Starting today Sunday 23rd May 2021, Westgate and Jem closes for 2 weeks. The reason for the closure is to perform deep cleaning as the authorities suspected there is ongoing transmission among the visitors to these two malls located at Jurong East.
Westgate was fully acquired by CapitaMall Trust (now Capitaland Integrated Commercial Trust) through the purchase of the balance of 70.00% of the units in Infinity Mall Trust which holds Westgate on 1st November 2018. As of 31st December 2020, the mall has estimated 246 tenants.
The other shopping mall Jem was not directly owned by Lendlease Global Commercial REIT (“LREIT”). LREIT acquired a stake in Jem through an investment of 5.0% equity stake in Lendlease Asian Retail Investment Fund 3 Limited (the “Fund”) on 1st October 2020.
Westgate and Jem Closes For 2 Weeks – What is The Impact?
Deep Cleaning Cost
At this point of writing, I am not sure who will bear the cost of the deep cleaning. The cleaning is a big feat given the size and lettable area of the malls. If the cost is bear by the managers of the mall, this will add on to the operating expenses which in turn erodes away distribution to unit holders.
Tenant Rebates
Since tenants are not able to operate, it is most likely the managers will provide certain form of COVID-19 assistance or rental rebates even though there is no confirm news at this point in time that they will do so. This means lesser gross revenue and also reduced amount for distribution to unit holders.
Shopper Traffic
Even though the malls will open after 2 weeks, I bet shoppers will shun the malls for a period of time given the fear of potential lurking around viruses.
Current Dividend Yield
Based on Capitaland Integrated Commercial Trust’s current share price of S$2.05 and FY20 Distribution Per Unit of 8.69 cents, this translate to a current dividend yield of 4.24%.
Based on Lendlease Global Commercial REIT current share price of S$0.74 and FY20 Distribution Per Unit of 3.05 cents, this translate to a current dividend yield of 4.12%.
Opportunity For Investors
Should the share price fall when stock market opens tomorrow, this poses an opportunity for interested investors of Capitaland Integrated Commercial Trust and Leadlease Global Commercial REIT to buy upon weakness.