CEO of Lendlease Global Commercial Trust Management drives Jem acquisition through strong leadership, innovative funding structure

It obtained an $860 million sustainability-linked loan to aid with the acquisition.

Lendlease Global Commercial Trust Management, the Manager of Lendlease Global Commercial REIT, and its CEO Kelvin Chow were recognised at the SBR Management Excellence Awards in the Executive of the Year - Commercial Real Estate Trust category for their transformational acquisition of suburban mall Jem that raised $1.7 billion in equity funds and was considered the industry’s largest acquisition in 2022.

Jem was valued at approximately $2.1 billion, which was greater than the company’s portfolio valuation of $1.4 billion before the transaction took place. There were high capital requirements for this acquisition, alongside other factors such as investors' buy-in and support from banking partners in view of macroeconomic disruptions and rising interest rates.

As such, Chow and his team structured a phased approach to acquire strategic stakes in the private funds that own Jem so each phased acquisition was more palatable to the unitholders, given that Jem commands a high purchase consideration.

In order to secure sufficient liquidity for a large-size debt at an attractive pricing, the team leveraged Lendlease Global Commercial REIT’s (LREIT) leading sustainability credentials as a unique selling point to the bank market in the format of a sustainability-linked loan (SLL).

LREIT obtained its first SLL of $860 million, and it was successfully executed to provide LREIT with a lower cost of debt funding whilst achieving sustainability outcomes. It was one of the largest SLLs to be undertaken.

With natural daylight pouring into Jem's offices, the need for artificial lighting is reduced.

Given that LREIT held a 31.8% effective interest in Jem, it utilised non-cash methods of financing to partially offset capital requirements. Promissory notes were introduced and consideration units were employed in place of cash to pay for the sponsor’s equity injection. These effectively decreased the funding amount and partially offset the funding cost.

A strategic funding mix ultimately helped to improve LREIT’s acquisition capital structure and offset the higher cost of equity.

“The 100% acquisition of Jem is a culmination of a carefully planned acquisition strategy which taps on the synergy of all stakeholders from Lendlease and its key working partners,” the company said.

SBR Management Excellence Awards recognises and celebrates the remarkable achievements of leaders, innovators, teams, and initiatives that drive growth and make a positive impact on both business operations and its workforce.

The SBR Management Excellence Awards is presented by Singapore Business Review Magazine. To view the full list of winners, click here. If you want to join the 2024 awards programme and be acclaimed for your company's employee engagements and management initiatives, please contact Julie Anne Nuñez at [email protected].

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