A real estate investment trust(REIT) provides investors with stable income streams and capital appreciation through investing in real properties. Investors intending to reduce large price fluctuations may find the REIT suitable investment tools in their portfolios.
REIT investments comprise residential, commercial, and specialized industries like healthcare and technology. You should be careful in choosing an appropriate company for your hard-earned money.
Lendlease Global Commercial REIT( JYEU.SGX) looks to fit the two criteria: 1. Steady income; 2. Capital appreciation potential. If you intend to invest in the Lendlease REIT, you should know more than the above before you act.*
Read also How To Invest in Property Without Owning One.
Profile
The real estate trust performance market is various. A careful examination is essential. Lendlease global commercial REIT(JYEU, SGX), locally registered and listed in the Singapore stock market since October 2019, holds two flagship projects domestically and in Italy. They are 313@somerset in Singapore and Sky complex in Milan, Italy.
Despite few assets on hand, Lendlease REIT has actively participated in some significant project developments. You shouldn’t underestimate their potential.
Assets
1. 313@Somerset – one of the core projects of Lendlease Global Commercial REIT. It is a retail and commercial property – a shopping complex. As it has a 99-year lease contract, you may like the fact the property can provide a long-term income stream, shopper traffic and a steady tenant sales.The occupancy rate is still high despite the pandemic. The reasons are:
- a. 313@somerset lies at the heart of Singapore.
- b. The property has invited premium brands like Paris Baguette, Skechers, and Josh’s Grills for long-term tenancy.
2. Sky Complex – Situated in the prime area of Milan, Italy, comprises three office buildings. You may be surprised the whole asset is for a quality tenant – Sky Italia. A subsidiary of Sky TV owned by Comcast(CMCSA), a US-listed entertainment conglomerate.
What’s more, the Sky complex is a freehold property. It means Lendlease REIT owns it as long as it sells it. You may be happy to know the lease term is 12+12 years, with the earliest expiry date of May 2032. It isn’t difficult to forecast a long and steady income to the trust.
Lendlease Global Commercial REIT Portfolio (as of 30 June 2020)
| 313@Sommerset | Sky Complex | |
| Appraisal value | S$1 billion | S$4.3billion |
| Net lettable area | 288,277 square feet | 985,967 squared feet |
| Ownership | 100% (99-year lease-hold) | 100% (freehold) |
| Occupancy | 97.8% | 100% |
| Valuation cap rate | 4.25% | 5.25% |
Diversified Portfolio Performance
Lendlease Global Commercial REIT still performs well despite the pandemic. The overall occupancy rate remains above 95%. Besides, the sales have been gradually bouncing back to 70% of the pre-pandemic time. Thanks to its principal investment strategy to invest directly and indirectly to a diversified portfolio of income-producing assets.
Moreover, the net property income has increased from 29.9M Singapore dollars 1H20’ dollars to 30.0M 1H21’(annualized). It performs above average at the time of the pandemic.
Total Portfolio Occupancy
| Combined Appraisal Value | S$1.4billion |
| Occupancy | 99.50% |
| Combined Net Lettable Area(NLA) | 1.3million squared feet |
| Weighted Average Lease Expiry(WALE) | 9.7 years for NLA(net lettable area)
4.9 years for GRI(gross rental income) |
Distributable Income Per Unit(DPU)
DPU refers to income distributed to a unitholder of a REIT. Owing to the pandemic, the distributable income for 2020 is S$3.05 per share, lower than the management forecast and the peers’ performance. One thing is sure: Lendlease REIT is still committed to distributing 100% of its income to shareholders.
Gross Revenue and Net Property Income
As is the case with DPU, hit by the pandemic, the revenue and income for 2020 are S$55.5M and S$40.3M, short of market expectation. However, the occupancy rate remains high due to tactical strategies, including using concessions with tenants.
Revenue and Net property income for 1H21 with S$41.6M and S$30.4M are slightly better than 1H20 withS$ 40.3M and S$29.9M.
Healthy Balance Sheet
Lendlease REIT still maintains a sound debt status. Its gearing ratio is about 35%, well below the industry level. It means the trust retains potent financing ammunition for future development.
Projects on Pipeline
Lendlease REIT is also active in taking part in property projects around Singapore. The following is in the process:
- Parkway Parade
- Jem(Lendlease REIT owns 3.75% through 15.10% of the ownership of Lendlease Asia Investment Fund 3)
- PLQ
- Grange Road Carpark
- Paya Lebar Quarter (PLQ)
- PoMo
Current Valuation
Lendlease Global Commercial REIT(JYEU, SGX) sponsor is Lendlease Group(LLC, ASX). Headquartered in Australia and listed on the Australian Securities Exchange, has a total market capitalization of A$8.3 Billion.
Lendlease Group has operations all across the Americas, Europe, and Asia besides Australia. Started as Lendlease Corporation Limited in 1958 in Australia, Lendlease is a global real estate company operating in more than 40 countries worldwide.
Lendlease Global Commercial REIT(JYEU, SGX) has a market value of S$1.04 Billion.
The Price to Net Asset Value(P/NAV) ratio is about 1, that said, the share price equals the book value. The dividend rate is 4.18%.
Our Verdict
The current share price is within an acceptable range; however, a 4% or more dividend yield is attractive for long-term income investors. As Lendlease Global Commercial REIT(JYEU.SGX) mainly operates a high-quality portfolio, it gives confidence for investors demanding mid-to-long term and sustainable income. We treat it as a long-term investment.
Final Words
To recap, you may consider the following before buying the stock:
- A reasonable price-NAV ratio
- An attractive dividend yield
- High quality of a leading international property
- A robust backup sponsor – Lendlease group
You may think the investment opportunities are around the corner, just like a quality stock investment. But you may need financing to leverage the opportunities.
Instant Loan may help you find out the best rates. You can request up to three free loan quotes for the best loan offers and reduce your financing costs to a minimum.
Read also Review on the 10 Best REITs Singapore and Why They Are Popular (2021).
