LENDLEASE GLOBAL COMMERCIAL REIT (SGX:JYEU)
Lendlease Global Commercial REIT - Demonstrating Resilience
- 313@Somerset’s 3QFY21 occupancy was 98.6%; portfolio occupancy 99.7%. Tenant sales/ footfall recovered to ~94%/77% in Jan - Mar 21.
- Rental reversions improved q-o-q albeit still in negative territory. Lendlease Global Commercial REIT expects minimal impact from retail code of conduct.
- We reiterate our ADD call with a DDM-based target price of S$0.86.
Lendlease REIT's 3QFY21 occupancy remained high, strong tenant sales recovery
- Lendlease Global Commercial REIT (SGX:JYEU) maintained a healthy overall occupancy of 99.7% with a long WALE of nine years by NLA (1HFY21: 9.3 years). 313@Somerset’s (313) occupancy was relatively unchanged at 98.6% with tenant retention rate improving to 62% (1HFY21: 59%) as of 31 Mar 2021.
- Lendlease Global Commercial REIT reported stronger tenant sales recovery at ~94% in Jan-Mar 21 while footfall recovered to ~77% over the same period. Rental reversions have improved q-o-q, albeit still in negative territory according to the manager.
Development plans on track; minimal impact from new Retail Code of Conduct (CoC)
- Despite the recent tightening of COVID-19 restrictions in Singapore in May 21, the manager expects the Grange Road development works to be on track to commence by 2H21F and completed by 2022.
- Lendlease Global Commercial REIT also expects minimal impact from the Retail Code of Conduct (CoC) which the manager estimates to be less than 1% of revenue. The CoC is not retrospective and only applies to leases signed from 1 Jun 2021.
- Lendlease Global Commercial REIT presently has ~3% of leases by portfolio GRI expiring in FY21F.
Continued development of precinct surrounding Sky Complex
- Sky Complex’s occupancy continues to be at 100% and its long lease structure with annual escalations pegged to Italy’s CPI continues to provide resilience to the portfolio, in our view. The Milano Santa Giulia district is also seeing good progress with development projects expected to obtain approvals by end-2021 according to the manager. This should raise the overall attractiveness of Lendlease Global Commercial REIT’s properties as the area is set to transform into one of Milan’s key decentralised office and mixed-use destinations in our view.
- Lendlease Global Commercial REIT remains well capitalised with gearing at 35.4% and interest coverage at 7.7x.
- Lendlease Global Commercial REIT does not face refinancing risks until FY23F.
Reiterate ADD with a DDM-based target price of S$0.86
- We reiterate our ADD call on Lendlease Global Commercial REIT, with a DDM-based target price of S$0.86. The share price is trading at ~6.0% yield and 0.9x P/BV vs 1.1x pre-COVID-19 (Jan 20).
- While we expect Lendlease Global Commercial REIT to face rental pressures in FY21F as its tenants continue to face uncertainties from COVID-19 headwinds, we believe annual rental escalations in ~60% of the mall’s NLA, the long lease structure of Sky Complex, and the 44,200 sq ft Grange Road redevelopment (expected to be operational in 1H22) will be able to cushion negative rental reversions for renewed leases going forward.
- See
- Re-rating catalysts/downside risks include faster/slower-than-expected recovery from the COVID-19 outbreak.
EING Kar Mei CFA
CGS-CIMB Research
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LOCK Mun Yee
CGS-CIMB Research
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https://www.cgs-cimb.com
2021-05-07
SGX Stock
Analyst Report
0.858
SAME
0.858
