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Lendlease REIT is the Latest SGX Darling, But Why Isn’t Paya Lebar Quarter In It?

lendlease global commercial reit

I haven’t been to the new Paya Lebar Quarter, but if reports from our editor Val (who has been there like 5 times already) are to be believed, PLQ is amazing.

If you, too, are impressed by Paya Lebar’s newest mixed-use development, then you’d be interested to know that PLQ’s developer, Lendlease, has just released a REIT on the Singapore stock market.

I’m not advising you for or against buying it, but there are a few things you should know about the Lendlease REIT before you decide.

 

First, what’s a REIT? 

To recap, a REIT (real estate investment trust) is a type of Singapore stock that can be bought and sold on SGX. 

You know how shareholders of SGX-listed companies become part-owners of those companies? Well, for REITs, the shareholders become part-landlords of whatever properties are included in the trust.

So when you invest in a REIT, it’s slightly different from investing in the company.

For example, when you buy CapitaLand Mall Trust, you’re not really investing in CapitaLand as a whole. You’re investing in just the CapitaMalls listed in that REIT. 

Although the REIT may or may not contain ALL the CapitaLand malls, and it may even have non-shopping mall properties in there, it’s still ultimately a retail REIT. 

Not all REITS are for retail properties — some are focused on industrial parks, some on premium office space, and still others focus on healthcare or hotels. Also, not all REITs contain just Singapore properties. Some also include properties in overseas countries such as China, Indonesia and the UK.

Due to their amazing performance of late, REITs are becoming quite a favourite among small-time investors. According to the Straits Times, Singapore REITs have generated in total an insane 22.9% in returns from Jan to Aug 2019 alone.

 

What exactly is Lendlease?

To start with, Lendlease is a big Australian construction company and property developer that’s listed on the Aussie stock market. 

You can think of them as somewhat like the CapitaLand or MapleTree of Down Under, except Lendlease doesn’t do much domestically (in Australia). Instead, they focus a lot on projects overseas — including in Singapore, of course. 

Apart from the fabulous new Paya Lebar Quarter, Lendlease is also behind [email protected], JEM and Parkway Parade.

Elsewhere, Lendlease has also clinched exciting projects, most notably to build a US$15 billion residential/retail property in Silicon Valley for Google. Huat ah!!! (Also, I guess “Google Home” will have a new meaning?)

Lendlease seems to specialise in “urban regeneration” — developing large areas into integrated complexes along the lines of Paya Lebar Quarter, rather than just creating standalone buildings.

Some of the notable upcoming mega-developments in its portfolio are the Barangaroo South and Melbourne Quarter in Australia, Southbank in the US and TRX in Malaysia.

 

What is in the Lendlease REIT?

You’re probably wetting your pants thinking that you can be part of the new Google housing development in Silicon Valley, or at least part-landlord at the glittering new Paya Lebar Quarter.

Sadly, most of Lendlease’s high-profile projects are not included in the Lendlease REIT.

Based on the official prospectus, the Lendlease Global Commercial REIT contains just 2 properties: [email protected] in Singapore and Sky Complex in Milan, Italy.

The former needs no introduction, while the latter is mainly leased to Sky Italia as their HQ (you might even have streamed a football match or two on its subsidiary, Sky Sport).

However, the lack of other superstar local projects, such as Paya Lebar Quarter, JEM and Parkway Parade is quite disappointing to local retail investors.

Plus, can it really be called a “global commercial REIT” when it covers just 2 countries!?

 

Why is Paya Lebar Quarter not in the Lendlease REIT?

This question has been on everybody’s lips, but the answers given by Lendlease are rather vague.

What I gather from this Business Times interview is that Lendlease’s other shopping malls are not available for the public, because they are currently held by private investors who want to continue sitting on their goldmines.

As an example, Lendlease currently owns only 30% of the super-hot Paya Lebar Quarter, while the other 70% is owned by the Abu Dhabi Investment Authority.

I’m guessing it won’t be too easy to get the UAE oil barons to let go of their share of PLQ…

However, in the interview, the chairman of the Lendlease REIT did say that “hopefully, over time” the current private investors of Paya Lebar Quarter, JEM, etc. will release their hold on those malls and use the REIT as the “exit vehicle”.

Given that this person said both “hopefully” and “over time”, I’m guessing he means (a) chances are slim and (b) it will be quite a long time before this happens.

 

Still, the Lendlease REIT share price has gone up

Since making its debut on SGX on 2 Oct 2019, the new Lendlease REIT has been quite the belle of the ball. Both investment fund houses and regular retail investors scrambling for a piece of that pie. (Sorry, I didn’t mean to compare women to pastry.)

The Lendlease REIT IPOed at $0.88 per share. One day 1 alone, its share price rose to $0.94 and has stayed around there ever since. That’s a significant increase of about +6.8%.

Of the shares Lendlease released to retail investors like you and me, performance was spectacular. Lendlease offered 22.7 million units, but Singaporean investors applied for 330.4 million units, which means it was almost 15X oversubscribed! Siao.

But the real mark of confidence here is how institutional investors rushed to snap up the Lendlease REIT shares too. These include big names like BlackRock, Lion Global Investors and (gasp) Temasek Holdings’ Fullerton Fund Management.

So despite the lack of diversification and the disappointing lack of more superstar malls, it seems like quite a lot of people think the Lendlease REIT makes a sound investment after all.

What do you think of the Lendlease REIT? Tell us what you think.

 

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