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Benefitting From China’s Economic Growth
By: Xavier Lim
Articles (51) Profile

The People’s Bank of China formally announced plans to loosen the yuan’s de-facto peg to the dollar on 19 Jun-10 in Beijing, less than a week before a meeting of global leaders from the Group of 20 major economies. However, it has ruled out a one-time revaluation and said any strengthening of its currency would be gradual.

As a pure-play China commercial real estate investment trust, Treasury China Trust (TCT) will most definitely benefit from the aforesaid policy, which appears poised to strengthen its net asset value in terms of currency exchange. TCT is a Singapore-based business trust established with the principal objective of owning and investing in commercial real estate located in Greater China, with its initial property portfolio comprising three completed properties, namely City Center, Central Plaza and Treasury Building, and two development sites, City Center Extension and Beijing Int’l Logistics Park. TCT has an estimated net asset portfolio value of US$1.3b.

TCT is a total return vehicle enjoying significant competitive advantage over traditional REIT structures while operating at a lower risk profile than pure development vehicles. Richard Barrett, Chairman of the Trustee Manager commented that the Asian listing is for the long-term benefit of unitholders and may provide an opportunity for TCT units to trade closer to its net asset backing. “We are confident of delivering total return to our unitholders over the medium term underpinned by the demand from tenants for high quality, well-managed commercial property in China and our internal development pipeline,” he further elaborated.

TCT dived into the red in FY09 due to the reduction in occupancy across the portfolio. This was caused by the Shanghai office real estate market experiencing a downturn in late 2008 which has extended through 2009. Nevertheless, TCT believes that with China’s rapid economic growth and unprecedented pace of urbanisation will continue to support the momentum for the expansion of China’s real estate sector, particularly in cities such as Shanghai and Beijing, it is able to benefit from it. TCT is projecting a tax-free annualized distribution yield of 5.8%.

Armed with an arsenal of investment knowledge, Xavier is the Senior Research Editor at Shares Investment.

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