Lendlease Global Commercial REIT - DBS Research 2020-06-15: Adding A New Groove To 313@Somerset


Lendlease Global Commercial REIT - Adding A New Groove To 313@Somerset

  • Lendlease Global Commercial REIT wins tender to redevelop 48,200 sqft open-air car park at Grange Road that is adjacent to 313@Somerset.
  • Target completion is 2Q22, with tenancy term not exceeding 10 years.
  • Winning concept comprises dedicated event spaces, an independent cinema and local F&B attractions.

What's New

Grange Road open-air car park to be transformed into a multi-functional event space next to 313@somerset

  • Lendlease Global Commercial REIT (SGX:JYEU) has won the tender to redevelop the 48,200 sqft car park at Grange Road into a new multi-functional event space, as part of the 2019 URA Master Plan to rejuvenate the Orchard and Somerset precinct.
  • The tender comes with a total tenancy term of not more than 10 years, or 3+3+3+1 years.
  • Located next to 313@Someset, this will effectively expand Lendlease Global Commercial REIT’s footprint in the Somerset area to c.330k sqft, making one of the larger malls in the Somerset submarket .
  • The concept will include multiple dedicated event spaces, an independent cinema, and local food & beverage attractions, targeted at millennials and tourists.

Working with Live Nation to infuse new life and exciting concepts to Somerset area.

  • Lendlease Global Commercial REIT is collaborating with Live Nation, an American events promoter, to host concerts, film and events all year round.
  • Live Nation has organised concerts and events for the likes of Taiwanese band Mayday and Korea girls group TWICE.
  • Cinema operator will be The Projector, a local independent cinema operator based in Golden Mile Tower.
  • The development will boost the variety of entertainment related tenants at 313@Somerset, which currently comprises of Fat Cat Arcade, HaveFun Family KTV, and K Bowling Club.

Target completion in 2Q22; funded by internal funds

  • Target completion date for the curated space will be in 2Q22, with an estimated development cost of c.S$10m.
  • The development cost will be funded via Lendlease Global Commercial REIT’s working capital, spread across the development time frame.
  • No additional debt is expected to be undertaken for the project, with minimal impact on gearing (c.36% at 31 March 2020).
  • While information on potential returns was not provided, we believe that an ROI in the double-digit level will most likely commensurate for the short tenure of 10 years.

Our thoughts

  • The news is a positive surprise as it is not usual for retail REITs to partake and win redevelopment tenders. This will serve as another short to medium term catalyst for Lendlease Global Commercial REIT, above the deployment of additional plot ratio at 313@Somerset.
  • Various retail concepts have been tested at Grange Car Park, including the Flashbang street market, but we believe that the long tenure period will help anchor the area as a designated event space within the Orchard and Somerset precinct.
  • This is a step forward for 313@Somerset to transform into a one-stop entertainment hub and compete with neighbouring retail malls with cinema operators such as Orchard Cineleisure and Plaza Singapura.
  • Moreover, we envision that the lease terms for non-anchor tenants will be shorter for this event space to keep concepts fresh and may serve as an expansion or test bed option for new retail concepts for existing tenants at 313@Somerset.
  • See Lendlease REIT Share Price; Lendlease REIT Target Price; Lendlease REIT Analyst Reports; Lendlease REIT Dividend History; Lendlease REIT Announcements; Lendlease REIT Latest News.

Singapore Research DBS Group Research | Derek TAN DBS Research | https://www.dbsvickers.com/ 2020-06-15
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