Industrialists and third-party facility providers such as property funds/developers who own industrial properties on JTC-leased sites will now be required to hold these properties for a longer period before they may sell them.
JTC has also extended the minimum occupation period for anchor tenants of third-party facility providers. The changes took effect on Nov 15. The move is aimed at safeguarding Singapore’s scarce industrial land resources for optimal use by genuine industrialists and dampening property speculation.
Contacted by BT, JTC said the changes aimed to “ensure the lessees allocated our limited industrial land in their lease contract based on their proposed business plans remain committed to them for a sustained and reasonable period of time”. The changes also discourage speculation and promote price stability in the industrial property market, it added.
The statutory board reckons its policy strikes a “reasonable balance” between facilitating a lessee‘s need to sell its industrial premises in the secondary market and ensuring the lessee deploys the land towards the purpose that JTC allocated it for.
Industry players believe the move will dampen secondary market transactions for landed factories on JTC-leased sites and thus hit industrial property brokers.
JTC leases land chiefly to end-user industrialists to build their facilities. After a lease assignment prohibition period, the industrialist may sell the property to either another end-user; or a third-party facility provider, subject to the industrialist leasing back the property as an anchor tenant for a minimum occupation period (MOP).
This Sale and Leaseback Scheme is one of the schemes under which JTC allows a third-party facility provider to be its lessee. Another is the Third-Party Build and Lease Scheme, where a property fund or developer agrees to build a customised facility for an end-user, to whom it leases the building for an MOP. Both schemes are aimed at helping industrialists to offload assets and lighten their balance sheets.
Before Nov 15, new JTC lessees (both industrialists and third-party facility providers) were not allowed to assign (sell) their premises until they had fulfilled the investment period (the duration of construction of the industrial facility and installation of plant and machinery). Typically, the investment period spans three years.
Following the policy revision, JTC has lengthened this “assignment prohibition period” by five years.
As for those buying JTC facilities from the secondary market, the ban on selling the property used to be three years from the date of assignment previously. Effective Nov 15, the sale-ban period is five years in the case of properties with up to 30 years’ remaining lease, and 10 years for properties that have more than 30 years’ balance lease.
However, an industrialist that needs to offload its property may still do so under the Sale and Leaseback Scheme, subject to fulfilling an MOP. This used to be three years from the assignment date. From Nov 15, this period has been lengthened to five years from the assignment date in the case of properties on sites with up to 30 years’ balance lease, and to 10 years from the assignment date for properties with more than 30 years’ remaining lease.
JTC has also increased the MOP for new anchor tenants in the Third-Party Build and Lease Scheme. Before Nov 15, this was three years following the issue of the Temporary Occupation Permit (TOP) of the building. With the revised policy, JTC has lengthened the MOP to five years after the investment period.
The revisions in the assignment prohibition period and MOP are applicable to all new and renewed contracts for JTC facilities on lease, as well as new assignments, issued from Nov 15. Existing contracts will not be affected.
Another change is that all owners of industrial premises on JTC-leased sites with less than five years’ balance lease are no longer allowed to sell them. Previously, the sale ban applied to leases below three years.
JTC said that based on its engagement with third-party facility providers, they are generally receptive of the longer prohibition period for lease assignments as well as the longer MOP for anchor tenants. “Third-party facility providers such as Reits are long-term investors, and hence the extended prohibition period is not an issue with them,” it added.
Source: Business Times –6December 2013
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