Lendlease REIT has finally announced it’s intention to acquire JEM, incorporating it into it’s portfolio. This is a pretty big move as it will become the flagship asset of the REIT, surpassing 313@Somerset.
This is not a surprising move. Lendlease REIT has been increasing it’s stake in JEM since 2020, which is one of the local assets of the sponsor. At the moment, the REIT holds a 31.8% interest in the property.
Westies will know the integrated development well. It’s a prominent building which is situated right smack in the middle of Jurong East, next to the MRT station. Unbeknownst to most, it also includes a office component as well.
Let’s take a closer look at JEM, and see what lies under that glitter.
It does seem like Lendlease has found a winner. The property has good operating metrics, including full occupancy, 4.4% NPI, and a long WALE of 5.9 years. Being one of the largest malls in the west also places it in good stead with upcoming population centers such as the Tengah district.
Part of the reason why the WALE is so long is because of one of it’s key tenants, the Ministry Of National Development. MND has fully leased JEM’s office component for a master lease of 30 years, subject to rent reviews every 5 years.
JEM is also expected to benefit from future developments such as the Jurong Lake & Innovation district, as well as the upcoming new town.
A New & Improved REIT
Barring any future COVID-19 impacts, LREIT shareholders should be able to enjoy a DPU boost of around 10% post-acquisition. The REIT’s portfolio will also lean towards SG suburban retail, which has traditionally been more stable during volatility.
Other proclaimed benefits include a larger market cap, slightly longer portfolio WALE, and a more efficient structure for taxation purposes. While NAV stays the same, it’s gearing is expected to go up to about 40%.
In order to raise funds, management is contemplating between a private placement, a preferential offering of new shares, or a combination of both. Assuming the EGM goes through, we can expect the acquisition to be completed by the 15th May.
With this acquisition, Lendlease REIT seems to be making the right moves. The property will boost the REIT’s overall portfolio quality and operating metrics.
We’ll continue to keep our fingers crossed for Parkway Parade & Paya Lebar Quarter in the (hopefully!) near future.