RENTS at industrial properties formerly owned by JTC Corp are likely to go up from June next year once a rental rise cap is lifted and a real estate investment trust (Reit) manager takes over.
The properties are held under the Mapletree Industrial Trust, which is headed for an initial public offering, possibly by the end of the year. Reits collect rent from tenants of the properties they own and pay most of it as dividends to unit holders.
Mapletree Investments, which bought the properties in 2008, had to face unhappy tenants struggling with soaring rents last year. Many had petitioned Mapletree for hefty rent cuts to cope with the tough market conditions then. Most of all, they were upset at having missed out on a 15 per cent rental rebate granted by JTC as part of the Government's Resilience Package.
Many are small and medium-sized enterprises occupying the cheapest of the ex-JTC factories. And JTC rents are generally below market rates.
Property consultants had said that they cannot expect Mapletree to offer them the same low rates.
In any case, Mapletree had said that 1,448 of the industrial trust's flatted and stack-up factories, as well as warehouses, would benefit from a 5 per cent rental cap - of JTC's rent in July 2007 - when they renewed their leases before this month.
There is no cap for the remaining 108 - 7 per cent of the total - tenants in its business park buildings.
Mapletree Investments' chief executive (Industrial) Phua Kok Kim said yesterday it has stuck to the rental cap. He said new tenants are signing leases at higher rates, which shows that the properties are 'under-rented and there is potential for organic growth'.
But any rise is likely to be gradual, said Mapletree group chief financial officer Wong Mun Hoong.
Mr Phua added: 'All our rents are subject to competitive market forces of supply and demand, so even when the rental cap of 5 per cent is lifted for non-business park space, the renewal rents will still be subject to market forces.'
Source: Straits Times, 1 Jul 2010