CGS International May 8, 2025
Lendlease Global Commercial REIT: Stable Occupancy, Strategic Asset Recycling, and Attractive Yield Maintained
Portfolio Performance Remains Resilient in 3QFY25
Lendlease Global Commercial REIT (LREIT) reported a stable portfolio committed occupancy of 92.1% as at the end of 3QFY25. This performance was significantly bolstered by a robust retail occupancy rate of 99.5%. The office portfolio recorded an occupancy of 86.6% during the same period.
In his first results briefing since taking over as CEO of LREIT’s Manager on April 1, 2025, Mr. Guy Cawthra outlined key priorities. These include optimizing portfolio performance, actively managing assets and capital to reduce gearing, and driving income growth. Initiatives to sustain income growth involve ramping up leasing for Building 3 in Milan and enhancing retail rents through active asset management and the introduction of new-to-portfolio tenants.
Rental Reversions Show Continued Strength
Despite a challenging retail environment marked by a 5.1% year-on-year dip in tenant sales and a marginal 0.2% decrease in shopper traffic in 9MFY25, LREIT achieved robust rental reversions of +10.4% over the same period.
Management highlighted recent leasing activities, including signing a lease with Shaw Theatres to take over the space previously occupied by Cathay Cineplex. New tenants onboarded during the quarter include lululemon, Chagee, and 2nd Street.
The rent review for Jem Office was successfully completed in February 2025, resulting in a +13% rental uplift over the prevailing base rent for a five-year term, effective from December 2024. Occupancy at Building 3 of Sky Complex in Milan remained stable at 31% at the end of 3QFY25.
Development efforts continue, with the construction of a 48.2k sq ft multifunctional event space adjacent to 313 @Somerset progressing on schedule for completion in 2H26F.
Active Capital Management and Deleveraging Plans
LREIT’s gearing level stood at 38% at the end of 3QFY25. Management indicated that this level is likely to increase to approximately 43% following the partial refinancing of its S$200 million perpetual securities (with a call date in April 2025) through new debt issuance.
The adjusted interest coverage ratio (ICR) was reported at 1.5x at the end of 3QFY25. To address the anticipated increase in gearing and reduce the overall level, LREIT is actively exploring asset divestment opportunities. The potential sale of the Jem office is being considered as a medium-term strategy for deleveraging.
Investment Rating and Outlook
CGS International maintains an “Add” rating for Lendlease Global Commercial REIT, with an unchanged DDM-based target price of S$0.69.
The report projects an FY25F dividend yield of 7.8%. Analysts believe the current market price has already factored in the near-term capital management risks associated with gearing.
Potential catalysts for a re-rating of LREIT’s stock include faster-than-expected backfilling of Sky Complex Building 3 and the successful divestment of the Jem Office. These actions are expected to improve the REIT’s financial flexibility and restore its capacity for inorganic growth.
Conversely, key downside risks identified are weak rental reversions and a slowdown in consumer spending, which could negatively impact LREIT’s ability to price rents effectively.
Singapore REIT Peer Comparison
The report includes a comparison of LREIT against other Singapore REITs across various sectors as of May 8, 2025.
|
|
Rec. |
Price (LC)
as at
08 May 25 |
Target
Price (LC)
(DDM-based) |
Mkt Cap
(US \$m) |
Last
reported
asset
leverage |
Last
stated
NAV |
Price /
Stated
NAV |
Dividend Yield (%)
FY25F |
Dividend Yield (%)
FY26F |
Dividend Yield (%)
FY27F |
| Hospitality |
| CapitaLand Ascott Trust |
CLAS SP |
Add |
0.85 |
1.13 |
2,499 |
39.9% |
1.15 |
0.74 |
7.2% |
7.4% |
7.5% |
| CDL Hospitality Trust |
CDREIT SP |
Add |
0.79 |
0.87 |
767 |
41.8% |
1.48 |
0.53 |
6.6% |
7.7% |
8.0% |
| Far East Hospitality Trust |
FEHT SP |
Add |
0.56 |
0.74 |
866 |
31.2% |
0.92 |
0.60 |
6.9% |
7.0% |
7.1% |
| Frasers Hospitality Trust |
FHT SP |
NR |
0.63 |
NA |
773 |
35.0% |
0.64 |
0.98 |
4.1% |
4.4% |
4.8% |
| Simple Average |
|
|
|
37.0% |
0.71 |
|
6.2% |
6.6% |
6.8% |
| Industrial |
| AIMS AMP |
AAREIT SP |
NR |
1.23 |
NA |
754 |
33.7% |
1.26 |
0.98 |
7.4% |
7.3% |
7.5% |
| CapitaLand Ascendas REIT |
CLAR SP |
Add |
2.63 |
3.10 |
8,928 |
38.9% |
2.20 |
1.20 |
5.9% |
6.0% |
6.2% |
| ESR-REIT |
EREIT SP |
Add |
2.20 |
0.36 |
1,363 |
42.8% |
0.28 |
8.00 |
1.0% |
1.0% |
1.0% |
| Frasers Logistics & Commercial Trust |
FLT SP |
Add |
0.84 |
1.11 |
2,423 |
36.1% |
1.08 |
0.77 |
6.8% |
6.5% |
6.5% |
| Keppel DC REIT |
KDCREIT SP |
Add |
2.16 |
2.48 |
3,760 |
30.2% |
1.53 |
1.41 |
4.6% |
4.8% |
4.9% |
| Mapletree Industrial Trust |
MINT SP |
Add |
1.96 |
2.56 |
4,311 |
40.1% |
1.71 |
1.15 |
6.9% |
6.7% |
6.8% |
| Mapletree Logistics Trust |
MLT SP |
Add |
1.08 |
1.63 |
4,221 |
40.7% |
1.31 |
0.82 |
7.5% |
6.9% |
6.9% |
| Stoneweg European REIT |
SERT SP |
Add |
1.52 |
1.93 |
963 |
42.9% |
1.98 |
0.77 |
8.7% |
8.9% |
9.3% |
| Sabana Shariah |
SSREIT SP |
NR |
0.36 |
NA |
291 |
37.4% |
0.50 |
0.72 |
0.0% |
0.0% |
0.0% |
| Simple Average |
|
|
|
38.1% |
1.76 |
|
5.4% |
5.4% |
5.5% |
| Office |
| Keppel REIT |
KREIT SP |
Add |
0.86 |
1.08 |
2,559 |
42.1% |
1.24 |
0.69 |
6.3% |
6.7% |
6.8% |
| OUE REIT |
OUEREIT SP |
Add |
0.29 |
0.33 |
1,232 |
40.6% |
0.59 |
0.49 |
6.9% |
7.3% |
7.6% |
| Suntec REIT |
SUN SP |
Hold |
1.13 |
1.26 |
2,561 |
43.4% |
2.01 |
0.56 |
5.5% |
5.9% |
6.2% |
| Simple Average |
|
|
|
42.0% |
0.58 |
|
6.3% |
6.6% |
6.9% |
| Retail |
| CapitaLand Integrated Commercial |
CICT SP |
Add |
2.09 |
2.45 |
11,792 |
38.7% |
2.09 |
1.00 |
5.3% |
5.6% |
5.9% |
| Frasers Centrepoint Trust |
FCT SP |
Add |
2.26 |
2.70 |
3,526 |
38.6% |
2.22 |
1.02 |
5.4% |
5.5% |
5.7% |
| Lendlease Global Commercial REIT |
LREIT SP |
Add |
0.51 |
0.69 |
953 |
38.0% |
0.74 |
0.68 |
7.8% |
7.9% |
7.9% |
| Mapletree Pan Asia Commercial Trust |
MPACT SP |
Add |
1.19 |
1.48 |
4,836 |
37.7% |
1.78 |
0.67 |
6.7% |
7.0% |
7.1% |
| Paragon REIT |
PGNREIT SP |
Hold |
0.98 |
0.98 |
2,146 |
35.3% |
0.92 |
1.07 |
5.1% |
5.4% |
5.5% |
| Starhill Global REIT |
SGREIT SP |
Add |
0.50 |
0.60 |
877 |
36.2% |
0.69 |
0.72 |
7.3% |
7.4% |
7.5% |
| Simple Average |
|
|
|
37.4% |
0.86 |
|
6.3% |
6.5% |
6.6% |
| Overseas-centric |
| CapitaLand China Trust |
CLCT SP |
NR |
0.68 |
NA |
916 |
42.6% |
1.09 |
0.62 |
8.4% |
8.5% |
8.6% |
| Elite UK REIT |
ELITE SP |
Add |
0.30 |
0.35 |
232 |
43.0% |
0.40 |
0.74 |
10.0% |
10.0% |
10.0% |
| Manulife US REIT |
MUST SP |
Add |
0.06 |
0.13 |
107 |
60.8% |
0.23 |
0.26 |
0.0% |
45.9% |
53.3% |
| Sasseur REIT |
SASSR SP |
Add |
0.64 |
0.85 |
620 |
24.8% |
0.83 |
0.77 |
9.6% |
9.9% |
10.3% |
| Simple Average |
|
|
|
42.8% |
0.60 |
|
7.0% |
18.6% |
20.6% |
| Healthcare |
| Parkway Life REIT |
PREIT SP |
Add |
4.22 |
4.91 |
2,124 |
36.1% |
2.42 |
1.74 |
3.7% |
4.0% |
4.1% |
LREIT’s projected FY25F dividend yield of 7.8% compares favorably to the simple average yield of 6.3% for the Retail sector peers listed in the table. Its asset leverage at 38.0% is slightly below the Retail sector average of 37.4%.
Financial Summary and Projections
The report provides a financial summary for LREIT, including historical data and future projections.
| Profit & Loss (S\$m) |
Jun-23A |
Jun-24A |
Jun-25F |
Jun-26F |
Jun-27F |
| Rental Revenues |
204.9 |
220.9 |
213.4 |
225.2 |
234.4 |
| Other Revenues |
|
|
|
|
|
| Gross Property Revenue |
204.9 |
220.9 |
213.4 |
225.2 |
234.4 |
| Total Property Expenses |
(50.9) |
(55.6) |
(54.4) |
(58.8) |
(60.9) |
| Net Property Income |
153.9 |
165.3 |
159.0 |
166.4 |
173.5 |
| General And Admin. Expenses |
|
|
|
|
|
| Management Fees |
(18.9) |
(19.5) |
(19.8) |
(20.2) |
(20.5) |
| Trustee’s Fees |
(0.4) |
(0.4) |
(0.6) |
(0.6) |
(0.6) |
| Other Operating Expenses |
(3.8) |
(1.8) |
(4.8) |
(4.8) |
(4.8) |
| EBITDA |
130.9 |
143.5 |
133.9 |
140.9 |
147.6 |
| Depreciation And Amortisation |
|
|
|
|
|
| EBIT |
130.9 |
143.5 |
133.9 |
140.9 |
147.6 |
| Net Interest Income |
(50.7) |
(66.9) |
(73.5) |
(75.0) |
(76.1) |
| Associates’ Profit |
|
|
|
|
|
| Other Income/(Expenses) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
| Exceptional Items |
39.2 |
2.9 |
0.0 |
0.0 |
0.0 |
| Pre-tax Profit |
119.3 |
79.5 |
60.4 |
65.9 |
71.5 |
| Taxation |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
| Minority Interests |
|
|
|
|
|
| Preferred Dividends |
|
|
|
|
|
| Net Profit |
119.3 |
79.5 |
60.4 |
65.9 |
71.5 |
| Distributable Profit |
108.2 |
91.4 |
96.1 |
98.4 |
101.3 |
| Balance Sheet (S\$m) |
Jun-23A |
Jun-24A |
Jun-25F |
Jun-26F |
Jun-27F |
| Total Investments |
3,736 |
3,769 |
3,774 |
3,784 |
3,788 |
| Intangible Assets |
0 |
0 |
0 |
0 |
0 |
| Other Long-term Assets |
13 |
6 |
6 |
6 |
6 |
| Total Non-current Assets |
3,749 |
3,774 |
3,780 |
3,790 |
3,793 |
| Total Cash And Equivalents |
54 |
34 |
29 |
31 |
35 |
| Inventories |
0 |
0 |
0 |
0 |
0 |
| Trade Debtors |
4 |
8 |
8 |
8 |
9 |
| Other Current Assets |
12 |
9 |
9 |
9 |
9 |
| Total Current Assets |
70 |
51 |
46 |
48 |
53 |
| Trade Creditors |
58 |
55 |
54 |
58 |
61 |
| Short-term Debt |
434 |
358 |
288 |
198 |
518 |
| Other Current Liabilities |
1 |
0 |
0 |
0 |
0 |
| Total Current Liabilities |
492 |
413 |
342 |
256 |
579 |
| Long-term Borrowings |
1,079 |
1,178 |
1,277 |
1,396 |
1,100 |
| Other Long-term Liabilities |
25 |
26 |
25 |
27 |
28 |
| Total Non-current Liabilities |
1,103 |
1,204 |
1,302 |
1,423 |
1,128 |
| Shareholders’ Equity |
1,829 |
1,812 |
1,785 |
1,763 |
1,744 |
| Minority Interests |
2 |
1 |
1 |
1 |
1 |
| Preferred Shareholders Funds |
399 |
399 |
399 |
399 |
399 |
| Total Equity |
2,231 |
2,212 |
2,186 |
2,163 |
2,144 |
| Key Ratios |
Jun-23A |
Jun-24A |
Jun-25F |
Jun-26F |
Jun-27F |
| Gross Property Revenue Growth |
102% |
8% |
(3%) |
6% |
4% |
| NPI Growth |
104% |
7% |
(4%) |
5% |
4% |
| Net Property Income Margin |
75.1% |
74.8% |
74.5% |
73.9% |
74.0% |
| DPS Growth |
48.3% |
(17.4%) |
2.7% |
0.6% |
1.1% |
| Gross Interest Cover |
2.55 |
2.10 |
1.80 |
1.86 |
1.92 |
| Effective Tax Rate |
0% |
0% |
0% |
0% |
0% |
| Net Dividend Payout Ratio |
91% |
115% |
159% |
149% |
142% |
| Current Ratio |
0.14 |
0.12 |
0.13 |
0.19 |
0.09 |
| Quick Ratio |
0.14 |
0.12 |
0.13 |
0.19 |
0.09 |
| Cash Ratio |
0.11 |
0.08 |
0.08 |
0.12 |
0.06 |
| Return On Average Assets |
3.18% |
2.08% |
1.58% |
1.72% |
1.86% |
The financial forecasts indicate a slight dip in Gross Property Revenue and NPI in FY25F before returning to growth in FY26F and FY27F. DPS is projected to see modest growth after a decline in FY24A. Gross Interest Cover is forecast to decrease in FY25F before improving slightly. The Net Dividend Payout Ratio is projected to remain above 100% in the forecast period.
ESG Commitment and Highlights
LREIT has demonstrated strong performance in sustainability, receiving a 5-star rating in the 2023 Global Real Estate Sustainability Benchmark (GRESB) rankings. It was also recognized as a Global Sector Leader in Retail and retained its Regional Sector Leader status for Asia Retail (Overall) and Asia Retail (Listed) for the fourth consecutive year. The REIT achieved an A score for public disclosure in 2023.
Its Singapore properties, 313@somerset and Jem, hold the Building and Construction Authority’s (BCA) Green Mark Platinum certifications, while Sky Complex has a LEED Gold certification.
A significant achievement is LREIT’s attainment of its net zero carbon target for Scope 1 & 2 emissions in August 2022, three years ahead of its original 2025 goal. Under its Mission Zero initiative, LREIT targets absolute zero carbon emissions across Scopes 1, 2, and 3 by 2040. In FY23, LREIT exceeded its resource intensity reduction targets compared to FY22, reducing water, energy, and GHG emissions intensities by 14%, 18%, and 18% respectively.
The increasing integration of sustainable financing is evident, with sustainability-linked loans accounting for approximately 85% of LREIT’s total committed debt facilities as of September 2024. These continuous efforts in ESG are expected to have a positive impact on LREIT’s operations and financials in the long term and enhance its appeal to the sustainable investing community.
Important Disclosures
This report is distributed by CGS International Securities USA, Inc. in the United States and is considered third-party affiliated research. The views expressed are based on data believed to be correct and reliable at the time of issue. CGS International, its affiliates, and employees may have positions in securities mentioned and may conduct business with the covered company. The analyst certifies that the views expressed accurately reflect their personal opinions and were prepared independently. Compensation is not tied to specific investment banking transactions or recommendations. The report is for informational purposes and does not constitute an offer or solicitation to buy or sell securities. Investors are advised to seek independent financial advice. Distribution is restricted in various jurisdictions as outlined in the full report.
