Lendlease Global Commercial REIT – A Gem In The Making

About 2 weeks ago, I wrote an article regarding my thoughts on Starhill Global REIT (SGREIT). If you haven’t read it, you might want to check out my write-up here. I have had a couple of readers who had taken a look at the article and given me some constructive feedback so I would like to thank you guys for your support so far! One of my readers had requested for me to do an analysis on Lendlease Global Commercial REIT (SGX: JYEU), a counter that I have a substantial holding in as well. As such, I will be sharing my analysis of Lendlease Global Commercial REIT (“LREIT”) in this article today. In case you are curious to find out how my portfolio looks like, you can check it out here.

As usual, let me just start off quickly by giving a high level overview of what Lendlease Global Commercial REIT does. As its name suggests, it is a REIT that invests “Globally” and with a focus on “Commercial” real estate. It’s seed portfolio contains 2 assets, the first of which is 313@Somerset, a prime retail mall in Singapore. It’s second asset is Sky Complex, a grade A office complex in the periphery of Milan, Italy. More recently, it had acquired a 5% stake in Lendlease Asian Retail Investment Fund 3 (ARIF3), a fund managed by a subsidiary of its sponsor, Lendlease Corporation Limited. ARIF3 owns a 75% interest in JEM (an abbreviation for Jurong East Mall), an integrated office and retail development in the western suburban area of Singapore. As such, LREIT’s effective interest in Jem is 3.75%. For your easy reference, I have created 2 charts, one of which shows the breakdown by asset value while the second shows the breakdown by NPI based on LREIT’s latest FY2020 results. Please do note that these are just my estimates as an official breakdown had not been provided since its partial stake acquisition in ARIF3 was only completed after the end of the FY2020 reporting period.

According to LREIT’s press release, JEM’s valuation was around S$2.1 billion as of October 2020. A 3.75% interest would thus work out to be about $80 million. As the NPI from JEM was not provided for in its press release, I had estimated it by assuming a yield of ~4.7% , which is in line with cap rates applied on comparable suburban retail mall owned by REITs such as CapitaLand Integrated Commercial Trust (CICT) and Frasers Centrepoint Trust (FCT). Please note that the NPI in the above chart had factored in the various rental rebates that had been given out to the retail tenants at both 313@Somerset and JEM. This had inadvertently resulted in Sky Complex making up ~40% of its FY2020 NPI while during Pre-COVID times, this percentage should be smaller, in the range of low to mid 30s (had the rental rebates not been given out at the 2 Singapore properties).

From the above chart, it is apparent that the performance of 313@Somerset and Sky Complex are key drivers that will determine the near term performance of LREIT since they collectively make up 95% of NPI. In terms of its geographical exposure, LREIT derives the majority of its income from Singapore via its core asset, 313@Somerset. With a better understanding of the portfolio constitution of Lendlease Global Commercial REIT, I will now move on to share my thoughts on this REIT. As usual, I will begin by listing the things that I like about this REIT before weighing them against the things that I don’t feel too comfortable with. I will subsequently conclude with my recommendation on whether this REIT is worth a buy at its current per share price of $0.77. 

Insider Trades

In my earlier article on Sasseur REIT that can be found here, I had mentioned that one of the key reasons why I liked it was the presence of strong evidence that insiders have been building up their stakes in the REIT. Likewise for the case of LREIT, I had managed to dig out some information from its SGX filling suggesting insider ownership. Its CEO, Kelvin Chow had acquired units from the open market while the market started coming down in March last year. I have taken 2 screen grabs below showing him acquiring shares from the open market in 2 separate tranches.

Source: SGX Filings

In his first transaction that was executed on 2 March 2020, he acquired 20,000 shares at a per share price of $0.84. In the second transaction , he acquired another 20,000 shares at a per share price of $0.475 on 2 April 2020. I tend to view evidence of insider ownership favourably and treat it as a sign that the management has strong confidence in the long term viability and growth of the business. After all, in a world of imperfect information, insiders will always have more privy to exclusive information pertaining to the operations of the company relative to retail investors like us.

Strong Portfolio Operating Metrics

In its latest 1QFY2021 business update, it had published some key portfolio operating metrics that I had extracted in the image below for your reference.

Source: LREIT 1QFY2021 Business Update

Despite being a retail-centric REIT, LREIT does have a pretty decent Weighted Average Lease Expiry (WALE) profile. Its WALE (by GRI) is fairly long at 4.9 years, higher than other retail S-REITs who typically have a WALE (by GRI) of anything between 1.5 to 3 years. The longer WALE is attributable to its sole office asset, Sky Complex. As per its IPO prospectus, I have extracted in the below image information of its lease term with Sky Italia, the master tenant of Sky Complex.

Source: LREIT IPO Prospectus

Its lease with Sky Italia is effectively structured as a triple net 12 + 12 year lease that started in 2008 (subject to a break clause in 2026). For those who are not familiar with the term “triple net lease”, it is a type of lease where the tenants will bear most if not all of the operating expense with respect to the upkeep of the asset. The advantage of such a lease structure is that it minimises the operational costs and risks for the landlord. In a traditional lease that we are familiar with, landlords often collect rentals from tenants but will also be responsible for paying operating expenses such as utilities and any maintenance works such as the servicing of Air Handling Units (AHU). In exchange for the tenant undertaking the operational risk, rents of a triple net lease is often lower than the typical lease. Hence, from the landlord’s perspective, you are paying a little bit of premium (in the form of a lower rent) to enjoy greater stability and certainty in your cash flows. As a REIT investor, I certainly prefer some form of certainty in the current climate and the triple net lease structure offers investors some form of downward protection which I view as an advantage. The lease also has an in-built rental step-up clause which tracks ISTAT consumer price index variation.

Source: ISTAT

I have extracted the 5-year CPI trend in the above diagram. As you can see, the index has turned slightly negative in 2020 after hovering around a growth rate of between 0% to 2% between 2016 to 2019. As such, I do not expect to see any rental growth from the triple net lease agreement with Sky Italia in FY2020 and possibly FY2021. The limited rental growth is however likely to be compensated by a strengthening Euro (EUR). As the rental lease is denominated in EUR, an appreciation of the EUR is likely to benefit unitholders as dividends are distributed in Singapore Dollars (SGD). 

Source: XECurrency

It is apparent that since the end of 2019 (which is around the time that LREIT IPO-ed), the EUR has appreciated quite a fair bit. In its IPO prospectus, an exchange rate of €1.00 = S$1.525 was applied. At the current exchange rate of €1.00 = S$1.614, it implies an appreciation of about 6%. If we were to draw reference to the FOREX sensitivity table in its IPO prospectus below, a 5.0% appreciation in EUR would translate to an 11 bps improvement in dividend yield. While this might seem marginal, I do think that the appreciation in EUR should be able to make up for the dip in rentals collected from Sky Italia due to the marginally negative inflation rate as compiled by ISTAT.

Source: LREIT IPO Prospectus

Based on the above analysis, I believe that the triple net lease agreement should be able to partially cushion the hit at 313@Somerset due to the weaker operating environment for prime retail malls in the tourism dependent Orchard/Somerset area. I do expect LREIT to experience negative rental reversions in the periods ahead for its leases that are renewed at 313@Somerset. However, with only about 12% of leases by GRI set to expire in FY2021, the impact of the negative rental reversion on its DPU should not be as profound as for other retail S-REITs which tend to have between 30% to 40% of their lease by GRI expiring in FY2021 . If the economy does recover further by 2022, LREIT should be able to negotiate better rents then which is precisely when more of its retail leases at 313@Somerset are coming due. I therefore seek comfort in the fact that LREIT’s operating metrics are fairly strong when compared against other retail S-REITs. For example, FCT has about 30% of retail leases by GRI left coming due in FY2021. In addition, in terms of its GRI breakdown by sector, approximately 65% of LREIT’s GRI are derived from essential services such as Broadcasting (from its lease with Sky Italia), Food & Beverage, Beauty & Health and IT & Communications. In my opinion, these essential services should be more resilient than other sectors that are more discretionary in nature such as Fashion, Leisure and Entertainment. To show that my conjecture is true, I have extracted the tenant sales analysis from CICT’s latest FY2020 presentation slides. In the below image, you could see that for 4Q2020, tenant sales for sectors such as F&B, IT & Communications and Beauty & Health are relatively less impacted as compared to other hard-hit trade categories such as fashion, department store and leisure & entertainment. 

Source: CICT FY2020 Presentation Slides

Finally, LREIT’s occupancy while having dipped slightly in the last few quarters, is still relatively high at 99.0%, suggesting a strong tenant retention rate. 

While the operating metrics seem to remain strong as of now, investors would still need to keep a strong tab on the movement of these metrics in the coming quarters to ascertain whether there is any drastic and material change that might render you to rethink your position in this counter. With its 1HFY2021 results set to be released on 10th February, do keep a lookout on these key metrics that we have discussed above so as to pick up any clues on whether LREIT’s operational strength remains intact. In CICT’s latest FY2020 presentation slides, its rental reversion at The Atrium@Orchard was -11.1% while its other retail malls in more central locations such as Bugis Junction, Clarke Quay and Raffles City Singapore have rental reversion in the range of -7.0% to -22.2%. To be honest, this is pretty worrying but since only 12% of leases by GRI are expiring in FY2021, I think LREIT should be relatively less impacted as the rental income from Sky Complex should be able to cushion some of the impact of the negative rental reversion at 313@Somerset on its DPU. Nonetheless, I would be expecting rental reversion of anything between -10% to -15% at 313@Somerset. 

Having discussed the portfolio operational aspect, I will now move on to analyse the capital management side of things.

Sound Capital Management

On the capital management front, LREIT’s capital position is relatively healthy as well. I have put together a table comparing the key metrics that are typically looked at to determine the relative strength of a REIT’s capital position. In terms of the comparables, I have chosen REITs with similar characteristics i.e. a predominant exposure towards Singapore and a greater weighting towards the retail segment.

Referencing to the table above, LREIT has the highest interest coverage ratio at 9.2x, almost twice of its closest competitor, SPH REIT. This means that with its current available earnings, LREIT is able to service its interest expense 9 times and would still be left with some spare change! It is thus safe to say that LREIT should have no issue servicing its interest obligations. This is likely due to its cheap cost of debt which at 0.86%, is hands down the lowest among its competitors. The average cost of debt is essentially the interest rates that LREIT pays on its loan obligations. To understand why the average cost of debt is so low, I had a look at its debt maturity profile which I have extracted in the screen grab below.

Source: LREIT 1QFY2021 Business Update Slides

We can deduce from the above that the low interest rates on its loans is likely due to the fact that 75% of its loan facilities are euro-denominated. If you have been following the movement in the fixed-income market, you would have known that European bonds have been negative yielding ever since it first turned negative in 2012, in the aftermath of the European sovereign debt crisis. The substantial amount of euro-denominated term loan on LREIT’s book likely explains why its average cost of debt is so low.

Despite its low cost of debt, the one thing that concerns me is its debt maturity profile as the bulk of its borrowings is due in FY2024. The saving grace is that the risk of refinancing is likely to be low since monetary policy is likely to remain loose in the near term and market sentiment has also improved considerably since the March market crash. Nonetheless, I would hope to see the management spread out its debt maturity more evenly over the years. In terms of its gearing, it is relatively healthy as well at 35.1%, which is considered better than average when compared against its competitors listed above. This gives it a debt headroom of approximately S$280 million (based on 45% gearing) and S$450 million (based on 50% gearing). Given its relatively low debt headroom, I believe that LREIT will have to undertake some form of equity fund raising going forward if it were to make any meaningful acquisitions. This leads nicely into the next section where I will be sharing more on the strong pipeline of assets available for acquisition.

Strong Acquisition Pipeline

LREIT’s sponsor has signaled via its most recent partial stake acquisition in JEM that it’s main focus is to position LREIT as a Singapore-focused REIT. My guess is that the REIT manager has plans to further increase its stake in JEM gradually over time. If the long term plan is for LREIT to acquire the entire development which is valued at S$2.1 billion (twice that of 313@Somerset), LREIT will certainly have to undertake an equity fund raising. At the time of writing, LREIT is trading at S$0.77 per unit, below its book value of $0.85 per unit. As such, I do not think that it is an optimal time to carry out an equity fund raising and I believe that the management is waiting for its share price to move nearer to or above its book value before it will consider doing so. While there is no certainty that LREIT will further increase its stake in JEM, I will nonetheless share my thoughts on why I view this asset so favourably.

Strategically located next to Jurong East MRT station in the west of Singapore and with direct access to the train station and bus interchange, JEM is one of 4 major commercial developments surrounding Jurong East MRT station. The other 3 developments are – (1) Westgate, an integrated retail and office development, (2) JCube, a suburban retail mall and (3) IMM, Singapore’s largest outlet mall – all of which are owned by CapitaLand Integrated Commercial Trust. JEM which was opened in 2014, is an integrated retail and office development with 6 floors of retail spaces and 12 floors of office spaces. It counts Fairprice Xtra (a hypermarket), Don Don Donki, Uniqlo, H&M and Courts as its key retail tenants while the 12 floors of office spaces are fully leased to the Ministry of National Development (MND). Later this year, Ikea is slated to open its third Ikea store in Singapore in the form of a new concept store – within a shopping mall – that will be the first of its kind in the region. JEM’s Don Don Donki store is also its largest in Singapore, operating based on a new to market concept that incorporates a food court as well as a sushi counter where one can buy freshly-made sushi and consume it at its dedicated seating area. Its ability to constantly inject freshness and excitement into its customers’ experience through attracting key tenants with new to market concepts has been very successful in drawing crowds to its malls over the years. This is something that is ingrained in the DNA of the sponsor and is also apparent in its other assets such as 313@Somerset. 313@Somerset is a youth-centric lifestyle mall that has been successful in attracting new to market concepts such as “Love, Bonito” which had selected 313@Somerset to open its first flagship store back in 2017.

You might wonder why I had spent so much time emphasising on the operational strength of Lendlease as a property manager but trust me, a good property manager that is able to constantly curate an exciting and unique tenant mix is what sets it apart in the highly competitive retail market in Singapore. Having spoken to a couple of friends who are living in the west, many of them had mentioned that JEM is definitely one of the standout go-to malls in the area because of the exciting tenant mix that Lendlease has constantly been able to curate for its customers. For Singapore readers who are living in the area, do let me know your take and whether you agree on this!

Moving on to its office component, I really like the fact that the 12 floors are fully leased to the MND, a ministry of the Government of Singapore. The strong credibility of the Singapore government likely means that tenant default is very low. The lease, structured as a 30-year lease that started in 2014 is an icing on the cake! For the above explained reasons, I really do hope that LREIT looks to further increase its stake in Jem. 

In terms of its future growth prospect, JEM is located within the Jurong Lake District (JLD), which was first unveiled in 2017 by the Singapore Urban Redevelopment Authority (URA) in its masterplan as the city’s second central business district.

Source: Singapore Urban Redevelopment Authority

In fact, it is part of a wider regeneration program that the government is planning to undertake in the next 1 to 2 decades to transform the entire western region into an area to live, work and play. I have extracted a video montage from Youtube put together by URA that envisages the transformation that is likely to occur in JLD over the coming decades. 

According to URA’s official website, the entire regeneration will add up to an additional 20,000 new homes and create more than 100,000 jobs. Based on data from Onemap Singapore, there were about 25,600 households in Jurong East as of 2015. An additional 20,000 new homes would thus almost double the number of households in the Jurong East area, possibly benefitting JEM through higher footfalls and hence tenants sales.

Apart from JEM, the sponsor also owns a 30% stake in Paya Lebar Quarter (PLQ). PLQ is a mega mixed-use development comprising of 340,000 sqft of retail spaces branded as PLQ Mall, 900,000 sqft of office spaces that is named PLQ Workplace and the 429 residential units Park Place Residences. The end development value of the project is approximately S$3.3 billion, valuing Lendlease’s 30% stake at ~S$1 billion. For those who aren’t familiar with the Paya Lebar area, PLQ is strategically located right next to Paya Lebar MRT in the eastern city-fringe district of Paya Lebar. As of today, the Paya Lebar area is still predominantly made up of industrial developments with increasingly more residential and commercial developments being developed over the last couple of years. The below image gives a snapshot of the entire PLQ development and its relative position to the Paya Lebar MRT. I have also charted out other major developments in the immediate vicinity, such as Paya Lebar Square and Singpost Centre.

Source: Lendlease

The area has limited residential developments as a result of building height restriction that has been imposed by URA due to the presence of the Paya Lebar Air Base in the vicinity. In its latest masterplan  for the Paya Lebar precinct, URA has plans to progressively transform the industrial developments into a highly liveable and sustainable new town. Since the Paya Lebar Air Base will only be relocated from 2030 onwards, there is still a while to go before the regeneration of the entire Paya Lebar precinct materialises. Nonetheless, I have a strong belief that this is another up and coming neighbourhood that will undergo massive transformation through which PLQ will be able to benefit from in the future. With the sponsor holding a 30% stake in the development, I believe that this is another exciting asset that LREIT could look to potentially acquire in the future.

The above are just 2 of the many large scale development and regeneration projects that the sponsor is currently involved in Singapore and other parts of the world. Just to offer a sneak peek of its scale of operations, the sponsor currently has around S$100 billion of development pipeline, of which around S$81 billion is from urbanisation projects in Australia, Europe, Asia and the Americas. To cut the long story short, Lendlease has a strong development track record and an unparalleled reputation for undertaking regeneration projects in collaboration with local governments. These regeneration projects reimagines the way people live, work and play. Not only are they experts in developing real estate, they have also a proven track record at operating these assets as I have illustrated above. As a shareholder myself, I can’t hide my excitement at what lies ahead for LREIT. However, until the manager makes its next big move that will allow me to ascertain whether there is strong alignment of interest between the sponsor and the unitholders, I still have my reservations on this counter. As such, I will have to place a discount on LREIT when valuing it against other more established blue-chip REITs like CICT and MCT. With this, I will now move on to the next section of my analysis where I will share about the potential red flags that investors should be aware of.

Management Fee Structure

Often, when I try to look for clues regarding the alignment of interest between the sponsor and the unitholders, I would usually look at the way the management fee is being structured for a start. From an unitholders point of view, the key focus is to enjoy an ever increasing dividend i.e. DPU growth. Hence, the crucial thing to look out for in the management fee structure is for evidence that the management fee paid out to the REIT manager is directly/indirectly linked to the DPU distributed to the unitholders. Such a structure would incentivise the REIT manager to constantly grow the DPU which will in turn allow the REIT manager to earn higher management fees. Having taken a look at the management fee structure of LREIT, I have to say that I am pretty disappointed. I have extracted in the image below the management fee structure pertaining to LREIT.

Source: LREIT’s IPO Prospectus 2019

In the above screen grab, it is very obvious that there is a lack of evidence of any alignment of interest between the REIT manager and the unitholders. In particular, the performance fee is set at 5.0% per annum of LREIT’s NPI (before accounting for the Performance Fee in the relevant FY). This would encourage the REIT manager to expand inorganically via acquisition to boost its NPI so as to earn a higher management fee. However, if the acquisition is structured in a way that is dilutive to unitholders, unitholders will suffer a fall in DPU while the manager continues to earn a higher management fee. To give you an example of what a good management fee structure should look like, I have extracted the management fee structure for Mapletree North Asia Commercial Trust (MNACT) from its latest 1H FY20/21 presentation slides.

Source: MNACT 1H FY20/21 Presentation Slides

In the above image, you can clearly see that the performance fee is pegged to the difference in DPU in a financial year with the DPU in the preceding financial year. What this means is that unless the REIT manager manages to consistently grow the REIT’s DPU over time, it will not be entitled to any performance fee. This sort of management fee structure is exactly what I would like to see when I look to invest in a REIT. Since this was something that was missing in the case of LREIT, it makes me question whether the sponsor is really placing the interest of the unitholders first. 

Concentration Risk

Earlier at the start of this article, I had created a chart that shows LREIT’s portfolio breakdown by asset value. From that chart, it is apparent that LREIT suffers from a huge concentration risk as approximately 95% of its asset value is attributed to its 2 seed assets, 313@Somerset and Sky Complex. In particular, 313@Somerset alone makes up a staggering 66% of the entire asset value! This is a double-edged sort in my opinion. If the asset does really well, it will certainly deliver solid DPU growth for its unitholders but the converse is true as well. A prime example is MNACT, whose performance had been adversely affected as a result of the Hong Kong protest that started in early 2019. I have extracted the following diagrams from MNACT showing its portfolio valuation breakdown at the end of FY19/20 and its 5-years DPU trend.

Source: MNACT FY19/20 Annual Report and Presentation Slides

MNACT suffers from concentration risk given that 61% of its portfolio valuation is contributed by Festival Walk, an integrated retail and office development in Hong Kong. Do note that this concentration risk was even greater prior to its acquisition of several offices in Japan over the last few years. Prior to the Hong Kong protests that occurred in early 2019, MNACT had been delivering strong DPU growth for its unitholders as a result of strong positive rental reversion achieved at Festival Walk. However, there was a sharp drop in DPU in FY19/20, the year that the Hong Kong protests erupted as protestors stomped into Festival Walk and damaged its property. This is a perfect example of concentration risk at play as having a large exposure to Festival Walk was precisely the reason why MNACT was able to achieve strong DPU growth during good times. However, in bad times, in this case the unprecedented Hong Kong protests, the asset has weighed down on the overall performance of the REIT drastically.

Since 313@Somerset accounts for 66% of the REIT’s entire portfolio valuation, the performance of the REIT will be strongly correlated to the performance of 313@Somerset. Since the WHO announced COVID-19 as a pandemic in mid-March last year, world travel had come to a standstill. This had drastically affected prime retail malls on the Orchard/Somerset stretch due to their strong reliance on tourism receipts. I had previously put together a chart in my analysis of SGREIT that shows the relationship between the share price movement of the various retail S-REITs in 2020 and the chain of events as the COVID-19 pandemic unfolded. I have reused the chart below to draw some linkage to the concentration risk that LREIT suffers from.

 

If you look at the chart above, you could see that at one point, LREIT fell by a staggering 50% (alongside SGREIT) while other retail S-REITs peers only fell by about 40%. As per what is being taught in finance classes, risk is measured by the variance around the mean. A sharper fall than its peers as observed in the case of LREIT is a manifestation of a greater systematic risk that LREIT suffers from. Part of this risk is attributed to its concentration risk towards 313@Somerset which is reliant on tourist footfall to drive tenant sales. Hence, when world travel came to a standstill mid of last year, LREIT’s share price tanked by the most among all the retail S-REITs. However, its share price has recovered strongly ever since the announcement of the successful vaccine trial, and has even clawed all the way back up to $0.83 in mid-January, just 10% shy of its 52-week high. Such wild share price movement implies a larger risk that investors of LREIT have to stomach and this is something that I believe investors or potential investors in LREIT have to be wary of. 

Despite the huge concentration risk suffered by LREIT, I personally think that this is a risk that I am comfortable with. For one, this pandemic is likely a once in a generation kind of humanitarian disaster that we will face and if anything, it presents a strong buying opportunity for long-term investors. Secondly, unlike MNACT whose performance is strongly tied to the geopolitical situation in Hong Kong, LREIT is lucky in that it’s portfolio is predominantly exposed to Singapore. While some might argue that it is precisely because of Singapore economy’s openness and reliance on tourism that led to retail S-REITs with strong dependence on tourism dollars such as LREIT suffering the most, I do think that Singapore is in a much better position than Hong Kong or arguably any other major cities in the world in terms of its political stability and the effectiveness of the government. If anything, it’s ability to control the pandemic so well (despite a mishap earlier regarding its handling of the foreign workers dormitory) is an affirmation of the Singapore government’s ability to overcome all sorts of adversities. This has further rubber-stamped Singapore’s safe haven status as a preferred destination for foreign investors to park their money. 

Just to show that this isn’t all BS, I have extracted two news extract published on The Business Times and The Straits Times recently that proves the point that investors are still keen to invest in Singapore, with real estate remaining a key sector that funds are looking to deploy their capital in.

Source: Business Times

Source: The Straits Times

The above are just 2 of the many news articles that have been reported in the last one year that further highlights the overwhelming desire that foreign investors have to park their capital in Singapore. As such, I do think that REITs with good quality assets and a strong exposure to the Singapore market should continue to do well especially in a low-interest environment where people are “hungry for yield”. I had written an article in the beginning of January on why I think REITs as an asset class are good investments. In case you have not read it, you can click here  to access it.

Concluding Thoughts

I hope that after reading through my above analysis, you have a better idea of the key strengths of Lendlease Global Commercial REIT as well as the risks factors to watch out for going forward. Since LREIT had only been listed on the Singapore Exchange for just slightly under a year and a half, there is still insufficient data and historical precedence for us to truly establish whether this is ultimately a good REIT to invest in. If you had noticed, a fair portion of my analysis focuses more on the qualitative aspects such as establishing the quality of assets that might be injected into the REIT over the longer term. I do think that the sponsor has a very exciting portfolio of pipeline properties that could potentially be injected into the REIT but it is just not conducive for the REIT manager to conduct an equity fund raising that will allow it to carry out a DPU accretive acquisition as yet.

Source: Google

At its current price of $0.77, LREIT has recovered substantially since hitting an all-time low of $0.44 in April 2020. At this price, I do not think that there is going to be significant upside until life reverts back to normal and world travel normalises. More importantly, investors or potential investors who are looking into this counter should monitor its upcoming financial results closely to ascertain if there is any significant weakening of its operational metrics as I have discussed earlier. Due to the strong concentration risk attributable to 313@Somerset, metrics such as rental reversions and occupancy rate need to be watched closely to help identify if changes in its operating metrics are in line with the wider retail market or worse off.

Despite the near term challenges, I am still cautiously optimistic about this REIT in the longer term and would be more than happy to collect dividends while waiting for it to advance further when the economy fully recovers and tourism activities revert back to normality. Thank you for reading through my analysis and please do let me know your thoughts!

 

Please note that the information that I have shared are for informational purpose only. It represents my personal opinion and should NOT be taken as a business, legal, tax and investment advice.

4 thoughts on “Lendlease Global Commercial REIT – A Gem In The Making

  1. Great blog 💜 and thank you for this new post. I just realized I have two friends who also read your blog. They sent me your link 😸

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