Philippines State-run Social Security System Bullish on REIT Investments

The Social Security System (SSS) is poised to enhance its income by strategically increasing its investments in real estate investment trusts (REITs) this year, a calculated move expected to yield better returns for SSS.

​SSS President and Chief Executive Officer Rolando Ledesma Macasaet said that SSS is optimistic to generate more profit from its P6 billion investment in nearly all the REITs currently available in the Philippines.

Macasaet expressed optimism, stating that of P6 billion investment, more than 75% were purchased this year and yield around 8%. This promising figure is expected to significantly boost the SSS investment portfolio, instilling a sense of optimism among stakeholders.

Macasaet's bullish outlook on REITs prospect is underpinned by expected rate cut second half of the year and the increasingly favorable market conditions. This positive outlook sets the stage for potentially higher returns on SSS' investments.

SSS Investments Sector Concurrent Acting Head Ernesto D. Francisco, Jr., said that SSS currently invests 5% of its equity funds in REITs and looks to further increase on opportunities.

"REIT is a fantastic investment structure for pension funds like SSS because 90% of the lease income is mandatorily distributed. The REIT sector also greatly contributes to economic development since REIT players must reinvest within one year," Francisco said.

Francisco predicted that REITs will be among the top contributors to this year's investment income because they continue offering attractive dividend yields higher than the prevailing benchmark rates.

He said SSS will continue investing in REITs in the upcoming years because they can earn decently from steady rental income and growth. "The more robust and diversified the cash flow of the REITs asset, the more we will invest in them."

He noted that the trend now is REIT companies infusing more quality assets.

"Looking ahead, we envision a promising future for the Philippine REIT sector, which could potentially become a major contributor to the capital market. Consider Singapore, where 20%, or six out of 30, of its Straits Times Index component is composed of REITs. The absence of REITs in the Philippine Stock Exchange Composite Index presents a significant growth opportunity. Singapore's vibrant individual investor base, a key growth driver of their REITs, serves as an inspiring model for us," Francisco explained.

Francisco said that the Singapore experience on REIT development only shows that REITs can become a very significant growth driver in the Philippines.