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ASCENDAS Real Estate Investment Trust (A-Reit) has turned developer, and will build two warehouse retail facilities costing up to $128 million. It is understood that this will be a first for a Singapore Reit.

Reits are not restricted from developing properties but conditions do apply.

According to the updated Code of Collective Investment Schemes which was out in Oct 20, 2005, and issued by the Monetary Authority of Singapore, the total contract value of property development activities undertaken and investments in uncompleted property developments should not exceed 10 per cent of a property fund’s deposited property. The value of A-Reit’s two development projects currently accounts for about 4.7 per cent of its deposited property. A-Reit has a book value of $2.6 billion.

‘The two separate warehouse retail facilities will be developed for Cold Storage Singapore (1983) Pte Ltd for its Giant operations, a leading hypermarket operator in Singapore, and for Courts (Singapore) Ltd, a leading furniture and electrical product distributor,’ said A-Reit. It has already signed separate letters of offer with Cold Storage Singapore and Courts Singapore Ltd, detailing its agreement to develop the two individual warehouse retail facilities. Cold Storage and Courts have, in turn, committed to long-term leases.

‘We are pleased to have the opportunity to participate in this new concept to embark on A-Reit’s first two development projects,’ said Tan Ser Ping, CEO of A-Reit’s manager Ascendas-MGM Funds Management Ltd.

A-Reit said it will capitalise the holding cost for the developments to the respective projects and no income will be received during the development period. As a result, the two developments have no impact on A-Reit’s distributable income per unit during the development period. The pro forma financial effect of the completed acquisitions on the distribution per unit for the financial year ended March 31, 2005, would be an additional 0.36 cents per unit.

Both properties are located along Tampines Avenue 10. They were launched under the pilot Warehouse Retail Scheme in April 2004 by the Singapore Economic Development Board. Not less than 60 per cent of the gross floor area of the facility must be used in an industrial or warehousing nature.

Cold Storage is planning its 40,000 sq m facility for its Giant hypermarket operations. It will cost $66 million and is expected to be completed in early 2007. Upon completion, Cold Storage will sign a 29-year lease with A-Reit. The proposed rent is calculated based on a weighted average of retail and warehouse rental rates.

Courts will sign a 10-year lease with A-Reit upon completion of its 20,830 sq m facility in late 2006. The development cost is $55-$62 million.

Source : Business Times - 25 Jan 2006