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Sources expect it to sell its subsidiaries Ascendas and Jurong International Hldgs through trade sales

JTC Corporation is expected to announce long awaited details of its divestment plans by the end of this month and sources expect the statutory board to divest a substantial amount of its industrial property portfolio into a real estate investment trust (Reit).

Sources say the JTC Reit could contain assets worth between $1.5 billion and $2 billion, with the initial public offering (IPO) expected to be launched next year.

Meanwhile, sources expect JTC to sell its subsidiaries Ascendas and Jurong International Holdings through trade sales.

Market players believe a sale of Ascendas is likely to attract strong interest from parties like Australia’s Macquarie Bank as well as Middle Eastern investors, who are flush with cash and keen to control a vehicle that can be used to tap into infrastructure development opportunities in the Middle East. Macquarie Goodman has a joint venture with Ascendas, to manage Ascendas Reit.

Ascendas is Asia’s leading provider of business space solutions, with a pan Asian presence covering Singapore, China, India, Indonesia, Japan, Oman, South Korea, Thailand, the Philippines and Vietnam.

Jurong International provides a comprehensive suite of design and build, consultancy and facilities management services.

JTC’s industrial property portfolio being considered for divestment include 71 blocks of high-rise facilities, 800 units of workshops and three multi-tenanted business park buildings - The Synergy and The Strategy at International Business Park and The Signature at Changi Business Park.

When JTC first announced its divestment plans in November last year, it said the implementation plan for the divestment exercise would likely be finalised by the second quarter of this year.

But sources say the timetable may have been put back to address concerns raised by some of JTC’s small and medium enterprise (SME) tenants.

These tenants have voiced concerns that rents would rise if JTC’s properties are sold to a Reit. However, market players point out that whether JTC sells its properties to a Reit or to some other third party, JTC might no longer be as forthcoming in offering special rental rebates to help tenants tide over bad times.

Market players say the Reit route is the most viable for JTC to divest its industrial properties, given the number of properties involved.

They also suggest that while financial investors may not be keen to back income streams coming from individual SME tenants, a Reit that bundles together many tenancies of different SMEs achieves the benefits of diversification.

Market players note it would be interesting to see what properties JTC leaves out of the Reit and to see how the Reit goes about choosing a manager. They point out that an IPO of a JTC Reit might see the trust being sold to institutional and retail investors with the government retaining no stake in it, like the Link Reit in Hong Kong.

Market players add that the JTC Reit exercise would be closely watched, because its success or otherwise could determine whether chunks of properties held by various other government entities would find their way into Reit vehicles.

For example, sources have identified the Housing and Development Board as potentially injecting its car parks and shop units into a Reit.

The implementation of JTC’s divestment plans are likely to be at the top of the agenda for Ow Foong Pheng, who takes over as the statutory board’s chief executive officer, from Chong Lit Cheong on Aug 1.

Market players note that a JTC Reit would compete for investor monies, tenants and acquisitions with existing Reits like the Ascendas Reit as well as the Mapletree Logistics Trust and the soon-to-be-listed Cambridge Industrial Trust.

While Reits owning prime retail and office properties in Singapore offer investors upside exposure to rental renewals and new leases, the industrial property space in Singapore is seen as one which provides scope for growth through acquisitions as industrial entities may wish to divest their non-core assets.

Source : Business Times - 25 Jul 2006