Goodman Exit Seen As Chance For A-Reit Expansion

Source : The Business Times, March 13, 2008

IN A move that could pave the way for Ascendas Real Estate Investment Trust (A-Reit) to finally expand overseas, Australia’s Goodman Group has exited the trust.

Goodman is selling its 40 per cent stake in the entity that manages A-Reit as well as a 6.28 per cent stake in the trust itself. The latter transaction is for $158.16 million or about $1.90 per A-Reit unit. The counter closed at $1.95 yesterday, down two cents.

The buyers in both transactions are fully owned units of Ascendas Pte Ltd, which will gain full control of the Reit manager, which will be renamed from Ascendas-MGM Funds Management to Ascendas Funds Management (S).

Ascendas’ stake in A-Reit will also go up to 26.77 per cent.

An announcement last night put an end to speculation late last year that Goodman would exit A-Reit. Market watchers expected Goodman to sell its stake in the A-Reit manager when the Australian group was tipped to land the job of managing a proposed Reit that will hold some properties being divested by JTC Corp.

The strategy would have been to remove the conflict of interest of Goodman having an interest in two Singapore industrial Reit managers potentially competing for the same assets and tenants.

However, JTC eventually gave its Reit management job to Mapletree Investments in February. Although Goodman did not clinch that deal, some market watchers nonetheless welcome Goodman’s exit from A-Reit’s manager, as it paves the way for A-Reit to invest in properties outside Singapore.

A-Reit has never expanded overseas because of an understanding among the shareholders of the Reit manager to avoid conflict of interest, analysts say.

Goodman Group CEO Greg Goodman possibly hinted almost as much when he told BT last night that ‘we have operations in the region, and so does Ascendas’ and parting ways will minimise mutual conflict of interest.

Another important reason Goodman is exiting its involvement with A-Reit’s manager is because ‘our approach is that we prefer to have full control of any Reit manager we’re involved with, and that’s not possible in this case’, Mr Goodman said.

However, the group is not bidding goodbye to the Singapore industrial property market.

‘Goodman will re-enter the Singapore market at some point. We know this market well and we like it,’ Mr Goodman said.

The group could invest in the Singapore industrial property scene again, possibly through its wholesale property funds, or development activity.