Lendlease Global Commercial REIT’s Strategic Jem Office Divestment, Positive Rental Reversion, and Capital Optimisation Set To Reshape Portfolio in FY2026

Key Developments That Could Move Lendlease REIT’s Share Price:

• Completion of Jem Office Divestment by 12 November 2025 – Proceeds will significantly reduce leverage and provide a gain distributable to unitholders.
• Positive Retail Rental Reversion of 8.9% in Q1 FY2026 – Demonstrates strong asset quality and demand.
• Improved Portfolio Occupancy and Active Leasing Success – Occupancy stands at 95% and could adjust to 94.1% post-Jem divestment.
• Active Capital Management Reduces Cost of Debt – Weighted average cost of debt improved to 3.09% p.a., enhancing distributable income and financial resilience.
• Sustainability Achievements – Maintains GRESB 5 Star rating and awarded Regional Sector Leader, aligning with global ESG investment trends.

Detailed Analysis For Investors

1. Jem Office Divestment: A Transformational Move

Lendlease Global Commercial REIT (LREIT) is set to complete the divestment of its Jem Office asset by 12 November 2025. This deal is a cornerstone in the REIT’s capital recycling strategy. Upon completion:

• Net sales proceeds will be used to repay borrowings, cutting the aggregate leverage to approximately 35% on a proforma basis.
• Gain on disposal of S\$8.9 million (excluding certain fees) will be available for direct distribution to unitholders, a move that could materially impact upcoming distributions and returns.
• The sale will also trigger the breaking of associated hedges, potentially resulting in further interest cost savings.
• The Jem divestment will alter the portfolio mix, with Singapore assets dropping slightly in weight to 87% of total valuation, and the committed occupancy adjusting to 94.1%.

For shareholders, this is a price-sensitive event: it directly impacts leverage, distributable income, and portfolio composition, with possible positive implications for the share price due to the immediate gain and improved financial metrics.

2. Portfolio Optimisation, Leasing Momentum, and Occupancy Trends

LREIT’s proactive leasing and portfolio management strategies have yielded:

• Positive retail rental reversion of 8.9% in Q1 FY2026, reflecting strong tenant demand and the REIT’s ability to push rents higher even amid a challenging macro environment.
• Portfolio committed occupancy at 95%, with the Milan office portfolio showing a noteworthy rebound from 81.6% to 88.5% (with Building 3 being actively leased up).
• Tenant retention was at 52.2% (mainly due to the exit of Cathay Cineplexes, which has been immediately replaced by Shaw Theatres). Excluding this, retention would be a healthy 72.9%.
• The lease expiry profile remains well-staggered, and the weighted average lease expiry (WALE) stands at 7.0 years (to adjust to 4.7 years post-Jem divestment), providing visibility of income.

These factors signal robust operational execution and continued demand for LREIT’s properties, underpinning both income stability and growth.

3. Capital Management and Debt Optimisation

LREIT has taken decisive steps to further strengthen its balance sheet:

• Refinanced S\$200 million in perpetual securities with a combination of new issuance at lower coupons and loans at lower costs.
• Weighted average cost of debt reduced to 3.09% p.a. (from 3.46% at June 2025), in part due to lower coupon refinancing and interest savings from unhedged borrowings.
• Sustainability-linked financing now accounts for approximately 93% of total committed debt facilities.
• Interest coverage ratio (ICR) stands at 1.6x, with stress-tested sensitivities showing resilience even with a 10% decline in EBITDA or a 1% rise in interest rates.
• Gearing ratio remains at 42.7% as of September 2025 but is projected to fall to around 35% upon the Jem divestment.

The ability to lower financing costs and manage leverage amid a rising rate environment is likely to support both distributable income and valuation multiples.

4. Resilient Retail and Office Performance Amid Market Recovery

The portfolio continues to deliver:

• High occupancy in retail assets (99.6% at 313@somerset and Jem), with strong leasing momentum from sectors like F&B, beauty & health, and fashion.
• Tenant sales dipped slightly by 0.8% year-on-year, but visitation grew by 7.7%, reflecting successful marketing and activation campaigns, especially at 313@somerset.
• New-to-portfolio tenants (e.g., 5:59+ Café & Bistro, Hakka Yu, Xiang Xiang Hunan Cuisine, Old Tea Hut, and Moomoo’s first experience store) indicate dynamic tenant curation and sustained consumer engagement.
• Office segment rental uplift of 1.7% in Milan, driven by annual CPI-linked reviews and successful leasing in Building 3.

The strong leasing momentum and diversified tenant base (top three sectors: F&B, Fashion & Accessories, Broadcasting) provide both stability and growth prospects.

5. Sustainability Leadership and Strategic Project Pipeline

LREIT’s sustainability credentials are market leading:

• GRESB 2025 Regional Sector Leader (Retail Asia, Listed) and 5-Star rating for sixth consecutive year.
• Progressing towards Net Zero Carbon by FY2025 (Scope 1 & 2) and Absolute Zero Carbon by FY2040 (Scopes 1, 2, and 3) – a key differentiator for ESG-focused investors.

On the project pipeline front:

• Construction of a multifunctional event space adjacent to 313@somerset is underway and expected to complete in 2H 2026, further strengthening the REIT’s presence in the youth-centric Somerset precinct.
• Parkway Parade (10% stake) continues to deliver high occupancy (97.6%) and is poised to benefit from the completion of Marine Parade MRT and asset enhancements.

6. Market and Strategic Outlook: Singapore Focus and Asset Optimisation

LREIT’s strategy is to maintain a Singapore-centric portfolio, seeking further growth opportunities locally and considering non-core disposals when accretive. The REIT benefits from:

• Strong sponsor alignment with Lendlease Corporation (local expertise, 29% stake in LREIT, over \$6 billion Singapore portfolio).
• Top-quality suburban and prime retail assets with long leaseholds, ensuring both asset quality and tenure security.
• Industry tailwinds: Retail sales up 4.6% YoY (excluding motor vehicles), tourism recovery, and limited new retail supply underpinning rental growth (projected at 2.3% in 2025).
• Office market strength: Islandwide rents up 1.2% QoQ and decentralised vacancy down to 6.5%.

Conclusion: Price-Sensitive Catalysts That Could Move the Share Price

The imminent Jem office divestment is a major price-sensitive event that will unlock value, de-lever the balance sheet, and directly boost unitholder distributions. Combined with positive rental reversions, high occupancy, and robust capital management, LREIT is positioned for sustainable income growth and potential re-rating. Shareholders should closely watch the completion of the Jem divestment and subsequent capital redeployment, as well as continued leasing traction and sustainability milestones for further upside catalysts.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or an offer to buy or sell any securities. Please consult your financial advisor before making investment decisions. The information is based on the Q1 FY2026 Lendlease Global Commercial REIT business update as at 30 October 2025. Actual outcomes may differ due to market and company-specific factors.

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