Lendlease Global Commercial REIT Review @ 16 February 2023

Basic Profile & Key Statistics

• Main Sector(s): Retail & Office
• Country(s) with Assets: Singapore, Italy
  
• No. of Properties (exclude development/associate/fund): 3

Key Indicators

Performance Highlight

Gross revenue, NPI and distributable income improved yoy mainly due to the acquisition of Jem in Apr 2022. Despite that, DPU has improved slightly due to an enlarged unitholder base.

Tenant Sales & Visitation

Both tenant sales and visitation improved yoy mainly due to the acquisition of Jem in April 2022.

Rental Reversion

Both retail and office achieve positive rental reversion in 1H FY 23.

Distribution Breakdown

• Distributable Income Breakdown:
• 81.7% from Operation
• 18.3% from Fees Payable/Paid in Units
• Distribution = 100% of Distributable Income
• Distribution to Perpetual Securities Holder = 13.8% of Distributable Income

Related Parties Shareholding

• REIT Sponsor's Shareholding: ± 10% from median
• REIT Manager's Shareholding: Above median for more than 20%
• Directors of REIT Manager's Shareholding: Above median for more than 20%

Lease Profile

• Occupancy: ± 5% from median
• WALE: Above median for more than 20%
• Highest Lease Expiry within 5 Years: Above median for more than 20%; Falls in FY2026 and beyond, without breakdown
• Weighted Average Land Lease Expiry: Above median for more than 20%

Debt Profile

• Gearing Ratio: ± 10% from median
• Gearing ratio including perps: Above median for more than 20%
• Cost of Debt: Below median for more than 20%
• Fixed Rate Debt %: Below median for more than 20%
• Unsecured Debt %: 100%
• WADM: ± 10% from median
• Highest Debt Maturity within 5 Years: Below median for more than 10%; Falls in FY 2024
• Interest Coverage Ratio: Below median for more than 20%

Diversification Profile

• Top Geographical Contribution: Above median for more than 20%
• Top Property Contribution: Above median for more than 20%
• Top 5 Properties' Contribution: Above median for more than 20%
• Top Tenant Contribution: ± 10% from median
• Top 10 Tenants' Contribution: ± 10% from median

Key Financial Metrics

• Property Yield: Below median for more than 20%
• Management Fees over Distribution: ± 10% from median; $6.49 distribution for every dollar paid 
• Distribution on Capital: Below median for more than 20%
• Distribution Margin: Above median for more than 20%

Trends

• Uptrend: DPU
• Flat: Occupancy, Distribution Margin
• Slight Downtrend: NAV per Unit, 
• Downtrend: Interest Coverage Ratio, Property Yield, Distribution on Capital

*DPU at 4Q 2019 is annualized to 6 months to have an apple-to-apple comparison.

**The interest coverage ratio for 4Q 2019 and 1Q 2020 are estimated to reflect a closer figure in accordance with the Property Funds Appendix of the Code on Collective Investment Schemes.

Relative Valuation

• P/NAV: Below -1SD for 1y; Below average for 3y & 5y
• Dividend Yield: Above +1SD for 1y, 3y & 5y

Author's Opinion

Favorable	Less Favorable
Diversified Sector	High Perpetual Securities %
High REIT Manager's Shareholding	Low Fixed Rate Debt %
High Directors of REIT Manager's Shareholding	Low Interest Coverage Ratio
High Occupancy	High Top Geographical Contribution
Long WALE	High Top Property & Top 5 Properties' Contributions
Long Weighted Average Land Lease Expiry	Low Property Yield
Low Cost of Debt	Low Distribution on Capital
100% Unsecured Debt	Interest Coverage Ratio Downtrend
Well Spread Debt Maturity	Property Yield Downtrend
High Distribution Margin	Distribution on Capital Downtrend
DPU Uptrend

Following the acquisition of JEM, the income has improved compared to the previous half-yearly result. However, the adjusted interest coverage ratio has fallen to 2.1 due to the rising interest rates as well as the issuance of perpetual securities during the acquisition. Looking ahead, the Singapore retail sector is expected to grow further with China's border opening.

For more information, check out:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and details of Singapore REIT

REIT Review - List of previous REIT review posts

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*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my own findings and should not be considered as professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decisions.