Lendlease Global Commercial Reit bags 10% shares in Parkway Parade Partnership for S$90.5 million

LENDLEASE Global Commercial Reit (LReit) has taken over a 10 per cent share of Parkway Parade Partnership (PPP) for S$90.5 million.

The amount was based on a S$1.38 billion agreed market value of the 291 strata lots PPP owns in Parkway Parade, an integrated office and retail development in Marine Parade.

PPP holds an indirect 100 per cent interest in the 291 strata lots, which represent 77.09 per cent of the lots’ total share value.

The seller is Lendlease Asia Investments Pty Limited, a direct wholly-owned subsidiary of the real estate investment trust’s (Reit) sponsor.

The S$90.5 million estimated acquisition cost comprises a purchase consideration of S$88.9 million, and a S$0.9 million acquisition fee payable in LReit units to the manager. Estimated professional and other fees and expenses incurred or to be incurred by LReit in connection with the acquisition will amount to S$700,000, the manager further disclosed in a bourse filing on Monday (Jun 5). Stamp duty alone will cost S$200,000, it added.

Nevertheless, LReit’s manager said the acquisition benefits unit holders because it grants LReit flexibility to raise its stake in the properties over time through pre-emptive rights, and leads to distribution per unit (DPU) accretion on a pro forma basis.

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For illustration, it stated in the filing that, assuming that the acquisition had been effected at the beginning of the reporting period on Jul 1, 2021, LReit’s DPU for the 2022 financial year would have risen to 4.89 Singapore cents, up from 4.85 cents before the acquisition.

The higher DPU on a pro forma basis is a result of the acquisition being made at a price reflective of the cash flows which the PPP interest is expected to generate, combined with the debt-financing plan implemented by the manager, the manager pointed out.

LReit unitholders also stand to gain from greater income diversification with an increased exposure in the resilient suburban retail segment, it added.

The manager also said the acquisition is in line with its principal investment strategy to invest, directly or indirectly, in a diversified portfolio of stabilised, income-producing real estate assets located globally.

Apart from the acquisition fee to be paid in the form of units, the total acquisition cost has been financed through debt facilities and LReit’s internal resources, the manager said.

Upon the completion of the acquisition, the pro forma gearing of LReit is 40.4 per cent as at Dec 31, 2022.

LReit units closed flat at S$0.67 on Monday (Jun 5), before the announcement.