Lendlease Global Commercial REIT (“LREIT”) is a Singapore real estate investment trust established with the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of stabilised income-producing real estate assets located globally, which are used primarily for retail and/or office purposes.
Its portfolio comprises leasehold interest in 2 properties in Singapore namely Jem (office and retail property) and 313@somerset (retail property) as well as freehold interest in three grade-A office buildings, Sky Complex, in Milan. Other investment includes development of a multifunctional event space on a site adjacent to 313@somerset.
1. Overview of Business
Key highlights of the Lendlease REIT portfolio:
- 5 Retail and Office Buildings
- 2 Gateway Cities
- Appraised Value: $3.6 billion
- 2.2 million square feet (NLA)
- 99.8% Committed Occupancy
- 8.7 years Weighted Average Years Expiry
2. Gross Revenue & Net Property Income
Gross Revenue for FY22 grew 29.3% year-over-year to S$101.70 million from FY21 S$78.70 million. This is mainly attributed to the acquisition of Jem in FY2022. Correspondingly, property expenses increased 20.3% year-over-year to S$26.2 million. Lendlease REIT claims FY2022 was a milestone year with the acquisition of Jem, a dominant suburban office and retail property in the West of Singapore.
As a result of a higher gross revenue contribution, Net Property Income (NPI) for FY22 grew 32.7% year-over-year to S$75.5 million from FY21 S$56.90 million.
3. Distributable Income & Distribution Per Unit
Distributable Income for FY22 grew 29.7% year-over-year to S$71.5 million from FY21 S$55.10 million. Through LREIT Sustainability-Linked Loan (SLL), LREIT will enjoy savings in borrowing costs as it achieves its sustainability target through its portfolio in Singapore resulting in higher distributable income whilst achieving sustainable outcomes for all stakeholders.
Lendlease REIT has achieved a 3-year track record of delivering strong financial performance and DPU growth. FY2022 was a milestone year with the acquisition of 100% interest in Jem.
Market capitalization and total deposited property increased 1.8 times to S$1.8 billion and 2.1 times to S$3.7 billion over the year.
Distribution Per Unit (DPU) for FY22 grew 29.8% year-over-year to 4.85 cents from FY21 4.68 cents.
4. Gearing Ratio & Property Yield
Gearing Ratio grew to 40.0% FY22 from 32.0% in FY21. The 40% gearing ratio has a weighted average cost of debt of 1.69% per annum.
This demonstrated that LREIT is relatively financially sound, as it has $185.0 million and $370.0 million in debt headroom before meeting its 45 percent and 50 percent gearing limits respectively. (On April 16, 2020, MAS raised the leverage ceiling for S-REITs from 45 percent to 50 percent).
Similarly, PLife REIT property yield fell from 3.99% to 2.10% mainly due to the acquisition of Jem.
5. Occupancy Rate
LREIT assets continued to perform well, enjoying a high portfolio occupancy of 99.8% with a long weighted average lease expiry (“WALE”) of 8.7 years by NLA and 5.5 years by gross rental income (“GRI”), which will ensure long-term cash flow stability.
6. Interest Coverage Ratio
LREIT Weighted Average Debt Maturity increased from 2.8 years to 2.2 years (as of December 31, 2021). LREIT has an impressive interest coverage ratio of 9.2 times (excludes amortization of debt-related transaction costs), demonstrating its solid financial health and ability to satisfy interest commitments. The weighted average running cost of debt was 1.69%per annum with a weighted average debt maturity
of 2.8 years as of 30 June 2022, with no refinancing requirements until FY2023. LREIT has sufficient banking facilities available to refinance borrowings maturing within the next 12 months.
7. Rental Reversions
Tenant retention rate for 313@Somerset stood at 59% as at 30 June 2022 as the Manager continues its proactive effort to rejuvenate the mall’s offerings. As at 30 June 2022, rental reversion for 313@somerset was 3.6%. (Exclude Jem’s acquisition)
8. Growth Prospects
Lendlease REIT Mission is to provide unitholders with regular, stable distributions while achieving long-term growth in Distribution Per Unit (DPU) and Net Asset Value (NAV) per unit, as well as maintaining a prudent capital structure.
After the acquisition of JEM, LREIT prospects look rather bleak.
Or is it?
As of today, LREIT currently owns 30% of PLQ; with the remaining 70% held by the Abu Dhabi Investment Authority. This could be a potential catalyst for LREIT.
Furthermore, Lendlease REIT maintains consistent DPU growth while scoring on the ESG front. LREIT is well-placed to ride on the economic recovery for growth, as its local malls are located in prime and high footfall areas. LREIT’s distribution per unit (DPU) increased by 3.7% year-on-year to 4.85 cents, and gross revenue gained 29.3% year-on-year to $101.7 million. These figures bring its net property income (NPI) to $75.5 million, 32.7% higher than the previous year.
9. Dividend Yield
Dividend Yield (5 Year)
The current Dividend Yield PLife REIT stands at 6.98%,it’s 5-year Avg Yield stands at 4.05%.
Dividend Yield (1 Year)
The current Dividend Yield PLife REIT stands at 6.98%,it’s 1-year Avg Yield stands at 5.83%
10. Our Stand
LREIT does not have such an established track record like the rest of the REITs in Singapore. However, I am relatively pleased with the results they have displayed thus far.
I am excited to see if LREIT will be able to accomplish its near-term focus. They are as follows:
- Drive resilient and sustainable returns
- Active capital management to manage cost and gearing
- Proactive asset management to enhance resilience of the assets
- Leverage on technology to deliver integrated shopping experience
- Explore AEI opportunities and yield-accretive opportunities
LREIT, as of now, still does not have a very comprehensive portfolio. I will probably wait for LREIT to have a much bigger portfolio before executing a position. However, its current dividend yield looks relatively attractive of 6.98%. This may be attractive for dividend investors.
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