Indiabulls Properties Investment Trust's manager clarifies questions raised in BT article

INDIABULLS Property Management Trustee Pte Ltd, the manager of Indiabulls Properties Investment Trust (IPIT), said market conditions that were beyond its control are primary drivers of the decline in IPIT's net asset value (NAV).

The point was made in a clarification filed late on Tuesday on Singapore Exchange (SGX) in response to a Business Times article, "What went wrong with Indiabulls Property Investment Trust", published on Aug 15.

The article said from the time IPIT was listed "to its impending delisting sometime soon", the company has brought nothing but grief to its unitholders and that SGX "should scrutinise the entire chain of events associated with IPIT's eight-year existence on the mainboard with a view to improving its quality control".

On Tuesday night, IPIT gave reasons for the fall in its NAV from S$1.18 per unit on Sept 30, 2008, to S$0.32 per unit on June 30, 2016.

It said market conditions in India deteriorated following the listing of IPIT on SGX in June 2008 and rental rates for office in space in Mumbai dropped significantly. This was followed by the start of the global financial crisis.

Due to the state of the Mumbai office market, the average rent now achieved across IPIT office properties is about 145 rupees (S$2.90) per square foot per month - 50 per cent less than what was initially anticipated - while quite a few tenants have rentals that are about 60 per cent less than what was initially anticipated at the time of IPIT's listing.

Vacancy rates in the Mumbai office market have risen and it took longer for IPIT to rent out its properties versus what had been anticipated earlier, the manager said.

Currency exchange was another reason. The Indian rupee "has depreciated deeply" since IPIT's listing and the Sing dollar is now 60 per cent higher.

Finally, the rights issue IPIT carried out at end-2009 had diluted its NAV by about 30 per cent. The rights issue was fully underwritten and fully taken up.

"As for the decision to list IPIT on the SGX-ST in June 2008, we would like to explain that the economic environment and the Mumbai office market were different then as compared to the situation now. The listing of IPIT was fully underwritten and all of the units in IPIT which were available for subscription by investors were fully taken up.

"We were attracted by the prospects of a listing on the SGX-ST and took up the opportunity to do so. The liquidity in IPIT units has been quite low for several years now and hence, the reduced interest of institutional investors in the security. The market price of IPIT units on the SGX-ST is however something we do not have control over and therefore we are not able to comment on it," it said.