Cambridge – BT

CIT seeks conversion to become Syariah Reit

With change, it will be the first such listed Reit here

CAMBRIDGE Industrial Trust (CIT) is seeking unitholders’ approval to convert the real estate investment trust into a Syariah-compliant Reit to capitalise on the growing wealth in the Middle East and cultivate a new investor pool when raising capital or issuing debt.

‘In the long term, the diversification and broadening of the investor pool may deliver more cost-efficient capital and provide optimal funding options for CIT’s growth plans,’ CIT’s manager, Cambridge Industrial Trust Management Ltd (CITML), said in a release to the SGX yesterday evening.

Upon conversion, CIT will become Singapore’s first publicly-listed Syariah-compliant Reit and the world’s first listed Syariah-compliant industrial Reit, CITML said.

The fundamental difference between a Syariah-compliant Reit and a conventional Reit is in ensuring that the revenue of the Syariah-compliant Reit is derived from halal or permissible activities and its funds are managed in accordance with Syariah principles, CITML noted.

CIT has a portfolio of 43 properties valued at $966.8 million. The Islamic Bank of Asia has been appointed to act as Syariah adviser for the proposed conversion. HSBC will advise on, and arrange, a Syariah-compliant financing solution for CIT to refinance its existing interest-bearing loans. A fundamental tenet of a Syariah-compliant Reit is that it should not pay or receive interest. CIT currently has $369.3 million of interest-bearing loans.

The trust’s cash and liquid assets will also have to be invested in Syariah-compliant products and CITML is reviewing the alternatives in this regard.

‘A due diligence review on the use by the tenants of the properties in the CIT property portfolio has been undertaken to ascertain whether the tenants operate permissible activities. We are pleased to advise that 98.86 per cent of the rental income received by CIT has been derived from permissible sources,’ CITML said.

After conversion of CIT to a Syariah-compliant Reit, the usage of the properties by the trust’s new tenants must be fully Syariah-compliant.