, you get access to all kinds of real estate and significantly more property types.

    3. Low Capital Requirements

    To open a brokerage account and start investing in Philippine REITs, you won’t need more than a few hundred US dollars.

    Buying a complete hotel or shopping mall in Makati would set you back hundreds of millions of US dollars. One of the key benefits of investing in REITs is the low capital requirements needed.

    4. No Maintenance or Property Management Needed

    Owning a physical unit requires continuous property maintenance and property management. These kinds of services are often outsourced to companies that specialize in these services.

    Yet, this requires administration, meetings, and contractual renewals with the firms.

    If you own shares in REITs, no such maintenance or property management is needed. Everything is taken care of by the company that owns the properties.

    5. Liquidity

    You can buy REIT units with a click and sell the shares whenever you want. REITs are as liquid as stocks and you can opt out of the market anytime.

    Liquidity is another key benefit of investing in REITs and why it’s become so popular in recent years.

    6. High Dividend Yields

    REITs generally offer high dividend yields that can range up to 10% a year. This is something we will review for Philippine REITs specifically later and what these have returned.

    Not only can you enjoy high dividends by owning REITs but also the capital appreciation of the REIT value.

    List of REITs in the Philippines

    Philippines is a developing country and you won’t find as many REITs available here compared to the US or Hong Kong, for example.

    Congress approved the REIT Act in 2009 and there’s currently only one REIT available, Ayala Land, Inc. REIT (AREIT).

    Ayala Land, Inc. REIT (AREIT)

    Ayala Land, Inc. REIT (AREIT) was introduced as the first REIT in the Philippines in 2020. AREIT’s property portfolio comprises three commercial buildings in Makati City, including:

    • Solaris One
    • Ayala North Exchange
    • McKinley Exchange

    Solaris One is a 24-story commercial building and Ayala North Exchange comprises two towers as a mixed-use development. McKinley Exchange, on the other hand, is a five-story mixed-use development.

    AREIT was incorporated as early as 2006 but not listed on the PSE until the 13th of August, 2020. For more information about the REIT, I recommend you to visit the website. There you can also find information about the main stockholders.

    Disclosure: This information is intended for educational purposes. It does not constitute investment advice and should not be considered as a recommendation for investment. The writer of the article and the owners of the website don’t own any of the securities/REITs mentioned in the article. Note that the value and income of investments can go up, as well as down (resulting in a loss).

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