Lendlease Global Commercial REIT acquires stake in Jem for SGD45 million

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Lendlease Global Commercial REIT (LREIT) has acquired a 5% equity stake in Lendlease Asian Retail Investment Fund 3 Limited, which indirectly holds a 75% interest in Jem.

The stake has been acquired from Lendlease International Pty Limited at a purchase consideration of approximately SGD45.0 million (USD33 million).

Jem is an integrated office and retail development located in Jurong Gateway, close to what has been dubbed as Singapore’s second central business district.

It features retail space spread across six levels, and 12 levels of office space fully leased to the Ministry of National Development (MND) of Singapore.

As at 30 June 2020, Jem has a net lettable area (NLA) of about 892,000 square feet.

Its retail and office space by NLA account for 65% and 35%, respectively.
Anchor tenants within the retail space include FairPrice Xtra, Cathay Cineplexes and Don Don Donki.

Other major retail tenants include Koufu, Uniqlo, H&M and Courts, with IKEA slated to open in 2021.

Rationale

A key benefit of the investment is to provide LREIT with pre-emptive rights, which all existing investors have in the fund, said the REIT’s manager.

“This may provide opportunities for LREIT to potentially increase its strategic stake in the fund, and indirect interest in Jem, over time if other investors divest their interests in the fund”, the REIT’s manager added.

The REIT has financed the acquisition through internal resources and debt facilities.

The pro forma gearing of LREIT post the acquisition is 36.9% as at 30 June 2020.

“Jem is strategically located in Singapore’s second central business district and has direct access to the MRT interchange and other transport amenities”, said Kelvin Chow, CEO of the REIT’s manager.

“The acquisition of the 5.0% equity stake in the fund aims to benefit LREIT and its unitholders through further income diversification based on the office and suburban retail components of Jem”, he added.

The acquisition is accretive to LREIT’s distribution per unit based on the assumption that the acquisition had been effected on 2 October 2019, and LREIT held and operated Jem through 30 June 2020.

The remaining 25.0% interest in Jem is held by another private fund managed by Lendlease Investment Management.

Post-acquisition, the vendor holds approximately 15.1% interest in the fund, with the remaining interest held by unrelated third-party investors.

The total estimated cost of the acquisition is approximately SGD46.3 million, including costs, and the acquisition fee of SGD.09 million that will be paid to the manager.

LREIT was last done on the Singapore Exchange at SGD0.67, which implies a distribution yield of 4.5% according to data on the Singapore REITs table.

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