Jem Has Better Outlook Than Jurong Point: Citi Research

SINGAPORE – Citi Research analyst Brandon Lee is more upbeat regarding the prospects of Jem than Jurong Point, reported The Edge on Thursday morning (26 December, SGT).

“We see more attractive short/long-term and well-rounded prospects for Jem,” commented Lee.

In fact, the mixed-use commercial property is underpinned by the government’s plan to turn Jurong Lake District into Singapore’s largest business district outside the traditional city centre. The vicinity also has an existing vibrant area that houses a combination of office space, retail premises, and institutional buildings surrounding the Jurong East MRT Interchange Station.

Aside from that, the interchange station, which is linked with Jem, is expected to see more footfall and more commercial activity with the completion of a new Jurong Region Line station and an integrated transport hub by 2028, and the authorities plan to release more development sites nearby.

Jem comprises a 5-level retail podium, on which stands an 11-storey Grade A office block that is fully leased to Singapore’s Ministry of National Development. The mixed-use commercial property was completed in 2013.

Notably, Lee has maintained his “buy” call on Jem’s owner Lendlease Global Commercial REIT (LREIT) even though it has the worst-performing unit price among Singapore-listed REITs (S-REITs) monitored by Citi Research. LREIT’s unit price has slid by 3 percent year-to-date.

For the analyst, LREIT’s lower unit price could be due to concerns over the expansion of the suburban retail cap rate following the sale of Jurong Point to Hong Kong’s Link REIT.

“Jurong Point’s transacted yield of 4.8 percent in December 2022 was 20 basis points higher than its December 2022 valuation yield of 4.6 percent, which resulted in investors expecting suburban retail cap rate expansion over the next six to 12 months, especially for LREIT’s nearby Jem [whose implied net property income or NPI yield on (its) FY2022 valuation was (about) 4.2 percent for its retail component based on our estimates],” Lee explained.

However, the appraised value for Jurong Point as of December 2022 was flat on an annual basis, and is similar to the valuation exercise conducted in September 2022 by its prior owner. The same valuers were appointed for both Jem and Jurong Point, he added.