Lendlease Global Reit proposes to raise stake in Jem to up to 31.8%
LENDLEASE Global Commercial Reit has proposed to raise its stake in Jem mall to up to 31.8 per cent for a purchase consideration of between S$204.1 million and S$337.3 million, the manager said on Monday.
The Reit's trustee has entered into sale-and-purchase agreements with various vendors to acquire stakes in two private funds, Lendlease Jem Partners Fund Limited (LLJP) and Lendlease Asian Retail Investment Fund 3 Limited (ARIF3). They own 25 per cent and 75 per cent of Jem, respectively.
Lendlease Global Reit currently holds an indirect interest in Jem through its 5 per cent interest in ARIF3, acquired in October 2020.
On a pro-forma basis, assuming the acquisition was effective at the end of the first half of fiscal 2021, it would have boosted the Reit's DPU by 3 per cent to 2.41 Singapore cents, from 2.34 cents. If the proposed deal was completed on Dec 31, 2020, net asset value per unit would have slid to 0.84 Singapore cents from 0.85 cents.
As part of the proposed acquisition, the Reit's trustee will acquire a 53 per cent interest in LLJP for S$159.1 million from third-party vendors. The trustee will also acquire a 5 per cent interest in ARIF3 from Lendlease International for S$45 million.
It may raise its stake in ARIF3 to 19.8 per cent from other third-party investors for S$178.2 million, assuming the amount paid to these investors does not exceed ARIF3's net asset value per share.
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If the trustee acquired 19.8 per cent interest in ARIF3, the total acquisition cost will be S$347.1 million. The total acquisition cost comprises the purchase consideration of up to S$337.3 million, subject to post-completion adjustments, up to S$3.4 million acquisition fee payable to the manager, as well as up to S$6.4 million in other fees and expenses.
Post-completion, Lendlease Global Reit is expected to hold an effective 20.8 per cent to 31.8 per cent indirect interest in Jem.
The acquisition is based on Jem's agreed property value of about S$2.08 billion, at a discount of around 0.4 per cent to S$2.09 billion - the higher of two independent valuations conducted on Jem by the manager and trustee.
The manager appointed CBRE, which valued Jem at S$2.06 billion, while the trustee appointed JLL, which valued Jem at S$2.09 billion.
The manager said the proposed deal will be funded through debt, or a combination of debt and proceeds from the issuance of perpetual securities. The proposed acquisition is also conditional on unitholders' approval and is expected to complete by Sept 30, 2021.
Kelvin Chow, chief executive of the manager, said the proposed acquisition will enhance Lendlease Global Reit's income diversification.
"The enlarged portfolio size of S$1.8 billion will have a diversified asset base and an increased exposure to more resilient suburban retail and decentralised office segments," he said.
Moreover, the single largest asset by aggregate value of the enlarged portfolio would also have decreased to 55.1 per cent from 67.6 per cent.
Jem is an integrated office and retail asset located at 50 and 52 Jurong Gateway Road, next to Jurong East MRT Station and bus interchange. It has six levels of retail space and 12 levels of office space, which has been fully leased to the Ministry of National Development of Singapore.
The property has a leasehold of 99 years that started on Sept 27, 2010, a gross floor area of about 1.2 million square feet (sq ft) and a net lettable area of 892,148 sq ft.
Reasons for the proposed acquisition include Jem's strategic location and attractive market fundamentals, as well as the mall being a "resilient suburban asset with strong sustainability credentials".
Units of Lendlease Global Reit closed at S$0.785 on Monday, up 1.95 per cent or S$0.015.
READ MORE: Lendlease Reit's perp issue signals potential acquisition: CGS-CIMB
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