JLL Assists Asia's First Outlet Mall REIT Debut on SGX

At 9am Singapore time on March 28th, 2018, Asia’s first Outlet Mall Real Estate Investment Trust, Sasseur REIT, was officially listed on the main board of the Singapore Exchange under the stock symbol "CRPU". With its high-level professional expertise, JLL conducted the underlying asset appraisals for Sasseur REIT. Through accurately predicting the profit potential and methodically calculating the overall profits, JLL provided an impartial evaluation of the project’s market value, which laid a solid foundation for its successful listing

Sasseur REIT is not only the first Outlet Mall Real Estate Investment Trust project in Asia, but also the first real estate investment trust project across the whole of central and western China to be listed on the Singapore Exchange. It acts as an important model and driving force for enterprises in central and western China in terms of venture capital exit channels for commercial real estate financing and the exploration of new cross-border financing models. At the same time, it also marked the entry in to the REIT appraisal business for JLL.

The initial asset portfolio of the project included four outlet malls in Liangjiang District (Chongqing), Bishan (Chongqing), Hefei (Anhui) and Kunming (Yunnan), with a total construction area of approximately 371,600 m² and a total valuation of approximately RMB 7.4 billion. Compared with ordinary commercial projects, outlet malls are usually far from city centers and main commercial areas. Due to the higher entry threshold, they often hold a dominant advantage in the same city and generate profits through adopting the joint venture mode. Fixed profits account for a relatively low level, and the profit level is directly affected by factors such as operational management capacity and seasonal changes. These distinctive features make profit forecasting a difficult area in the appraisal of the outlet mall.

In this project, according to the general investment requirements of the capital market for real estate trust funds, the appointed manager of Sasseur REIT needed to provide a certain level of guarantee for the return on funds to match the investor's expectations. Therefore, the fund manager designated an EMA (Entrusted Management Agreement) mechanism for the project. According to the relevant items of the EMA, the four Chinese owners of the four outlet projects delegated the management and use rights of all the properties and their existing facilities to the appointed manager. Following the agreement, the appointed manager should, in a certain number of complete operating years, carry out the operation, maintenance, and management of the property, bearing all the costs incurred, and sharing the profits of the commercial operation with the Chinese owners as agreed.

Based on the characteristics of the outlet mall and the particulars of the EMA signed by Sasseur REIT, JLL collected information on the profit return of well-known nationwide outlet projects through a variety of open channels, to ensure the accurate and fair prediction of the project's profit forecast. The above-mentioned information was verified and subjected to in-depth analysis with the help of the industry data provided by Sasseur REIT and the operation data of all of its outlet projects. At the city level, large-scale shopping mall projects were selected as market research targets with the aim of finding out the return level of indirect competitors. Actual return information was extracted from the commercial documents accumulated during past appraisal projects to be cross-checked against market research information. The project's lease agreement and previous return data were used for future profit forecasts.

In this project, JLL obtained the current return data by adjusting the actual income of the project. Through considering statistics such as the lease opening rate, area occupancy levels, commission growth, and revenue growth, JLL made an accurate prediction on its future return. This process relied on our wide outlet mall market experience and understanding of development trends and led to us successfully assisting Sasseur REIT to be listed. JLL also took the opportunity to broaden its business scope, further develop and enhance its professional capabilities, and build further experience and confidence to face ever greater future challenges.