Minister Lim Hng Kiang's reply to Parliament Question on JTC and real estate Investment Trusts

Question No 11 in Notice paper No. 71 of 2011.

for Written Answer

Name and Constituency of Member of Parliament 
Mr Yee Jenn Jong, Non-Constituency Member of Parliament

Question

To ask the Minister for Trade and Industry (a) how many properties of JTC Corporation and how much total floor area have been transferred to Real Estate Investment Trusts or sold through trade sales since 2006; and (b) what is the average percentage change in rent of these properties one year after having transferred out from JTC.

Answer

1. JTC Corporation undertook two phases of pestment in 2008 and 2011 respectively for its ready-built high-rise industrial properties. A total of about 2 million square meters (sqm) of Gross Floor Area (GFA) of space in 83 properties was pested. This corresponds to less than 5% of the overall industrial space market. Most of these properties were flatted factories. The remaining properties were amenity centers and other types of industrial buildings. Separately, JTC pested three dormitories in 2007 with an estimated GFA of 110,000 sqm.

2. The first phase of pestment was completed in mid-2008 with a sale to Maple tree Investments Pte Ltd. Under the pestment terms, the rent escalation for existing tenants was capped at 5% per annum over JTC’s July 2007 posted rents for a period of three years. Hence, one year after the pestment, the maximum rents these existing tenants paid should be no more than 5% above JTC’s July 2007 posted rents. The actual adjustment in rent would vary among inpidual tenants, depending on the level of their base rent. JTC is not privy to the actual adjustments, as the tenancy agreements had become private commercial transactions with the pestment.

3. he second phase of the pestment was completed in August 2011. One of the conditions of the tender was for the bidder to provide a business continuity plan for tenants.

4. One tranche was sold to Soil build Group Holdings Ltd, which committed to cap renewal rates for a three-year tenancy for existing tenants at not more than 10% above JTC’s July 2011 posted rents, for a period of two years.

5. Another tranche was sold to Maple tree Industrial Trust (MIT), where the renewal rates would be pegged to JTC’s July 2011 posted rents with a cap of 5% per annum for three years, upon the completion of the trade sale. In addition, for tenants who have more than 10 years of continuous tenancy, MIT has offered an additional 2% discount off JTC’s July 2011 posted rates in the first year. The renewal rates for this group of tenants would be subject to a lower rent escalation cap of 3% per annum of JTC’s July 2011 posted rates for the subsequent two years.

6. One year after the second phase of pestment (which would be August 2012), JTC would similarly not be privy to the actual adjustments of rent. However, the new owners will have to keep to the rent caps when negotiating tenancy renewals with the tenants.

7. JTC will continue to track industrial rents as part of its overall responsibility.