Lendlease REIT’s $153M Offering to Fund Singapore Mall Buy Flops With 62% Take-Up

A preferential offering by Lendlease Global Commercial REIT suffered a rare setback on the Singapore Exchange late last week, with investors taking up just 62.2 percent of the S$196.6 million ($153 million) placement in the face of ongoing uncertainty caused by war in the Middle East.

Underwriters and the Singapore-listed trust’s Australian sponsor absorbed the balance of the offering after valid acceptances accounted for 53.05 percent of the units on offer, with excess applications bringing total subscriptions to 62.19 percent by the close of the offering on 18 March, the REIT’s manager said Monday in a filing. The rest of the units will be placed through an underwriting by lenders DBS, OCBC and UOB, ensuring that the full amount is raised despite the weak take-up.

The non-renounceable offering was launched to fund Lendlease REIT’s acquisition of a 30 percent interest in Singapore’s PLQ Mall from Lendlease, the ASX-listed builder and fund manager. The deal, which includes assumed debt and values the asset at S$885 million, is set to give Lendlease REIT full control of the shopping centre located at the Paya Lebar MRT interchange.

The REIT’s SGX-traded units have slid nearly 7 percent in price to S$0.56 since the offering plan was made public on 25 February, with analysts pointing to market turmoil as working against the placement. 

“Investors are wary of deploying new capital considering the uncertainty resulting from the war in the Middle East,” RHB Singapore analyst Vijay Natarajan told Mingtiandi. “We see challenges in both primary and secondary fundraising in the near-term until this fog of war clears and greater clarity on outlook emerges.”

Trust Takes Hits

Lendlease REIT’s manager said the offering “successfully raised gross proceeds of approximately S$196.6 million” and highlighted continued support from the sponsor, which subscribed in full to its pro rata entitlement.

PLQ Mall anchors Lendlease’s Paya Lebar Quarter mixed-use development in the Geylang area and features more than 200 retail, dining and entertainment outlets, including Uniqlo, Haidilao and Shaw Theatres. The 2019-built project has 88 years left on its 99-year leasehold tenure.

Complete ownership of the mall is expected to enable Lendlease REIT to fully refinance in-place borrowings, resulting in meaningful interest savings, according to the manager. The deal also allows the sponsor to recycle capital as it continues to execute on a multi-year overhaul aimed at scaling back overseas exposure and focusing on domestic operations.

Lendlease REIT’s units have weakened on the SGX since early February, when the trust’s six-month results showed a year-on-year drop in gross revenue and net property income after the S$462 million divestment of the Jem office block in western Singapore.

A second round of selling followed the late-February announcement of the PLQ Mall buy and associated preferential offering, with the trust recording S$21 million in net institutional outflows during that week alone. The discounted pricing of the new units pulled the market price towards the issue level, a common dynamic in capital raisings as investors adjust for dilution.

Market Under Pressure

The muted response to Lendlease REIT’s equity raising comes as Singapore’s broader REIT market shows signs of strain, with even high-profile listings struggling to sustain momentum after launch.

UI Boustead REIT, which completed Singapore’s largest IPO of the year earlier this month, fell 8.5 percent on its trading debut and opened below its S$0.88 offer price, highlighting fragile investor sentiment despite strong pre-listing demand. The units closed at S$0.80 on Monday.

The S-REIT market had been enjoying a long-awaited recovery after NTT DC REIT in July last year raised $773 million in the biggest debut of a listed trust on the SGX in a decade. That IPO was followed in September by the S$771 million listing of rental housing specialist Centurion Accommodation REIT, with the trust being 16 times subscribed and closing its first day of trading up more than 9 percent from its opening price.

NTT DC REIT closed Monday at $0.91, down 4.7 percent since its first trading day, while Centurion REIT finished at S$1.14, up 17.5 percent all-time.