UDC hopes to package downtown properties as REIT deals
Published:Wednesday | June 22, 2011 | 12:00 AM
The Urban Development Corporation says the formulation of real estate investment trusts (REITs) is now its preferred vehicle for the redevelopment of downtown commercial property assets.
"Although not actively pursued here, the time has come for this," UDC general manager Joy Douglas said, referring to the opportunity for companies to formulate REITs, given the availability of assets.
UDC's property divestment portfolio includes the three-acre Machado Complex at Victoria Avenue, to be redeveloped as a model 'green' office complex; the 65,000 square foot Jamintel building; Office Centre Building, comprising 13 floors 200,000 square feet of space; the Oceana building, a hotel/office complex; Victoria Pier restaurant/attraction; Seabed Arcade, featuring 12 shops located between Church Street and Orange Street.
The UDC is also suggesting that it's the parking facilities it owns downtown, comprising 1,600 parking spaces, plus available land space to build and operate another 800 spaces for users and businesses on the Kingston waterfront, could be formulated into one package.
Packaged product
However for its planned Festival Market complex, which will offer Jamaican food and artworks, restaurants, and a proposed entertainment zone, UDC said it has chosen to package the project as public-private partnership, and is seeking investors for its design, construction and operation.
A REIT is a form of indirect real estate investing, likened to the acquisition of stock in a company.
The trust acquires income-producing real estate and offers common shares to the public.
The earnings of the REIT can be derived from sale, rental income, as well as fair value gains from the properties owned.
In general, REITs are suggested for entities such as pension funds which seek stable long term portfolio returns.
According to a document authored by NCB Capital Markets Limited, when compared to equity investments, real estate has been shown to have lower risk.
"A significant portion of the return from REIT is likely to come from capital appreciation in the underlying asset, it is best suited to investors with a long time horizon , generating returns for retirement and other longer term goals.
It offers them ownership in real estate without the large capital outlay and transaction costs that is required in direct real estate investing."
The UDC, under the Urban Renewal Act, is currently seeking to entice investments in the downtown zone.
Among several measures, investors can, up to 2015, apply for full relief from income tax on any rental or lease income from improved property and exemption from transfer tax on transfers of title.