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Trust due to launch in middle of the year, subject to market conditions.

JTC Corporation yesterday said that it has appointed Temasek unit Mapletree Investments to establish and manage its upcoming real estate investment trust (Reit). The Reit is set for launch about the middle of this year, ’subject to market conditions’, JTC said.

JTC - Singapore’s biggest industrial landlord - said last July that it plans to sell up to $1.6 billion of assets, a big chunk of which will be pumped into a Reit. Industry players have said that the Reit’s initial portfolio is expected to be worth more than $1 billion.

JTC said that appointing Mapletree is a milestone in its divestment exercise, after it announced a request for proposals to explore the appointment of a Reit manager last year.

‘We received quality submissions from a wide range of international and local players,’ said JTC chief executive Ow Foong Pheng. Mapletree was chosen after a rigorous selection process, she said.

Mapletree aims to grow its capital management business, its chief executive Hiew Yoon Khong has said.

‘This appointment reflects the recognition, both locally and internationally, of our capabilities in managing industrial properties and in structuring and managing Reits,’ he said yesterday. Mapletree already has one Reit - Mapletree Logistics Trust - under its belt.

JTC Reit’s portfolio will comprise a range of high-rise ready-built properties including flatted factories, ramp-up and stack-up factories and multi-tenanted business park buildings, the landlord said yesterday.

The asset portfolio is attractive, Mr Hiew said, adding: ‘It is well diversified in terms of tenancy, location and asset type.’ The properties also enjoy high occupancy rates, a quality tenant base and long-term tenants, he said.

Market sources said that Mapletree beat several competitors to manage JTC’s Reit, including Singapore’s CapitaLand and Australian-listed property and wealth management company Goodman Group.

Previous reports have said that UBS, Goldman Sachs and DBS are in line to underwrite the offer.

Source : Business Times - 2 Feb 2008

Resident circulates letter to stop deal; developer warns of breach of contract.

ANOTHER collective sale dispute is brewing between the majority sellers of a condominium and its buyer.

This time, it is the owners of Gillman Heights in Alexandra Road that are locking horns with property developer CapitaLand, which agreed to buy the sprawling 607-unit estate in February last year.

The condo’s minority owners are already filing an appeal against the $548 million deal, which got the green light in December from the Strata Titles Board (STB), the body that governs collective sales.

But even some Gillman Heights majority owners, who originally agreed to sell, are not all happy about the sale.

At least one home owner has circulated letters to his neighbours, calling for a concerted application to the High Court to invalidate the collective sale agreement.

The letters, distributed at the beginning of last month to residents’ mail boxes, prompted a quick response from CapitaLand after they were brought to its attention.

It sent out at least two lawyers’ letters addressed to all Gillman Heights majority owners, warning them ‘not to do anything…that may hinder or prevent’ the sale.

These strongly worded letters, sent through law firm Rajah & Tann, identified the dissenting majority owner as Mr Jerry Lum.

Rajah & Tann also sent a six-page letter addressed specifically to Mr Lum, urging him to ‘take notice’ - in full capital letters - that CapitaLand ‘may have no option’ but to take legal action against him unless he stopped circulating the letters and organising any similar activities.

The letters stressed the sale agreement is ‘binding’ on all who have signed it and any attempt to block the sale could be viewed as a breach of contract.

A copy of the letters was obtained by The Straits Times this week. When contacted, Mr Lum confirmed he had distributed letters and had received the lawyers’ letters, but declined to comment further.

Among other things, Mr Lum argued in his original letters that the sale should require consent from 90 per cent of owners, rather than the usual 80 per cent. This is due to a dispute over Gillman Heights’ completion date.

He was also unhappy with the sale price, which he said ‘many neighbours’ feel is ’so, so cheap’. Each owner can expect to receive about $890,000 to $950,000 from the collective sale.

Although Mr Lum was the only one who signed off on his letters, the liberal use of the pronoun ‘we’ in the letters suggests he may have been writing on behalf of other like-minded, but unidentified, owners.

However, the Gillman Heights sales committee has claimed no knowledge of any activities aimed at obstructing the collective sale. It responded to CapitaLand’s letters with a letter of its own, sent through its lawyers Lee & Lee. In its letter, it said it ‘has every intention to and will carry out’ its obligations under the sale agreement.

Meanwhile, a group of 22 minority owners at Gillman Heights are appealing to the High Court to overturn STB’s approval of the sale. They filed it on Jan 16 and are awaiting the hearing. They are appealing on the grounds that the sale price is too low, and that more owners’ consent is required.

The Gillman Heights brouhaha is the latest in a series of unusual conflicts between an estate’s majority owners and its buyer. Historically, the quarrels have involved minority owners instead, who are unwilling to sell their homes.

But recent cases such as Horizon Towers in Leonie Hill and Regent Garden in West Coast Road have thrown up examples of majority owners who signed on the dotted line but later wanted to back out.

The Horizon Towers owners ended up being sued by the buyer - the suit is now on hold. The Regent Garden owners managed to get the sale dismissed earlier this week.

Letters making their rounds

THE letter-writing saga at Gillman Heights (above) was kicked off by home owner Jerry Lum, who distributed two letters to his neighbours dated Jan 1 and Jan 3.

Mr Lum called into question the estate’s sale price and the level of consent required for its collective sale. He also flagged rising home replacement costs, saying a High Court application would hold up the sale and let residents delay finding another place to stay.

CapitaLand responded with three letters - dated between Jan 4 and Jan 9 - reminding the majority owners of their contractual obligations and warning of breach of contract.

In reply, the estate’s sales committee wrote on Jan 10 that it was unaware of and did not support activities obstructing the sale. If anyone was involved in such activities, he would have to take ‘personal responsibility’.

Source : Straits Times - 2 Feb 2008

INDUSTRIAL landlord JTC Corporation has appointed Mapletree Investments to establish and manage a real estate investment trust (Reit) that it plans to list around the middle of the year.

The Reit will acquire some of JTC’s high-rise, ready-built properties , including flatted factories and multi-tenanted business park buildings, said JTC and Mapletree in a joint statement yesterday.

Singapore’s largest industrial landlord first announced its divestment plan in late 2005. It said the move would create a more vibrant market and enable it to focus on strategic industrial developments such as the Jurong Island chemicals hub.

JTC announced last July that it had shortlisted seven firms to manage the Reit.

It also said that it will sell $1.4 billion to $1.6 billion of assets - about 10 per cent of its $10.6 billion portfolio and that part of it will go into a Reit.

JTC chief executive Ow Foong Pheng said yesterday: ‘We received quality submissions from a wide range of international and local players.’

All proposals were evaluated on individual merit against an objective set of criteria, and Mapletree was chosen after a rigorous process, she said.

Mapletree, a Temasek Holdings subsidiary, is the sponsor for Singapore-listed Mapletree Logistics Trust.

The firm has an asset base of about $5.3 billion and assets under management of $2.5 billion across Asia.

Mapletree chief executive Hiew Yoon Khong said: ‘We find the asset portfolio very attractive. It is well diversified in terms of tenancy, location and asset type.’

The properties are also strategically located close to or have good access to the city centre, housing estates, key industrial belts and transport nodes, he said.

They enjoy high occupancy rates, a good quality tenant base and long-staying tenants.

JTC said it will work closely with Mapletree to effect a smooth transition upon the transfer of the selected properties .

The timing for the proposed Reit is around mid-2008 and subject to market conditions, said the joint statement.

The current outlook for initial public offerings is bearish as volatility rocks the stock market.

Singapore’s industrial property market has done well, with prices up 22.7 per cent last year, according to Urban Redevelopment Authority data.

Rents of industrial properties chalked up a stronger 32 per cent growth last year, as the sector had benefited from spillover office sector demand.

Source : Straits Times - 2 Feb 2008

AFTER dragging on for 12 years, the legal battle over a rundown hotel sitting on millions of dollars worth of prime downtown real estate has ended.

Singapore’s highest court yesterday ordered the land on which the Mitre Hotel sits to be sold and its occupants cleared out.

Some experts estimate that the plot could fetch $200 million, although the actual valuation has been ordered by a judge to be kept confidential.

The decision ends a long-running battle between the land owners, the bulk of whom want to sell the property .

The only owners resisting the sale are Mr Chiam Heng Hsien and Mitre Hotel Proprietors, the partnership that runs the hotel. Each has a 10 per cent stake in the land.

For more than 50 years, the hotel proprietors paid rent of about $660 a month to the land owners.

Mr Chiam, 62, went to the Court of Appeal to overturn an earlier lower court decision that ordered the site of the dilapidated, two-storey hotel to be sold.

But the three-judge panel rejected his appeal yesterday.

The hotel, which opened in 1948, stopped letting rooms when it lost its licence in 2002. But it continued to operate its bar.

The colonial-era building sits on a prime 40,000 sq ft lot in Killiney Road, against the backdrop of high-rise condominiums and office buildings.

When The Straits Times visited the site yesterday, the hotel looked abandoned. A distinct smell of urine wafted over the covered driveway leading to the lobby entrance.

The legal tussle over the land began in 1996, when Mr Chiam fought off a move by his cousin Heng Luan to sell the property .

Mr Chiam, who is the managing partner of the hotel, continued staying at the building.

The case went back to court in 2006. Mr Chiam argued that an agreement in 1948 allowed the hotel proprietors to stay on the property for as long as they wished.

In April last year, the High Court ruled against him.

Justice Judith Prakash ordered the property sold via public tender and the occupants to clear out.

She decided that the hotel partners are not entitled to compensation for being evicted, beyond the proceeds from the sale.

Mr Chiam and the hotel proprietors were ordered to pay the legal costs of the other parties.

The Court of Appeal yesterday upheld most of those decisions. But it ordered the costs of the legal battle to be paid out from the proceeds of the sale.

Source : Straits Times - 2 Feb 2008

INVESTORS scurry for cover in the strongest fortresses they can find when a storm breaks - such as the ferocious one currently raging in global financial markets.

But even the strongest citadel will show signs of wear and tear amid the panic that has been unleashed in recent weeks - just look at CapitaLand.

With a market value of $16 billion, the real estate giant must surely qualify as an ideal ‘fortress’ for property bulls to take cover in until calm is restored on global bourses.

And while the counter managed to stay relatively unscathed as the shares of other developers crumbled under the strain of the United States sub-prime mess and a vicious selldown, its strong walls showed signs of stress last week.

In the big frenzy that started on Jan 21, a Monday, when regional bourses were hit by widespread panic-selling, CapitaLand plunged to $5.10 at one point - its lowest levels in 19 months.

However, the relief rally sparked by the US Federal Reserve’s emergency interest rate cut of 0.75 percentage point last week enabled it to recover to a high of $6.55 on Tuesday.

But investors are now wondering if that is the best CapitaLand can manage in the near term. A further Fed cut of 0.5 percentage point on Wednesday failed to give CapitaLand a lift even though its bottom line should get a boost from the falling costs of funds.

Yesterday, the stock fell to a low of $5.58 before closing 10 cents lower at $5.80, as investors were spooked by news that it was raising $1.3 billion via a 10-year convertible bond issue.

This begs a question. Surely, in the current climate when the availability of credit is drying up globally, raising such a big sum should be a feather in CapitaLand’s cap.

The conversion price of $8.614 - which works out to a hefty 48.5 per cent premium over yesterday’s close - is not the same as giving away the family silver.

But some market observers believe the selldown could be due to fund managers switching out of CapitaLand into the bonds that pay a coupon rate of 3.125 per cent per annum.

Said a dealer: ‘In times like these, preservation of capital is king. If you believe that CapitaLand has more downside, you can cap your loss by selling the shares and buying the bonds. And since it is a convertible bond, you get to enjoy any upside if it subsequently rebounds above $8.60.’

So using the fortress analogy, fund managers are simply taking shelter in the strongest part of CapitaLand’s edifice, as storm clouds continue to gather and the global financial system encounters further stress from the sub-prime fallout.

Even the usually ebullient property analysts are not getting excited over developers’ prospects. Morgan Stanley analyst Melissa Bon noted in a report on Jan 25 that the attractive valuations for property counters may be an illusion.

Even though the sector is now trading at a 28 per cent discount to its net asset value, compared with a 15 per cent premium a year ago, she ’sees potential downside risks if there are further delays to residential launches’.

CLSA is also cautious, saying in a recent report that ‘2008 will see a year of more sustainable price growth though the pace of increase is likely to slow’.

Source : Straits Times - 2 Feb 2008