JTC Corporation has begun its search for a real estate investment trust (Reit) manager as part of a move to divest its high-rise ready-built properties.
Following news last year of its decision to divest these properties through a combination of a Reit and trade sale, JTC yesterday announced its launch of a Request for Proposals (RFP) to explore the appointment of a Reit manager.
JTC CEO Ow Foong Pheng said: ‘The RFP is expected to provide a rigorous process for us to find a suitable and qualified Reit manager. One of the objectives of our divestment exercise is to promote active competition in the industrial property market in Singapore so that existing and prospective tenants may benefit from more options and choices.’
JTC said that emphasis will be placed on Reit managers who have a proven track record of managing a listed or unlisted industrial Reit or property fund globally; or a listed or unlisted Reit or property fund in any sector in the Asia-Pacific region. The deadline for the RFP submissions is June 1.
Issues that could arise from this divestment are the impact on the competitiveness of the industrial property market as well as price stability and fair market value of the divested properties.
The properties it is divesting have a total net floor area of 1.7 million sq m. They consist mainly of flatted factories, ramp-up and stack-up factories, a warehouse building and three office blocks in the International Business Park and the Changi Business Park.
It is not known what properties JTC intends to put in a Reit. Market watchers have also pointed out that some properties will be more attractive than others.
Savills Singapore’s director of industrial business space Dominic Peters also notes that there could be issues pertaining to the number of years left on leases of certain properties. However, Mr Peters said that the strategy to ‘bundle’ properties together could be effective in averaging out the valuations of properties that are less attractive. He reckons the key properties in the Reit will be the buildings in the business parks. ‘Any Reit manager will want to include these because the occupancy is very high,’ he added. But he also highlighted that the three business park buildings only account for about 5 per cent of the portfolio being divested.
On whether JTC could have considered launching a Reit on its own, CB Richard Ellis Research executive director Li Hiaw Ho said: ‘An experienced Reit manager will be able to import best practices to the JTC Reit and, in turn, ensure that the properties are better managed. This will benefit both the tenants and unit holders of the Reit.’
Source : Business Times - 11 May 2007
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