Indiabulls trust clarifies issues raised in BT column

Singapore

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

The trustee-manager made this point in a clarification filed late on Tuesday with the Singapore Exchange (SGX) in response to a Hock Lock Siew column in The Business Times ("What went wrong with Indiabulls Property Investment Trust?", Aug 15).

The column had said that from the time IPIT was listed in June 2008 "to its impending delisting sometime soon", the business trust 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, IPMT gave reasons for the fall in IPIT's NAV from S$1.18 per unit on Sept 30, 2008 - the first post-listing date when financials were available - to S$0.32 per unit on June 30, 2016, the latter after adjusting for a 5:1 share consolidation that took place in August 2015.

Citing the global financial crisis that came months after IPIT's listing, the trustee-manager said that market conditions in India deteriorated and rental rates for office in space in Mumbai dropped significantly. Currently, 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, said IPMT.

It added that vacancy rates in the Mumbai office market also increased and it took longer for IPIT to rent out its properties versus what had been anticipated earlier. Another factor was foreign exchange. The Indian rupee "has depreciated deeply" since IPIT's listing and the Sing dollar is now 60 per cent higher.

Also, 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." The trustee-manager said it was attracted by the prospects of a listing on SGX and took 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.

Read more: Need to probe Indiabulls trust