SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

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For the past 12 weeks, the 10 S-REITs recipient to the Sector’s highest net institutional inflows (proportionate to market capitalisation) included seven of the S-REIT Sector’s best performers over the period, including Keppel DC REIT which has been amongst the 25 strongest performing global REITs in the 2020 YTD. 
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These 10 S-REITs averaged a 6% total return from 9 June through to 28 August, whilst the remaining S-REITs averaged a 9% decline. The iEdge S-REIT Leaders Index generated a 3% decline over the 12 weeks, in-line with the global REIT market.  
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Sabana REIT saw the S-REITs’ highest proportionate net institutional inflows since 9 June. As the Manger reiterated on 28 Aug, the proposed ESR REIT merger offers opportunities for re-rating and for reducing the NAV discount in the long term as part of a larger, more liquid and scalable REIT, backed by a developer-sponsor.
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Globally there are more than 800 stocks that make up the REIT Sector, with a combined market capitalisation of US$1.8 trillion (S$2.4 trillion). The FTSE EPRA/NAREIT Global REIT Index represents approximately two-thirds of the S$1.8 trillion combined market capitalisation and has generated a declined a 17% decline in the 2020 year to 28 August. Like most equity benchmarks, the Index formed its post-23 March high on 9 June which coincided with the beginnings of the second wave of COVID-19 across the United States. Similarly, the iEdge S-REIT Leaders Index formed its post-23 March high on 9 June, and has since declined 3%. Over the 12 week period the S-REIT sector was recipient to S$147 million in net institutional outflows. A total of 13 trusts of the S-REIT Sector saw net institutional inflows over the 12 weeks. The 10 trusts with the highest net institutional inflows between 10 June to 28 June, proportionate to current market capitalisation included seven of the best performing REITs over the period. Together the 10 trusts generated an average gain of 6% over the 12 weeks, whilst the remaining REITs averaged a 9% decline. 
Sabana REIT saw the S-REIT Sectors’ highest proportionate net institutional inflows since 9 June. As the Manger reiterated on 28 August (click <a href="https://links.sgx.com/1.0.0/corporate-announcements/OZZOXHVNDL7FV4HU/94f78e53d56f79823f6693002a11cab7be59d2c671523099a4385830a84e4205">here</a>), the proposed ESR REIT merger offers opportunities for re-rating and for reducing the NAV discount in the long term as part of a larger, more liquid and scalable REIT, backed by a developer-sponsor. 
The table below sorts the S-REIT Sector to the highest net institutional inflows between proportionate to current market capitalisation between 10 June and 28 August 2020.

<table class="table table-striped"><tbody>
<tr>
<td>S-REIT Sector: REITS, Stapled Trusts and Business Trusts </td>
			<td>SGX Code</td>
			<td>Market Cap S$M</td>
			<td>Net Institutional Flow 10 June - 28 Aug / Mkt Cap</td>
			<td>Total Return 9 June - 28 August </td>
			<td>Total Return YTD</td>
		</tr>
<tr>
<td>Sabana REIT</td>
			<td>M1GU</td>
			<td>389.6</td>
			<td>1.00%</td>
			<td>-1%</td>
			<td>-17%</td>
		</tr>
<tr>
<td>Frasers L&amp;C Tr</td>
			<td>BUOU</td>
			<td>4607.8</td>
			<td>0.60%</td>
			<td>14%</td>
			<td>13%</td>
		</tr>
<tr>
<td>A-REIT</td>
			<td>A17U</td>
			<td>11983</td>
			<td>0.50%</td>
			<td>3%</td>
			<td>15%</td>
		</tr>
<tr>
<td>Mapletree Log Tr</td>
			<td>M44U</td>
			<td>7850.6</td>
			<td>0.40%</td>
			<td>8%</td>
			<td>22%</td>
		</tr>
<tr>
<td>SPH REIT</td>
			<td>SK6U</td>
			<td>2362.5</td>
			<td>0.40%</td>
			<td>-4%</td>
			<td>-19%</td>
		</tr>
<tr>
<td>Keppel Pac Oak REIT</td>
			<td>CMOU</td>
			<td>920.7</td>
			<td>0.40%</td>
			<td>4%</td>
			<td>-1%</td>
		</tr>
<tr>
<td>ARA LOGOS Log Tr</td>
			<td>K2LU</td>
			<td>691.6</td>
			<td>0.30%</td>
			<td>14%</td>
			<td>-6%</td>
		</tr>
<tr>
<td>Keppel DC REIT</td>
			<td>AJBU</td>
			<td>4719.4</td>
			<td>0.20%</td>
			<td>22%</td>
			<td>42%</td>
		</tr>
<tr>
<td>CapitaCom Trust</td>
			<td>C61U</td>
			<td>6333.5</td>
			<td>0.10%</td>
			<td>-10%</td>
			<td>-14%</td>
		</tr>
<tr>
<td>ParkwayLife REIT</td>
			<td>C2PU</td>
			<td>2268.8</td>
			<td>0.10%</td>
			<td>8%</td>
			<td>16%</td>
		</tr>
<tr>
<td>CDL H Trust</td>
			<td>J85</td>
			<td>1281</td>
			<td>0.10%</td>
			<td>-11%</td>
			<td>-32%</td>
		</tr>
<tr>
<td>Mapletree Ind Tr</td>
			<td>ME8U</td>
			<td>7138.6</td>
			<td>0.00%</td>
			<td>9%</td>
			<td>21%</td>
		</tr>
<tr>
<td>Ascott Trust</td>
			<td>HMN</td>
			<td>2747.3</td>
			<td>0.00%</td>
			<td>-19%</td>
			<td>-30%</td>
		</tr>
<tr>
<td>Far East H Trust</td>
			<td>Q5T</td>
			<td>1057.5</td>
			<td>0.00%</td>
			<td>-1%</td>
			<td>-24%</td>
		</tr>
<tr>
<td>Frasers H Trust</td>
			<td>ACV</td>
			<td>835.7</td>
			<td>0.00%</td>
			<td>-18%</td>
			<td>-38%</td>
		</tr>
<tr>
<td>Dasin Retail Tr**</td>
			<td>CEDU</td>
			<td>616.7</td>
			<td>0.00%</td>
			<td>-2%</td>
			<td>1%</td>
		</tr>
<tr>
<td>BHG Retail REIT</td>
			<td>BMGU</td>
			<td>295.5</td>
			<td>0.00%</td>
			<td>-9%</td>
			<td>-13%</td>
		</tr>
<tr>
<td>Mapletree NAC Tr</td>
			<td>RW0U</td>
			<td>3064.8</td>
			<td>-0.10%</td>
			<td>-4%</td>
			<td>-16%</td>
		</tr>
<tr>
<td>IREIT Global</td>
			<td>UD1U</td>
			<td>446.1</td>
			<td>-0.10%</td>
			<td>-3%</td>
			<td>-8%</td>
		</tr>
<tr>
<td>OUE Com REIT</td>
			<td>TS0U</td>
			<td>2030.5</td>
			<td>-0.20%</td>
			<td>-7%</td>
			<td>-30%</td>
		</tr>
<tr>
<td>EC World REIT</td>
			<td>BWCU</td>
			<td>550.7</td>
			<td>-0.20%</td>
			<td>-3%</td>
			<td>-4%</td>
		</tr>
<tr>
<td>Elite Com REIT GBP</td>
			<td>MXNU</td>
			<td>399</td>
			<td>-0.20%</td>
			<td>-1%</td>
			<td>N/A</td>
		</tr>
<tr>
<td>Mapletree Com Tr</td>
			<td>N2IU</td>
			<td>6395.9</td>
			<td>-0.30%</td>
			<td>-10%</td>
			<td>-18%</td>
		</tr>
<tr>
<td>Frasers Cpt Tr</td>
			<td>J69U</td>
			<td>2769.3</td>
			<td>-0.30%</td>
			<td>-5%</td>
			<td>-11%</td>
		</tr>
<tr>
<td>Soilbuild Biz REIT</td>
			<td>SV3U</td>
			<td>519.9</td>
			<td>-0.40%</td>
			<td>-1%</td>
			<td>-16%</td>
		</tr>
<tr>
<td>Keppel REIT</td>
			<td>K71U</td>
			<td>3568.9</td>
			<td>-0.50%</td>
			<td>-11%</td>
			<td>-12%</td>
		</tr>
<tr>
<td>Cromwell REIT EUR</td>
			<td>CNNU</td>
			<td>1819.5</td>
			<td>-0.50%</td>
			<td>3%</td>
			<td>-6%</td>
		</tr>
<tr>
<td>ESR-REIT</td>
			<td>J91U</td>
			<td>1361.5</td>
			<td>-0.50%</td>
			<td>-8%</td>
			<td>-24%</td>
		</tr>
<tr>
<td>Lendlease REIT</td>
			<td>JYEU</td>
			<td>749.9</td>
			<td>-0.50%</td>
			<td>-8%</td>
			<td>-28%</td>
		</tr>
<tr>
<td>Prime US REIT USD</td>
			<td>OXMU</td>
			<td>1119.3</td>
			<td>-0.60%</td>
			<td>-5%</td>
			<td>-12%</td>
		</tr>
<tr>
<td>Sasseur REIT</td>
			<td>CRPU</td>
			<td>919.1</td>
			<td>-0.60%</td>
			<td>-1%</td>
			<td>-8%</td>
		</tr>
<tr>
<td>Utd Hampshire REIT USD</td>
			<td>ODBU</td>
			<td>365.3</td>
			<td>-0.70%</td>
			<td>-8%</td>
			<td>N/A</td>
		</tr>
<tr>
<td>Lippo Malls Tr</td>
			<td>D5IU</td>
			<td>345.4</td>
			<td>-0.70%</td>
			<td>-22%</td>
			<td>-45%</td>
		</tr>
<tr>
<td>ARA H Trust USD</td>
			<td>XZL</td>
			<td>273.7</td>
			<td>-0.70%</td>
			<td>-24%</td>
			<td>-57%</td>
		</tr>
<tr>
<td>CapitaMall Trust</td>
			<td>C38U</td>
			<td>7011.3</td>
			<td>-0.80%</td>
			<td>-14%</td>
			<td>-21%</td>
		</tr>
<tr>
<td>First REIT</td>
			<td>AW9U</td>
			<td>430.4</td>
			<td>-0.80%</td>
			<td>-23%</td>
			<td>-43%</td>
		</tr>
<tr>
<td>Ascendas-iTrust**</td>
			<td>CY6U</td>
			<td>1514.7</td>
			<td>-0.90%</td>
			<td>-10%</td>
			<td>-12%</td>
		</tr>
<tr>
<td>Manulife REIT USD</td>
			<td>BTOU</td>
			<td>1588.6</td>
			<td>-1.00%</td>
			<td>-9%</td>
			<td>-21%</td>
		</tr>
<tr>
<td>Suntec REIT</td>
			<td>T82U</td>
			<td>3920.9</td>
			<td>-1.30%</td>
			<td>-11%</td>
			<td>-22%</td>
		</tr>
<tr>
<td>Starhill Global REIT</td>
			<td>P40U</td>
			<td>954.8</td>
			<td>-1.30%</td>
			<td>-24%</td>
			<td>-38%</td>
		</tr>
<tr>
<td>AIMS APAC REIT</td>
			<td>O5RU</td>
			<td>833.9</td>
			<td>-1.70%</td>
			<td>-4%</td>
			<td>-13%</td>
		</tr>
<tr>
<td>CapitaR China Tr</td>
			<td>AU8U</td>
			<td>1406.3</td>
			<td>-3.00%</td>
			<td>-14%</td>
			<td>-25%</td>
		</tr>
<tr>
<td>Average</td>
			<td> </td>
			<td> </td>
			<td> </td>
			<td>-5%</td>
			<td>-14%</td>
		</tr>
</tbody></table>
 ** note Business Trust. Source: SGX, Bloomberg, Refinitiv (Data as of 28 August 2020). Note table sort by highest net institutional buys to highest net institutional sells proportionate to current market capitalisation.

 

By comparison, the 10 trusts of the S-REIT sector that saw the highest net institutional inflow proportionate to market capitalisation following the major market lows of 23 March through to the post-low high of 9 June included First REIT, Ascendas REIT, Frasers Logistics &amp; Commercial Trust, Mapletree Logistics Trust, Soilbuild Business Space REIT, Keppel REIT, EC World REIT, Keppel Pacific Oak REIT, Ascott Trust and SPH REIT. During that period, the 10 trusts averaged a 54% Total Return compared to the remaining trusts of the S-REIT Sector gaining 45%.
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For the past 12 weeks, the 10 S-REITs recipient to the Sector’s highest net institutional inflows (proportionate to market capitalisation) included seven of the S-REIT Sector’s best performers over the period, including Keppel DC REIT which has been amongst the 25 strongest performing global REITs in the 2020 YTD.  
	 
	
These 10 S-REITs averaged a 6% total return from 9 June through to 28 August, whilst the remaining S-REITs averaged a 9% decline. The iEdge S-REIT Leaders Index generated a 3% decline over the 12 weeks, in-line with the global REIT market.   
	 
	
Sabana REIT saw the S-REITs’ highest proportionate net institutional inflows since 9 June. As the Manger reiterated on 28 Aug, the proposed ESR REIT merger offers opportunities for re-rating and for reducing the NAV discount in the long term as part of a larger, more liquid and scalable REIT, backed by a developer-sponsor.


 

Globally there are more than 800 stocks that make up the REIT Sector, with a combined market capitalisation of US$1.8 trillion (S$2.4 trillion). The FTSE EPRA/NAREIT Global REIT Index represents approximately two-thirds of the S$1.8 trillion combined market capitalisation and has generated a declined a 17% decline in the 2020 year to 28 August. Like most equity benchmarks, the Index formed its post-23 March high on 9 June which coincided with the beginnings of the second wave of COVID-19 across the United States.  Similarly, the iEdge S-REIT Leaders Index formed its post-23 March high on 9 June, and has since declined 3%. Over the 12 week period the S-REIT sector was recipient to S$147 million in net institutional outflows. A total of 13 trusts of the S-REIT Sector saw net institutional inflows over the 12 weeks. The 10 trusts with the highest net institutional inflows between 10 June to 28 June, proportionate to current market capitalisation included seven of the best performing REITs over the period. Together the 10 trusts generated an average gain of 6% over the 12 weeks, whilst the remaining REITs averaged a 9% decline.  
Sabana REIT saw the S-REIT Sectors’ highest proportionate net institutional inflows since 9 June. As the Manger reiterated on 28 August (click here), the proposed ESR REIT merger offers opportunities for re-rating and for reducing the NAV discount in the long term as part of a larger, more liquid and scalable REIT, backed by a developer-sponsor.  
The table below sorts the S-REIT Sector to the highest net institutional inflows between proportionate to current market capitalisation between 10 June and 28 August 2020.



S-REIT Sector: REITS, Stapled Trusts and Business Trusts 
			SGX Code
			Market Cap S$M
			Net Institutional Flow 10 June - 28 Aug / Mkt Cap
			Total Return 9 June - 28 August 
			Total Return YTD
		

Sabana REIT
			M1GU
			389.6
			1.00%
			-1%
			-17%
		

Frasers L&amp;C Tr
			BUOU
			4607.8
			0.60%
			14%
			13%
		

A-REIT
			A17U
			11983
			0.50%
			3%
			15%
		

Mapletree Log Tr
			M44U
			7850.6
			0.40%
			8%
			22%
		

SPH REIT
			SK6U
			2362.5
			0.40%
			-4%
			-19%
		

Keppel Pac Oak REIT
			CMOU
			920.7
			0.40%
			4%
			-1%
		

ARA LOGOS Log Tr
			K2LU
			691.6
			0.30%
			14%
			-6%
		

Keppel DC REIT
			AJBU
			4719.4
			0.20%
			22%
			42%
		

CapitaCom Trust
			C61U
			6333.5
			0.10%
			-10%
			-14%
		

ParkwayLife REIT
			C2PU
			2268.8
			0.10%
			8%
			16%
		

CDL H Trust
			J85
			1281
			0.10%
			-11%
			-32%
		

Mapletree Ind Tr
			ME8U
			7138.6
			0.00%
			9%
			21%
		

Ascott Trust
			HMN
			2747.3
			0.00%
			-19%
			-30%
		

Far East H Trust
			Q5T
			1057.5
			0.00%
			-1%
			-24%
		

Frasers H Trust
			ACV
			835.7
			0.00%
			-18%
			-38%
		

Dasin Retail Tr**
			CEDU
			616.7
			0.00%
			-2%
			1%
		

BHG Retail REIT
			BMGU
			295.5
			0.00%
			-9%
			-13%
		

Mapletree NAC Tr
			RW0U
			3064.8
			-0.10%
			-4%
			-16%
		

IREIT Global
			UD1U
			446.1
			-0.10%
			-3%
			-8%
		

OUE Com REIT
			TS0U
			2030.5
			-0.20%
			-7%
			-30%
		

EC World REIT
			BWCU
			550.7
			-0.20%
			-3%
			-4%
		

Elite Com REIT GBP
			MXNU
			399
			-0.20%
			-1%
			N/A
		

Mapletree Com Tr
			N2IU
			6395.9
			-0.30%
			-10%
			-18%
		

Frasers Cpt Tr
			J69U
			2769.3
			-0.30%
			-5%
			-11%
		

Soilbuild Biz REIT
			SV3U
			519.9
			-0.40%
			-1%
			-16%
		

Keppel REIT
			K71U
			3568.9
			-0.50%
			-11%
			-12%
		

Cromwell REIT EUR
			CNNU
			1819.5
			-0.50%
			3%
			-6%
		

ESR-REIT
			J91U
			1361.5
			-0.50%
			-8%
			-24%
		

Lendlease REIT
			JYEU
			749.9
			-0.50%
			-8%
			-28%
		

Prime US REIT USD
			OXMU
			1119.3
			-0.60%
			-5%
			-12%
		

Sasseur REIT
			CRPU
			919.1
			-0.60%
			-1%
			-8%
		

Utd Hampshire REIT USD
			ODBU
			365.3
			-0.70%
			-8%
			N/A
		

Lippo Malls Tr
			D5IU
			345.4
			-0.70%
			-22%
			-45%
		

ARA H Trust USD
			XZL
			273.7
			-0.70%
			-24%
			-57%
		

CapitaMall Trust
			C38U
			7011.3
			-0.80%
			-14%
			-21%
		

First REIT
			AW9U
			430.4
			-0.80%
			-23%
			-43%
		

Ascendas-iTrust**
			CY6U
			1514.7
			-0.90%
			-10%
			-12%
		

Manulife REIT USD
			BTOU
			1588.6
			-1.00%
			-9%
			-21%
		

Suntec REIT
			T82U
			3920.9
			-1.30%
			-11%
			-22%
		

Starhill Global REIT
			P40U
			954.8
			-1.30%
			-24%
			-38%
		

AIMS APAC REIT
			O5RU
			833.9
			-1.70%
			-4%
			-13%
		

CapitaR China Tr
			AU8U
			1406.3
			-3.00%
			-14%
			-25%
		

Average
			 
			 
			 
			-5%
			-14%
		

 ** note Business Trust. Source: SGX, Bloomberg, Refinitiv (Data as of 28 August 2020). Note table sort by highest net institutional buys to highest net institutional sells proportionate to current market capitalisation.

 

By comparison, the 10 trusts of the S-REIT sector that saw the highest net institutional inflow proportionate to market capitalisation following the major market lows of 23 March through to the post-low high of 9 June included First REIT, Ascendas REIT, Frasers Logistics &amp; Commercial Trust, Mapletree Logistics Trust, Soilbuild Business Space REIT, Keppel REIT, EC World REIT, Keppel Pacific Oak REIT, Ascott Trust and SPH REIT. During that period, the 10 trusts averaged a 54% Total Return compared to the remaining trusts of the S-REIT Sector gaining 45%.



S-REITs Most Sought by Institutions Since 9 June

<figure>
 <img src='https://api2.sgx.com/sites/default/files/2020-03/Lendlease-Global-REIT-CEO.jpg' alt='Lendlease ' />
 </figure>
 <div class='content-caption'>Lendlease </div>
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With more than two decades of industry experience under his belt, Kelvin Chow has come to appreciate the convergence of art and science in real estate.

“Traditionally, in the area of lease management, the key requirement was just to lease the property out, get a good price, and manage its risks,” said the Chief Executive Officer of the manager of SGX-listed Lendlease Global Commercial REIT.

“But in this day and age, just focusing on the science of the transaction is not enough – there’s an art to it as well, such as finding creative ways to manage an asset, understanding the surrounding demographics, and getting the right tenant mix for the target market.”

Chow, who keeps a notebook by his pillow to jot down ideas that pop into his head during the wee hours, finds his greatest satisfaction in instances when he is able to generate value.

“What inspires me most is solving problems and unlocking potential – improving the REIT’s value proposition, such as boosting cashflow and yields, as well as managing disruptors,” he added.

Chow, who holds a Master of Business Administration from Universitas 21 Global, and is a Fellow of the Association of Chartered Certified Accountants, was appointed CEO of the manager of Lendlease Global REIT in 2019.

Prior to this appointment, he was the Managing Director of Investment Management in Asia in 2018, overseeing the asset management function and performance of the Asia funds platform.

Before joining Lendlease, he held senior financial management roles with Keppel REIT, Soilbuild Business Space REIT and then-Cambridge Industrial Trust, now called ESR-REIT.

Listed on SGX Mainboard on 2 October 2019, Lendlease Global REIT has the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of stabilised income-producing real estate assets located globally, and used primarily for retail and/or office purposes. Its initial portfolio comprises a leasehold interest in the Lendlease-developed 313@somerset retail property in Singapore, and a freehold interest in Milan’s Sky Complex that consists of three Grade A freehold office buildings. The portfolio has a total net lettable area of approximately 1.3 million square feet, with an appraised value of S$1.4 billion.

The REIT is managed by Lendlease Global Commercial Trust Management Pte Ltd, an indirect, wholly owned subsidiary of the sponsor, Lendlease Corporation Ltd. The latter is part of the Lendlease Group – an international property and infrastructure group established in 1958 and headquartered in Sydney. Listed on the Australian Securities Exchange, the Group has operations spanning Australia, Asia, Europe and the Americas.

Enhancing Performance

To generate growth, Lendlease Global REIT has adopted a three-pronged strategy – proactive asset management, investments and acquisition growth, as well as prudent capital management.

“We want to drive the performance of our existing assets, enhance our portfolio through suitable acquisitions, and manage our financing to maximise returns to unitholders,” Chow said.

For the REIT’s prime retail asset in Singapore – 313@somerset – which has developed as a differentiated lifestyle destination mall, one focus is maintaining a robust relationship with its high-quality, well-diversified base of tenants.

Leases in the mall are typically structured with three-year tenures, comprising base rent and turnover rent, which is calculated as a percentage of tenants’ gross turnover, with an average rental escalation of 3%.

The REIT is also exploring how to unlock further value for unitholders after the permissible plot ratio for 313@somerset was raised under the Urban Redevelopment Authority’s (URA) Master Plan 2019, resulting in a potential increase of up to 1,008 square metres of space based on its current gross floor area utilisation.

“We’re conducting feasibility studies on what will generate the highest cashflow possible, such as identifying specific floors in the mall where we can increase footfall or traffic,” he added.

Over in Milan, Sky Complex comprises about a third of Lendlease Global REIT’s IPO portfolio based on its appraised value. It consists of three Grade A, freehold office buildings located in one of the city’s newest and most vibrant office precincts – Milano Santa Giula.

It is 100% leased to Sky Italia, an Italian satellite television platform owned by Comcast Corporation, the world’s largest broadcasting and cable TV company by revenue. The single lease runs until 2032, with a break option in 2026.

“There is no retail component in Sky Complex. This tenant is ranked number one in the broadcasting industry, while the lease has a rental step-up clause that tracks the Italian National Institute of Statistics’ Consumer Price Index variation, and features a triple net structure whereby the tenant is generally responsible for the operating expenses of the property,” Chow said.

“It’s like owning AAA-rated bonds – the asset provides the portfolio with very stable cashflow.”

Resilient Outlook

Meanwhile, the outlook for 313@somerset remains bright. The mall features brands – including Pomelo Fashion and Love, Bonito – with omni-channel offerings that appeal to millennials and the younger generation.

“Singapore’s retail sector will continue to evolve, driven by changing consumer behaviours and the rise of e-commerce,” he added.

“The government’s proposed plans to rejuvenate Singapore's Orchard Road shopping belt, with the Somerset sub-precinct slated to provide more youth-oriented dining and entertainment offerings, also augurs well for us.”

While acknowledging that the COVID-19 coronavirus outbreak may impact domestic retail sales, Chow remains sanguine about 313@somerset’s performance.

“Yes, regional travel bans may affect foot traffic, but we expect the mall to stay resilient,” he said.

Retail market fundamentals also appear encouraging, with little supply expected over the next two to three years, according to data from real estate consultancy JLL. They point to a tighter vacancy environment that should support modest rental growth, Chow added.

“Our rental rates for 313@somerset are already at the bottom of the cycle, with one-third of our leases due for renewal. The remaining two-thirds will capture the annual rental escalation, and help mitigate any downside.”

Nonetheless, the REIT manager will monitor the impact of COVID-19 and if tenants seek reprieves, it will assess their needs on a case-by-case basis, he said.

And as for Milan – the fourth-largest economy in Europe and one of the continent’s top office sector destinations for investors and businesses – the investment market has remained active through 2019, with strong interest from both domestic and foreign investors for office assets, Chow noted.

“The robust take-up rates for office space led to tighter supply in 2019, and the take-up rate for this year is expected to stay healthy. We’re pretty positive on this asset, and don’t expect much downside risk ahead,” he added.

Earlier this week, Italy imposed a ban on all non-essential travel to and around the country, as well as a temporary ban of public events through 3 April 2020, in a bid to contain the coronavirus spread.

Meanwhile, acquisitions are definitely on the cards. But the REIT, which has a global mandate, isn’t focusing on any specific country or region at the moment. “The potential asset must tick the right boxes – enhance the diversification of the portfolio and deliver the best value proposition to investors,” he noted.

Key criteria include at least 80% occupancy levels, no major asset enhancement initiatives (AEIs) for two years post-acquisition, and prevailing rentals must be at or above market rates. Opportunities may also emerge in Singapore, Italy, or other gateway cities in which its sponsor, Lendlease Corporation, has a presence.

“Current market conditions – whether the office or retail sector in that geography is in an up or downturn – will also play a part,” he added.

Lendlease Corporation has a secured development pipeline of approximately A$112 billion and current funds under management of approximately A$37 billion, each of which includes retail and office assets. These may present future acquisition opportunities for the REIT.

Fully Hedged

Prudence is the watchword as macro challenges continue to abound, ranging from continuing US-Sino trade tensions to the economic fallout generated by the coronavirus epidemic, Chow noted.

Lendlease Global REIT has hedged 100% of its floating-rate debt to fixed-rate via interest rate swaps and options. To mitigate foreign currency risks, it has also substantially hedged its projected euro-denominated income for FY2020 and FY2021.

“We have also protected our cashflows – they are hedged not just for one but two years,” he added.

The REIT has a focus on delivering stable and long-term returns to investors. For example, it has obtained a euro-denominated term loan, which provides a full natural currency hedge against its euro investment in Sky Complex.

“When the euro falls, our asset values will fall in tandem, but our loan amount will also decline, which neutralises the impact on our balance sheet as well as P&amp;L,” he added, referring to the REIT’s profit and loss statement.

An added complexity, however, comes from the nature of retail malls, Chow admitted. “The challenge lies in managing our tenants’ performances and sales, as well as determining the overall mix of stores within the mall.”

“This encompasses a gamut of marketing and promotional activities, which are aimed at forging a clear identity for the mall, targeting specific shopper profiles, and could include using technology to develop apps to reward spending,” he added.

Apart from grappling with the day-to-day operational issues of the REIT, the 48-year-old is also focused on nurturing the next-generation of leaders for the real estate industry.

“REITs as an industry will continue to grow in Singapore, but where will the next-generation of talent come from?” he asked.

“The question I ask myself is: Do I see my job just as a career? Or can I create a legacy by sharing my values, experience and knowledge? The answer is obvious – it’s the latter.”

Lendlease Global Commercial REIT

Listed on SGX on 2 October 2019, Lendlease Global Commercial REIT is established with the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of stabilised income-producing real estate assets located globally, which are used primarily for retail and/or office purposes. Its initial portfolio comprises a leasehold interest in, 313@somerset, a retail property located in Singapore, and a freehold interest in Sky Complex, which comprises three office buildings located in Milan. The portfolio has a total net lettable area of approximately 1.3 million square feet, with an appraised value of S$1.4 billion. LREIT is managed by Lendlease Global Commercial Trust Management Pte. Ltd, an indirect wholly owned subsidiary of the sponsor, Lendlease Corporation Ltd.

The company website is: <a href="http://www.lendleaseglobalcommercialreit.com">www.lendleaseglobalcommercialreit.com</a>. 
Click <a href="https://www2.sgx.com/securities/equities/JYEU">here</a> for the company's StockFacts page. 
For financial results from 2 Oct 2019 to 31 Dec 2019, click <a href="https://links.sgx.com/FileOpen/2QFY2020%20Results%20Press%20Release%20-%20Final..ashx?App=Announcement&amp;FileID=595729">here</a>.
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    Lendlease 


With more than two decades of industry experience under his belt, Kelvin Chow has come to appreciate the convergence of art and science in real estate.

“Traditionally, in the area of lease management, the key requirement was just to lease the property out, get a good price, and manage its risks,” said the Chief Executive Officer of the manager of SGX-listed Lendlease Global Commercial REIT.

“But in this day and age, just focusing on the science of the transaction is not enough – there’s an art to it as well, such as finding creative ways to manage an asset, understanding the surrounding demographics, and getting the right tenant mix for the target market.”

Chow, who keeps a notebook by his pillow to jot down ideas that pop into his head during the wee hours, finds his greatest satisfaction in instances when he is able to generate value.

“What inspires me most is solving problems and unlocking potential – improving the REIT’s value proposition, such as boosting cashflow and yields, as well as managing disruptors,” he added.

Chow, who holds a Master of Business Administration from Universitas 21 Global, and is a Fellow of the Association of Chartered Certified Accountants, was appointed CEO of the manager of Lendlease Global REIT in 2019.

Prior to this appointment, he was the Managing Director of Investment Management in Asia in 2018, overseeing the asset management function and performance of the Asia funds platform.

Before joining Lendlease, he held senior financial management roles with Keppel REIT, Soilbuild Business Space REIT and then-Cambridge Industrial Trust, now called ESR-REIT.

Listed on SGX Mainboard on 2 October 2019, Lendlease Global REIT has the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of stabilised income-producing real estate assets located globally, and used primarily for retail and/or office purposes. Its initial portfolio comprises a leasehold interest in the Lendlease-developed 313@somerset retail property in Singapore, and a freehold interest in Milan’s Sky Complex that consists of three Grade A freehold office buildings. The portfolio has a total net lettable area of approximately 1.3 million square feet, with an appraised value of S$1.4 billion.

The REIT is managed by Lendlease Global Commercial Trust Management Pte Ltd, an indirect, wholly owned subsidiary of the sponsor, Lendlease Corporation Ltd. The latter is part of the Lendlease Group – an international property and infrastructure group established in 1958 and headquartered in Sydney. Listed on the Australian Securities Exchange, the Group has operations spanning Australia, Asia, Europe and the Americas.

Enhancing Performance

To generate growth, Lendlease Global REIT has adopted a three-pronged strategy – proactive asset management, investments and acquisition growth, as well as prudent capital management.

“We want to drive the performance of our existing assets, enhance our portfolio through suitable acquisitions, and manage our financing to maximise returns to unitholders,” Chow said.

For the REIT’s prime retail asset in Singapore – 313@somerset – which has developed as a differentiated lifestyle destination mall, one focus is maintaining a robust relationship with its high-quality, well-diversified base of tenants.

Leases in the mall are typically structured with three-year tenures, comprising base rent and turnover rent, which is calculated as a percentage of tenants’ gross turnover, with an average rental escalation of 3%.

The REIT is also exploring how to unlock further value for unitholders after the permissible plot ratio for 313@somerset was raised under the Urban Redevelopment Authority’s (URA) Master Plan 2019, resulting in a potential increase of up to 1,008 square metres of space based on its current gross floor area utilisation.

“We’re conducting feasibility studies on what will generate the highest cashflow possible, such as identifying specific floors in the mall where we can increase footfall or traffic,” he added.

Over in Milan, Sky Complex comprises about a third of Lendlease Global REIT’s IPO portfolio based on its appraised value. It consists of three Grade A, freehold office buildings located in one of the city’s newest and most vibrant office precincts – Milano Santa Giula.

It is 100% leased to Sky Italia, an Italian satellite television platform owned by Comcast Corporation, the world’s largest broadcasting and cable TV company by revenue. The single lease runs until 2032, with a break option in 2026.

“There is no retail component in Sky Complex. This tenant is ranked number one in the broadcasting industry, while the lease has a rental step-up clause that tracks the Italian National Institute of Statistics’ Consumer Price Index variation, and features a triple net structure whereby the tenant is generally responsible for the operating expenses of the property,” Chow said.

“It’s like owning AAA-rated bonds – the asset provides the portfolio with very stable cashflow.”

Resilient Outlook

Meanwhile, the outlook for 313@somerset remains bright. The mall features brands – including Pomelo Fashion and Love, Bonito – with omni-channel offerings that appeal to millennials and the younger generation.

“Singapore’s retail sector will continue to evolve, driven by changing consumer behaviours and the rise of e-commerce,” he added.

“The government’s proposed plans to rejuvenate Singapore's Orchard Road shopping belt, with the Somerset sub-precinct slated to provide more youth-oriented dining and entertainment offerings, also augurs well for us.”

While acknowledging that the COVID-19 coronavirus outbreak may impact domestic retail sales, Chow remains sanguine about 313@somerset’s performance.

“Yes, regional travel bans may affect foot traffic, but we expect the mall to stay resilient,” he said.

Retail market fundamentals also appear encouraging, with little supply expected over the next two to three years, according to data from real estate consultancy JLL. They point to a tighter vacancy environment that should support modest rental growth, Chow added.

“Our rental rates for 313@somerset are already at the bottom of the cycle, with one-third of our leases due for renewal. The remaining two-thirds will capture the annual rental escalation, and help mitigate any downside.”

Nonetheless, the REIT manager will monitor the impact of COVID-19 and if tenants seek reprieves, it will assess their needs on a case-by-case basis, he said.

And as for Milan – the fourth-largest economy in Europe and one of the continent’s top office sector destinations for investors and businesses – the investment market has remained active through 2019, with strong interest from both domestic and foreign investors for office assets, Chow noted.

“The robust take-up rates for office space led to tighter supply in 2019, and the take-up rate for this year is expected to stay healthy. We’re pretty positive on this asset, and don’t expect much downside risk ahead,” he added.

Earlier this week, Italy imposed a ban on all non-essential travel to and around the country, as well as a temporary ban of public events through 3 April 2020, in a bid to contain the coronavirus spread.

Meanwhile, acquisitions are definitely on the cards. But the REIT, which has a global mandate, isn’t focusing on any specific country or region at the moment. “The potential asset must tick the right boxes – enhance the diversification of the portfolio and deliver the best value proposition to investors,” he noted.

Key criteria include at least 80% occupancy levels, no major asset enhancement initiatives (AEIs) for two years post-acquisition, and prevailing rentals must be at or above market rates. Opportunities may also emerge in Singapore, Italy, or other gateway cities in which its sponsor, Lendlease Corporation, has a presence.

“Current market conditions – whether the office or retail sector in that geography is in an up or downturn – will also play a part,” he added.

Lendlease Corporation has a secured development pipeline of approximately A$112 billion and current funds under management of approximately A$37 billion, each of which includes retail and office assets. These may present future acquisition opportunities for the REIT.

Fully Hedged

Prudence is the watchword as macro challenges continue to abound, ranging from continuing US-Sino trade tensions to the economic fallout generated by the coronavirus epidemic, Chow noted.

Lendlease Global REIT has hedged 100% of its floating-rate debt to fixed-rate via interest rate swaps and options. To mitigate foreign currency risks, it has also substantially hedged its projected euro-denominated income for FY2020 and FY2021.

“We have also protected our cashflows – they are hedged not just for one but two years,” he added.

The REIT has a focus on delivering stable and long-term returns to investors. For example, it has obtained a euro-denominated term loan, which provides a full natural currency hedge against its euro investment in Sky Complex.

“When the euro falls, our asset values will fall in tandem, but our loan amount will also decline, which neutralises the impact on our balance sheet as well as P&amp;L,” he added, referring to the REIT’s profit and loss statement.

An added complexity, however, comes from the nature of retail malls, Chow admitted. “The challenge lies in managing our tenants’ performances and sales, as well as determining the overall mix of stores within the mall.”

“This encompasses a gamut of marketing and promotional activities, which are aimed at forging a clear identity for the mall, targeting specific shopper profiles, and could include using technology to develop apps to reward spending,” he added.

Apart from grappling with the day-to-day operational issues of the REIT, the 48-year-old is also focused on nurturing the next-generation of leaders for the real estate industry.

“REITs as an industry will continue to grow in Singapore, but where will the next-generation of talent come from?” he asked.

“The question I ask myself is: Do I see my job just as a career? Or can I create a legacy by sharing my values, experience and knowledge? The answer is obvious – it’s the latter.”

Lendlease Global Commercial REIT

Listed on SGX on 2 October 2019, Lendlease Global Commercial REIT is established with the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of stabilised income-producing real estate assets located globally, which are used primarily for retail and/or office purposes. Its initial portfolio comprises a leasehold interest in, 313@somerset, a retail property located in Singapore, and a freehold interest in Sky Complex, which comprises three office buildings located in Milan. The portfolio has a total net lettable area of approximately 1.3 million square feet, with an appraised value of S$1.4 billion. LREIT is managed by Lendlease Global Commercial Trust Management Pte. Ltd, an indirect wholly owned subsidiary of the sponsor, Lendlease Corporation Ltd.

The company website is: www.lendleaseglobalcommercialreit.com.  
Click here for the company's StockFacts page.  
For financial results from 2 Oct 2019 to 31 Dec 2019, click here.



Lendlease Global REIT: Unlocking Value, Driving Growth

Australia

Lendlease Group designs, develops, and manages property and infrastructure assets. The Company constructs apartments, commercial buildings, government offices, retirement living, and educational facilities. Lendlease serves customers worldwide.

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Lendlease Global REIT: Unlocking Value, Driving Growth

With more than two decades of industry experience under his belt, Kelvin Chow has come to appreciate the convergence of art and...

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