SGX-listed Lendlease Global Commercial REIT has agreed to pay S$337.3 million ($254.7 million) to boost its slice of a western Singapore mixed-use development, following a recent fundraising.
LREIT’s second major investment since its 2019 IPO will see the real estate investment trust increase its effective interest in Jem, a Jurong-area office-retail complex, to a maximum of 31.8 percent, the trust’s manager said in a Monday release. The property is owned by investment funds managed by LREIT’s sponsor, Sydney-based developer Lendlease.
Under the terms of the deal, LREIT will acquire a 53 percent stake in Lendlease Jem Partners Fund (which owns 25 percent of Jem), while raising its existing 5 percent stake in Lendlease Asian Retail Investment Fund 3 (which owns 75 percent of Jem) to as much as 24.8 percent.
“The proposed acquisition is in line with our strategy of continually optimising LREIT’s portfolio and demonstrates our commitment to achieve sustainable returns and growth,” said Kelvin Chow, chief executive of the trust’s manager. “The acquisition price is attractive for a high-quality asset like Jem.”
Directly connected to Jurong East MRT station, Jem features a six-storey shopping mall and 12 levels of office space across 1,164,336 square feet (108,170 square metres) of gross floor area and 892,148 square feet of net lettable area. The deal values the property at S$2.077 billion, or S$2,328 ($1,758) per square foot of NLA.
The asset is on a leasehold of 99 years dating from 27 September 2010 and has 99.7 percent committed occupancy with a weighted average lease expiry of 6.5 years. Key tenants include Singapore’s Ministry of National Development, Swedish furniture chain IKEA, hypermarket FairPrice Xtra and fashion retailers H&M and Uniqlo.
LREIT expects a net property income yield of 3.9 percent from the acquisition, which is being financed in part by S$200 million in perpetual securities issued earlier this month.
“Following the acquisition, the enlarged portfolio size of $1.8 billion will have a diversified asset base and an increased exposure to more resilient suburban retail and decentralised office segments,” Chow said. “The single largest asset by aggregate value of the enlarged portfolio would also have decreased from 67.6 percent to 55.1 percent. The proposed acquisition will therefore enhance LREIT’s income diversification.”
LREIT’s largest portfolio asset is a 288,277 square foot mall, [email protected], on Singapore’s Orchard Road. The trust’s other big holding is the 985,967 square foot Sky Complex of three office buildings in Milan, accounting for roughly 30 percent of the portfolio.
Chairman’s Maiden Deal
Lendlease launched LREIT in a S$1 billion IPO in September 2019. Since the listing, the trust’s only other investment of note was its purchase of a 5 percent stake in Jem through a S$45 million purchase of a stake in Lendlease Asian Retail Investment Fund 3 in a deal announced last October.
In May, LREIT announced that it would raise S$200 million by issuing the perpetual securities at a 4.2 percent interest rate, in a moved that tipped off market analysts that a new investment could be in the works.
The enlarged stake in Jem is the first deal under LREIT’s new chairman, Ng Hsueh Ling, who took the helm on the first of this month. A former chief executive of Keppel REIT Management, Ng succeeded Tony Lombardo as chairman after he was picked to become Lendlease’s group CEO in February of this year.
One of Singapore’s largest suburban malls, Jem was ordered closed from 23 May amid fears of COVID-19 transmission. The mall underwent deep cleaning and reopened this past Sunday to reportedly thin crowds.