GLOBAL - UK-listed Indian real estate investor Unitech Corporate Parks (UCP) says it will consider offloading income-producing assets via a REIT after issuing a mixed forecast for the three cities it targets for investment.
The company, listed on the London Stock Exchange's AIM and counting US institutional investor TIIA-CREF among its major shareholders, said today it would "actively pursue ways of monetising assets", possibly via a Singapore REIT-type structure.
While the focus will be on selling income-producing assets, chairman Aubrey Adams nonetheless said he would emphasise caution against trying to sell immature developments at prices that did not reflect their long-term value.
It today posted group rental income of £9.9m (€11.8bn) for the six months to date - an annualised increase of 44% - and a 14% increase in the value of its portfolio to £198.8m. Its development pipeline is valued at £331.3m, mainly invested via joint ventures.
Describing the Indian real estate market as "challenging", Adams attributed a quarter-by-quarter macro slowdown to weak global economic conditions. Early momentum in the first couple of quarters amid bullish developer confidence in some sub-markets dissolved in Q3 as central bank tightening resulted in increased borrowing costs and a 50% drop in supply.
At the same time, Q3 occupancy fell 33% as tenants re-evaluated expansion plans, although sub-markets such as Gurgaon proved largely immune to this trend, with an increase in their leasing activity over the past two quarters.
In contrast, Kolkata saw dampened demand in Q3, despite the government earmarking its periphery for IT Industry and residential development. Despite "huge" anticipated supply into 2012, rental values are expected to remain stable.
In contrast, rental in Noida will remain under pressure in the short and medium term. Although he said the nascent manufacturing hub would emerge as "the next big office destination" and "a viable alternative to Gurgaon", Adams acknowledged extensive variation in rental and a likely glut of supply in the short term as stalled development projects recommence.