UDC looking at developing REIT as mode of property divestment
Published:Friday | June 17, 2011 | 12:00 AM
Avia Collinder, Business Reporter
A suggestion by the Government's growth experts that it package expansive property assets into a real estate investment trust (REIT) has been taken on board by the largest state developer as a likely new format for ongoing divestments of national holdings.
The Urban Development Corporation's immediate focus is on four properties in St Ann for which it will solicit business proposals either for purchase, lease or joint-venture partnerships: a new commercial centre in Ocho Rios; the Dunn's River Estate Villas on the Belmont property; a luxury residential development in Mammee Bay named Laughing Waters East and West; and Cardiff Hall.
"We're putting opportunities together in preparation for private investor involvement whether through REITs, public-private partnerships or otherwise," said UDC General Manager Joy Douglas.
The Jamaican market has limited exposure to real estate trusts and their workings.
A REIT is a corporate entity invested in real estate assets of which there is but one of its type in the Caribbean, Kingston Properties Limited, which trades on the Jamaican stock market under the symbol KPREIT.
REITs are not necessarily listed or publicly traded - some are privately held - but the suggestion of the Planning Institute of Jamaica's growth strategy committee was that it be treated as a tool for capital market development, and structured as a stock market investment through the issue of exchange-traded shares.
The Government is Jamaica's largest property owner with 22 per cent of all holdings.
"The fact that, in Jamaica, the state-owned real estate is substantially diversified across geographical markets and property asset classes, is substantially beneficial to the functioning of a REIT. The asset classes cover office, industrial, retail and hotel and other tourism facilities helps to spread the risk in the portfolio, as the property values are dynamic and are determined by varying economic fundamentals in each sector or market segment," read the Growth-Inducement Strategy report of March 2011.
The Jamaican REIT would continue to own and manage the portfolio of large properties, while investors would buy units in the REIT.
"Thus, the Jamaican REIT would be a unitised portfolio of property assets which would be traded freely on the capital market and the value of the unit price would be determined by demand and supply," said the growth report that arose from consultations and analyses led chiefly by consultant Professor Donald Harris and PIOJ Director General Dr Gladstone Hutchinson.
"This initiative could be implemented within an 18 to 24 month period, through the public-private partnership modality, but such a process would require that an up-to-date inventory of all publicly owned land be developed."
UDC has made no final decisions on the direction it will take, saying it is still in the process of developing its pitch to investors. Costings of the properties are also pending.
Dunns River Estate Villas, located west of Ocho Rios, is a 22.9-hectare (56.59-acre) development conceptualised as a secluded luxurious collection of three-bedroom villas on 170 lots, with each lot size a minimum of 1,000 square metres.
The UDC concept includes a spa, gourmet food store, fitness centres, meeting and business centres, ballroom facilities, and a children's club.
The residential development named Laughing Waters East and Laughing Waters West is planned for the Mammee Bay, and is zoned for luxury resort residential development. The two properties span 8 hectares (20 acres).
Cardiff Hall, located between Ocho Rios and Discovery Bay, is also slated for resort residential development.
The proposal for the Ocho Rios Commercial Centre envisages the creation of a shopping complex spread over 8.39 hectares (21 acres) of beachfront property "which will act as a catalyst for the further development of the town".
The development includes a boardwalk linking the Reynolds Pier to the Sunset Jamaica Grande, a shopping village, and multi-storey car park adjoining the hotel, said a UDC document drafted March 2011 that showcases the St Ann assets.
Douglas said that, for now, the UDC is just "putting opportunities together" to entice investors.