Chamber of Real Estate and
Builders' Association, Inc.

8th Monthly Business Meeting / Grand Launching of the National Convention 2007
Chamber of Real Estate and Builders' Association, Inc.
"The Land Sector,s Quantum Leap to the Future"
Grand Ballroom, Hotel Intercontinental, Makati City
30 August 2007, 12 Noon

Guest of Honor and Speaker
Senator Edgardo J. Angara

It is an honor for me to be speaking to you on your 8th Monthly Business Meeting and the Grand Launching of the National Convention 2007.

Growth in the real estate industry translates to economic growth. It is undeniable that the strength or weakness of economic activities in real estate has the capacity to stimulate or dampen economic growth in all areas. And it is for this reason that the government and the private industry players welcome the 40-year high in the real estate industry.

But despite this growth, fears that the US subprime mortgage collapse will bring consequential losses to Asia-Pacific economies hovers above every investors mind. The mortgage crisis has so far caused prices in the $6.5 trillion mortgage- backed securities to collapse.

Allow me to bring some good news.

The mortgage crisis in the US may in fact bring opportunities to Asia. Tomoyuki Yoshida, Head of Japan operations for General Electric Co., said that the subprime problem may increase real estate investments in Asia.

US has 45% share of GE's global real estate portfolio, followed by France then Japan with 10% and 9%, respectively. To date, GE Real Estate has more than $62 billion of assets worldwide and is planning to expand its investment in Asia, specifically in Hong Kong and Australia's real estate investment trusts.

Another undeniable truth is that economic policies in the county have the power to attract or drive away potential investors. Low interest rates, tax incentives or tax exemptions and tax shelters-the presence and absence of which has the capacity to keep investors coming or going.

Prospects are good for our neighbors who have adopted the REIT. It is high-time that the Philippines take this opportunity and accelerate its investment potential.

The Real Estate Investment Trust (REIT) Act aims to create a level playing field to both small and large investors. It will give them equal opportunity to participate directly in the ownership and financing of large-scale real estate projects at affordable rates of investments, without the disadvantage of illiquidity, high transaction and management costs.

This will create the real estate investment trust, a stock corporation formed for the sole purpose of investing in income-producing real estate assets. Under the Act, the stock of the trust will be listed in The Philippine Stock Exchange, Inc. and small investors are able to buy and sell securities of said companies through REIT.

REIT will provide steady income to the investor and the national government and allow cross boarder investments that will encourage strategic foreign investment in the capital market.

At this time of unstable economic conditions, REIT is just what we need.

REIT is protected against declining prices of stocks and bonds.

In The Outlook for Real Estate Market, a paper presented by the Counselors of Real Estate in US, it stated that real estate is an asset class separate from stocks and bonds and the values of real properties move in a cycle that differs in timing from the timing of stock and bond price movement.

To illustrate, the 2001 recession in the US which caused major stock indices to plunge, have brought a 77.7% increase in the NAREIT equity REIT index. This is so because investors are attracted to real estates' promise of higher yield and better appreciation prospect than major alternative types (stocks and bonds).

This is not a new concept in Asia and other nations. Since early 2000, governments around Asia have been actively promoting the real estate investment trusts and the private sector responded positively to this measure.

In a span of five years, the number of real estate investment trusts in Asia grew from five in 2001 to approximately eighty in August 2006. As of August 2006, total real estate investment trusts' market capitalization in Asia was estimated to be worth $50 billion.

Japan and Korea pioneered the introduction of REIT in Asia. Singapore, Malaysia, Taiwan, Hong Kong and Thailand followed suit, offering tax incentives to encourage REIT listings.

Allow me to mention some of the best practices in Asia.

REIT offers higher yield. While interest rates on savings accounts are below 1% per annum, REITs are paying an average of 5% to 9%. This is possible because of the steady stream of revenue from rents.

Hong Kong's Link REIT, one of the world's largest REITs, has an asset of around US$3.3 billion and offers a 6.65% dividend yield. In Malaysia, Axis Real Estate Investment Trust Bhd., offers about 8% yield in 2005 and 8.63% in 2006 while Thailand's Central Pattana Pcl, offers 7.8%.

REITS are higher yielding than stocks and are more stable too.

In Japan, in 2006, the balance of REIT has jumped 73% in one year to 4.5 trillion yen and the number of listed REIT has doubled to 36. The total investment in real estate funds has reached 10 trillion yen. Tokyo's Stock Exchange's REIT Index has an average yield of 3.4%.

REIT offers a steady and recurrent income to its investors.

In Singapore, REIT is expected to triple in 5 years. To date, it remains the biggest REIT market in Asia, excluding Japan and Australia.

REIT is readily available even to small investors.

In Japan, mutual funds investing in REIT are popular with retirees for its generous monthly dividend that supplements their pension.

Lastly, REIT opens the market to foreign direct investments in properties such as office spaces, condominiums, shopping malls, hotels, and resort facilities, to mention a few.

A survey by the Association of Foreign Investors in Real Estate named Tokyo as one of the top three cities for real estate investment. US institutional investors are among the biggest holders of Japanese REITs.

REIT translates to a stable real estate industry and economy.

This is a new concept for us but with the current real estate boom and the success stories of our Asian neighbors, I am positive that the introduction of REIT in the country will help the real estate industry and the economy soar high and finally reach a quantum leap.

Thank you.