LENDLEASE Global Commercial Real Estate Investment Trust (Reit) has issued S$200 million in perpetual securities at 4.20 per cent per annum, for the financing of potential investment opportunities among several other uses.

 

Lendlease Global Commercial Trust Management, the Reit' s manager, in a regulatory filing on Thursday, announced that the issuance under Lendlease Global Commercial Reit' s S$1 billion multicurrency debt-issuance programme will bear an initial rate of distribution of 4.20 per cent per annum for the first five years.

 

The first reset of the distribution rate will be on June 4, 2026 subsequent resets will take place every five years thereafter.

 

The proceeds will be used for the financing of potential acquisition and investment opportunities as well as for general working capital, capital expenditure requirements and refinancing of existing borrowings.

 

Following the issuance, Lendlease Global Commercial Reit' s aggregate leverage ratio is expected to drop to 31.3 per cent from 35.4 per cent as at March 31.

 

The perpetual securities were oversubscribed based on the initial target size of S$150 million. Lendlease Global Commercial Reit raised the issuance size to S$200 million and tightened the price to 4.20 per cent from the initial guidance of 4.35 per cent.

 

DBS and OCBC were the joint lead managers for the offering of the perpetual securities.

Lendlease Reit: JYEU 0% on Friday said its portfolio occupancy stood at 99.7 per cent as at March 31, down by a marginal 0.1 percentage point on year and unchanged from the previous quarter.

 

In a Q3 business update issued on Friday, its manager said the Reit' s (real estate investment trust) portfolio' s weighted average lease expiry (WALE) for the period stood at nine years by net lettable area (NLA) and 4.6 years by gross rental income (GRI). This was down from its WALE of 9.3 years by NLA and 4.9 years by GRI as at Dec 31, 2020.

 

The manager said it has completed about 98 per cent and 97 per cent of the expiring leases in FY2021 in terms of NLA and GRI, respectively.

 

It further noted that tenant sales at 313@somerset has recovered at a faster rate than visitation on a year-on-year basis at 94 per cent and 77 per cent respectively, as shopper spending continued to increase despite reduced footfall. Tenant retention rate for the mall stood at around 62 per cent as at end-March.

 

313@somerset' s multifunctional event space has notably been " substantially leased" to live entertainment company Live Nation as the anchor tenant. Lendlease Global Reit' s manager expects to the event space - where development works are expected to commence in H2 of 2021 and complete in 2022 - to draw constant footfall and boost tenant sales in the mall going forward.

 

Highlighting Jem' s new anchor tenant Ikea, the manager says the ability to bring in new and established brands to the mixed-used asset will reinforce Jem' s positioning as a dominant mall in the west of Singapore.

 

Lendlease Global Reit' s Grade-A office in Milan, Sky Complex, remains 100 per cent leased to Sky Italia, a subsidiary of Comcast Corp. The Reit manager says a newly appointed property manager for the property has resulted in some cost savings for its unitholders.

 

It added that a positive interest and progress of developments in the Milano Santa Giulia district are expected to " accelerate the transformation" of the area into one of Milan' s key decentralised office and mixed-use destinations.

 

Despite noting improving demand indicators in the overall retail landscape, Lendlease Global Reit' s manager believes the retail sector has yet to reach full recovery and expects leasing demand to remain weak in the short term.

 

" Alongside challenges from the growth of e-commerce and demand for experiential offerings, landlords may have to review their tenant mix and pivot their strategies. Nevertheless, the retail space market fundamentals continue to look encouraging with little supply expected in the Orchard Road micro-market over the next three years. This will lend support to modest leasing activities in the medium term," it said.

 

DBS Group Research on Thursday maintained Lendlease Global Commercial Reit (Lendlease Global Reit) as its top pick for an Orchard Road recovery play due to attractive risk-to-reward perspective.

 

The research team believes Lendlease Global Reit is " best leveraged" to deliver stronger metrics given its higher concentration in retail segments with greater upside potential. These segments are food and beverage, luxury, health and beauty, and IT and electronics.

 

Between Starhill Global Reit and SPH Reit, DBS prefers the former due to its discounted valuation and higher-income visibility from master and anchor leases.

 

Starhill Global Reit' s valuation - which appears to be low - is justified by a shorter lease term remaining of about 45 years compared with the 84 to 91-year range for its peers, DBS said.

 

On the same note, recovery is priced in at about S$4,450 price per square foot for SPH Reit' s Paragon mall. The research team also noted potential downside earnings from the potential non-renewal at the Metro department store in the coming few years.

 

DBS said its valuations for Orchard Road mall Reits " remain undemanding" and at a discount to sector average at 0.97 times price to net asset value. All three Orchard Road plays are trading at a current 30-80 basis point yield premium to the sector average of 5.8 per cent.

 

The research team has also noted that Orchard Road malls' shopper traffic and tenant sales lag the broader retail index, where sales have narrowed to pre-Covid-19 levels in December 2020.

 

" However, we believe that the trend will narrow, driven by various festivities in Q1 2021," DBS said.

 

It has a " buy" call for Lendlease Global Reit with a target price of S$0.90. The research team also has " hold" calls for both Starhill Global Reit and SPH Reit, with target prices of S$0.55 and S$0.80 respectively.

 

LENDLEASE Global Commercial Reit (Lendlease Global Reit) on Wednesday posted a H1 distribution per unit (DPU) of 2.34 Singapore cents for the six months ended Dec 31, 2020, up 0.8 per cent from the previous year' s DPU of 2.32 cents derived from annualised results.

 

Annualised results for the six months ended Dec 31, 2019 are based on the actual results from Oct 2, 2019 to June 30, 2020 prorated to 366 days, deducting for the Reit' s actual results from Jan 1, 2020 to June 30, 2020.

 

Gross revenue for H1 FY2021 rose 3.2 per cent year on year to S$41.6 million from S$40.3 million previously.

 

In its filing, the Reit manager said this was largely driven by the strengthening of the euro against the Singapore dollar for Sky Complex, as well as improved operational efficiency to reduce costs and conserve cash at 313@somerset.

 

Property operating expenses were S$11.2 million, up S$0.8 million or 7.6 per cent from a year ago. The higher expenses were mainly attributable to a S$1.5 million provision for doubtful debts which was partly offset by S$0.7 million of lower repair & maintenance expenses, salary & related expenses, property taxes, operating expenses and utilities expenses.

 

As such, net property income for H1 FY2021 rose 1.6 per cent to S$30.4 million from S$29.9 million in the previous annualised half year.

 

The latest H1 DPU translates to an annualised distribution yield of 6.36 per cent, which is 139 basis points above the previous year' s yield of 4.97 per cent.

 

The Reit' s portfolio occupancy as at Dec 31, 2020 stood at 99.7 per cent, with a weighted average leasehold expiry of 9.3 years by net lettable area (NLA) and 4.9 years by gross rental income (GRI). Approximately 2 per cent and 6 per cent of the portfolio NLA and GRI remain for renewal and review, respectively, in FY2021.

 

Lendlease Global Reit' s manager noted continued positive quarter-on-quarter traction in tenant sales and footfall at its prime retail asset 313@somerset, but warned of weak demand in the short term which may weigh on rental performance.

 

It added that stable revenue contribution from Sky Complex continues to mitigate downside risks during the Covid-19 pandemic.

 

Said Kelvin Chow, chief executive officer of the Reit manager: " We are encouraged by the improving signs seen in Singapore' s retail sales and the moderation in the rate of economic contraction in fourth quarter 2020.

 

" While leasing may continue to remain challenging in the near term, we believe that 313@somerset, given its prime location, will continue to attract new prospects to showcase their brands in this youth-oriented mall."

 

The first distribution for FY2021 will be for the period July 1, 2020 to Dec 31, 2020, and will be paid on or before March 31, 2021.

The Edge Singapore  Published on Wed, Feb 10, 2021 / 8:34 AM GMT+8 / Updated 1 hours ago