SM PRIME Holdings Inc., the country’s largest mall developer, has formally spoken out against the fiscal government’s proposed changes to the implementing rules of the Real Estate Investment Trust (REIT) Act.

SM Prime chief finance officer Jeffrey Lim said the company would like to see minimal changes to the current implementing rules released by the Securities and Exchange Commission  (SEC) in May. ?

The company executive was pertaining to the proposed increase in the minimum public float to 51 percent from the previously approved 33.3 percent, as requested by the Department of Finance (DOF).

Apart from requiring REITs to immediately sell a majority stake to the public, the DOF also wants these firms to increase the public float to at least 67 percent by the third year.

As a concession, Lim said there should be an increase in the minimum paid-up capital to P1 billion, from the current requirement of P300 million.

The private sector had already submitted its comments to SEC on November 5.

The commission is currently reviewing the points raised by both sides, with a decision to emerge before the end of the year, SEC chairperson Fe Barin said last week.

The SEC has the power to accommodate all the proposed changes of DOF, which also include a rule banning REITs from using its capital to pay off debts, and the removal of the requirement for a third-party property manager for the REIT company.

“[On restrictions on debt repayment], we don’t have problems with that,” Lim said, stating that the company merely seeking clarification from the DOF on this provision.

“The last one is the property manager, I think based on the proposal, what we [want] is the option of appointing an external or internal property manager,” Lim added.

The much delayed law provides a framework for the creation of REITs, which will own real-estate assets that generate recurring income such as hotels, office buildings and malls that will be listed on the local bourse.

This will allow REIT issuers to raise fresh capital while providing the public with a new investment instrument.

The DOF, through the Bureau of Internal Revenue (BIR), argues that its changes are meant to “democratize wealth” and “broaden participation” by Filipinos as stated in the REIT law.

For now, the BIR is holding back the release of its own tax rules, which potential issuers would need to see before coming forward with concrete REIT offers of their own.

REITs, which are required to pay out 90 percent of their distributable income as dividends to shareholders, will also be entitled to tax incentives. Other firms interested in holding early REIT offers are Ayala Land Inc. and Robinsons Land Corp.