Capital markets to take up urban redevelopment

Wednesday, September 28, 2011

THE Urban Development Corporation (UDC) will list properties on the Jamaica Stock Exchange as part of an aggressive move towards the capital markets this financial year.

It means individuals will be presented with the opportunity to purchase equity stakes in revenue earning properties owned by the UDC.

"It's already in the works and we have identified properties owned by the UDC which will be packaged and floated on the stock exchange," said UDC director of economic development and community integration, Gordon Summers.

UDC holdings include the waterfront properties of Oceana Hotel and Ocean Towers in downtown Kingston.

What's more, the organisation plans to float a real estate investment trust (REIT).

A REIT is a security -- which sells like a stock in a listed company -- that offers investors participation in the real estate market, whether through buying equities or mortgage-backed instruments. With this mechanism, the UDC will raise hundreds of millions of dollars for development, including the construction of a new parking garage in downtown Kingston.

"We are working with a REIT operator in order to put the package together," said Summers.

"The REIT operator is going to be responsible for raising all the capital neccessary to construct the building while the UDC's contribution to the transaction will be the value of the underlying property and the soft cost that will go into the development of the design, etc," he said at the Observer's most recent Monday Exchange meeting.

Finance Minister Audley Shaw gave the go-ahead for the UDC to move towards raising funds on the capital market.

It's part of a broad strategy by the organisation to allow the private sector to drive development and represents a policy shift from the traditional one whereby the public sector would acquire lands, develop properties and finance projects.

"Those days are over because, certainly in Jamaica, the public sector doesn't have the capacity to borrow as it did in the past," said UDC general manager Joy Douglas.

"The corporation will be seeking to foster closer links with the private sector so that it is private capital and not public capital that will actually secure the physical developments that are going to be required in areas," she said.

The UDC also said it's looking at using public/private sector partnership (PPP) to fund very large projects.