Manager of Lendlease Global Commercial Reit combines art and science

MR KELVIN CHOW, CEO of the manager of Lendlease Global Commercial Reit.
MR KELVIN CHOW, CEO of the manager of Lendlease Global Commercial Reit.

With more than two decades of industry experience under his belt, Mr 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 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."

Mr Chow, 48, 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 cash flow and yields, as well as managing disruptors," he added.

Mr Chow, who holds a master's in business administration from Universitas 21 Global, was appointed CEO last year.

Prior to this appointment, he was the managing director of investment management in Asia at Lendlease Investment Management 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 the SGX mainboard last October, 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 or office purposes.

Its initial portfolio comprises a leasehold interest in 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 sq ft, with an appraised value of $1.4 billion.

The Reit is managed by Lendlease Global Commercial Trust Management, an indirect, wholly owned subsidiary of sponsor Lendlease Corporation. The latter is part of the Lendlease Group - an international property and infrastructure group established in 1958 and headquartered in Sydney, Australia.

SCIENCE OF TRANSACTION

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.

MR KELVIN CHOW, CEO of the manager of Lendlease Global Commercial Reit, on the convergence of art and science in real estate.

STRATEGY FOR GROWTH

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 unit holders," Mr Chow said.

For the Reit's prime retail asset in Singapore - 313@somerset - one focus is maintaining a robust relationship with its diverse 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 per cent.

The Reit is also exploring how to unlock further value for unit holders after the permissible plot ratio for 313@somerset was raised under the Urban Redevelopment Authority's Master Plan 2019, resulting in a potential increase of up to 1,008 sq m of space based on its current gross floor area utilisation.

"We're conducting feasibility studies on what will generate the highest cash flow possible, such as identifying specific floors in the mall where we can increase footfall or traffic," he added.

While acknowledging that the coronavirus outbreak may impact domestic retail sales, Mr 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, Mr 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 the coronavirus and if tenants seek reprieves, it will assess their needs on a case-by-case basis, he said.

• This is an excerpt from Singapore Exchange's Kopi-C: The Company Brew, a column featuring C-level executives of SGX-listed firms. Previous editions are on SGX's website www.sgx.com/research

A version of this article appeared in the print edition of The Straits Times on March 16, 2020, with the headline 'Manager of Lendlease Global Commercial Reit combines art and science'. Print Edition | Subscribe