CGS International
August 7, 2025
Lendlease Global Commercial REIT: Financial Flexibility and Growth Prospects After Jem Office Divestment
Executive Summary: Key Takeaways from 2HFY25 Results
Lendlease Global Commercial REIT (LREIT), a prominent Singapore-listed real estate investment trust, has announced its 2HFY25 and FY25 results, revealing both challenges and opportunities. Distributable income grew 4.8% year-on-year, and the proposed divestment of Jem office for S$462 million promises to significantly strengthen financial flexibility and unlock new growth avenues. Despite a dip in DPU against forecasts, robust retail rental reversions and top-tier ESG credentials underscore the REIT’s resilience.
Financial Highlights: Revenue, Income, and Divestment Impact
2HFY25/FY25 DPU: 1.8/3.6 Scts, below forecast at 45.6%/91.1%
Revenue growth: 2HFY6/25 revenue up 1.9% YoY; NPI up 2.7% YoY
Distributable income: 4.8% YoY increase in 2HFY25
Year-end valuation uplift: Portfolio values increased 2.2%
Average cost of debt: Declined 8bp QoQ to 3.46% in 4QFY25
Interest coverage: Improved QoQ to 1.6x at end-FY25
Proposed Jem office sale: S$462m; proforma gearing expected to fall from 42.6% to 35%
Divestment gain: S$8.9m, potentially distributable to unitholders
Singapore retail exposure: Increases to 85% of portfolio value (from 60%)
Operational Performance: Retail and Office Portfolio Updates
Retail rental reversion remains strong at +10.2% for FY25
Jem and 313@somerset committed occupancy: 99.8% and 98.8%
Retail tenant sales: Fell 5.1% YoY; shopper traffic rose 1.3% YoY
Tenant transition: Fit-out works as Cathay Cineplexes exits and Shaw Theatres enters
New tenants: Casa Vostra (Jem), Ottie pancakes (313@somerset)
Milan office portfolio: +1.7% rental uplift for Buildings 1 and 2; Building 3 occupancy at 31%
Multifunctional event space: 48,200 sq ft next to 313@somerset, on track for completion in 2H26F
Financial Review: DPU, Asset Leverage, and Balance Sheet
| Jun-24A | Jun-25A | Jun-26F | Jun-27F | Jun-28F | |
|---|---|---|---|---|---|
| Gross Property Revenue (S\$m) | 220.9 | 206.5 | 195.8 | 193.4 | 200.7 |
| Net Property Income (S\$m) | 165.3 | 148.8 | 139.3 | 136.6 | 142.0 |
| Net Profit (S\$m) | 79.5 | 109.1 | 70.2 | 69.1 | 74.1 |
| Distributable Profit (S\$m) | 91.36 | 87.57 | 90.06 | 94.16 | 99.74 |
| DPS (S\$) | 0.038 | 0.036 | 0.036 | 0.037 | 0.039 |
| Dividend Yield | 6.69% | 6.22% | 6.30% | 6.49% | 6.78% |
| Asset Leverage | 40.2% | 42.0% | 34.3% | 34.3% | 34.3% |
| BVPS (S\$) | 0.76 | 0.75 | 0.74 | 0.72 | 0.71 |
| P/BV (x) | 0.75 | 0.77 | 0.78 | 0.79 | 0.81 |
| Recurring ROE | 4.37% | 5.99% | 3.84% | 3.78% | 4.07% |
Key DPS estimate reductions:
FY26F: -8.64%
FY27F: -6.95%
Peer Comparison: SREIT Sector Overview
The report provides a detailed breakdown of peer REITs in Singapore across hospitality, industrial, office, retail, overseas-centric, and healthcare sectors, focusing on price performances, asset leverages, and dividend yields.
| Company | Ticker | Price (LC) | Target Price (LC) | Mkt Cap (US\$m) | Asset Leverage | Price/NAV | Dividend Yield FY25F | Dividend Yield FY26F | Dividend Yield FY27F |
|---|---|---|---|---|---|---|---|---|---|
| CapitaLand Ascott Trust | CLAS SP | 0.88 | 1.13 | 2,593 | 39.6% | 1.12 | 7.0% | 7.2% | 7.3% |
| CDL Hospitality Trust | CDREIT SP | 0.77 | 0.75 | 758 | 42.0% | 1.48 | 5.5% | 6.2% | 6.7% |
| Far East Hospitality Trust | FEHT SP | 0.59 | 0.74 | 919 | 32.8% | 0.92 | 6.4% | 6.6% | 7.0% |
| Frasers Hospitality Trust | FHT SP | 0.70 | NA | 1,048 | 35.0% | 0.64 | 4.6% | 5.0% | 5.2% |
| Industrial, Office, Retail, Overseas-centric, and Healthcare REITs also analyzed in full detail in the report. | |||||||||
LREIT’s dividend yield is competitive in the retail REIT segment at 6.2% (FY25F), 6.3% (FY26F), and 6.5% (FY27F).
Major retail peers: CapitaLand Integrated Commercial (4.9–5.5%), Frasers Centrepoint Trust (5.5–5.8%), Starhill Global REIT (6.7–6.9%).
ESG Leadership: Sustainability as a Value Driver
LREIT stands out for its environmental, social, and governance credentials:
2023 GRESB: 5-star rating; Global Sector Leader in Retail
Regional Sector Leader for Asia Retail (Overall and Listed) for fourth straight year
A rating for public disclosure (2023)
313@somerset and Jem: BCA Green Mark Platinum certifications
Sky Complex: LEED Gold certification
Achieved net zero carbon (Scope 1 & 2) in Aug 2022, ahead of 2025 target
Mission Zero: Absolute zero carbon emissions by 2040 (Scopes 1, 2, & 3)
FY23: Water, energy, and GHG emissions intensity reduced by 14%, 18%, and 18% vs. FY22 baseline
Sustainability-linked loans: ~85% of total committed debt
Balance Sheet and Cash Flow
Total investments: S$3,849m (Jun-25A), projected to S$3,397m (Jun-26F) post Jem sale
Total cash & equivalents: S$42m (Jun-25A), S$32m (Jun-26F)
Short-term debt: S$314m (steady through FY28F)
Long-term borrowings: S$1,326m (Jun-25A), S$864m (Jun-26F onward)
Shareholders’ equity: S$1,827m (Jun-25A), S$1,829m (Jun-26F)
Gross interest cover: 1.93x (Jun-25A), projected to rise to 2.50x by Jun-28F
Dividend payout ratio: Fluctuates from 80% to 135% over forecast period
Major Shareholders and Trading Metrics
Market cap: US$1,096m / S$1,407m
Average daily turnover: US$2.44m / S$3.14m
Shares outstanding: 2,447m
Free float: 71.4%
Major holders: Lendlease SREIT PTY LTD (29.0%), Temasek Holdings (4.9%), BlackRock Inc (4.9%)
Price Performance and Analyst View
Current price: S$0.575
Target price: S$0.67 (previous: S$0.69)
Up/downside: +16.5%
Analyst rating: Add (reiterated)
FY26F dividend yield: Attractive at 6.3%
Price performance: 1M (+9.5%), 3M (+11.7%), 12M (+1.8%)
Relative performance: 1M (+5.6%), 3M (+3.5%), 12M (-41.6%)
Potential Catalysts and Risks
Upside catalysts:
Faster backfilling of Milan Sky Complex Building 3
Quicker repair of credit metrics, especially interest coverage ratio
Growth opportunities post-divestment
Downside risks:
Weak rental reversions
Slowdown in consumer spending affecting tenant sales and rental pricing power
ESG and Governance: Sustainable Investing Focus
LREIT’s sustainability efforts not only improve operational efficiency and long-term financials but also enhance attractiveness to ESG-focused funds. The REIT’s commitment to green financing and resource reduction targets positions it favorably within the investment community.
Recommendation Framework and Ratings Distribution
“Add”: Expected total return >10% over next 12 months
“Hold”: Expected total return between 0% and +10%
“Reduce”: Expected total return <0%
Sector ratings: Overweight, Neutral, Underweight; based on market cap-weighted recommendations
Country ratings: Overweight, Neutral, Underweight; relative to benchmark
Current distribution:
Add: 70.6% (1.1% investment banking clients)
Hold: 20.5% (0.5%)
Reduce: 8.9% (0.5%)
Conclusion: LREIT Positioned for Growth and Resilience
Lendlease Global Commercial REIT’s strategic divestment of Jem office is a pivotal move to strengthen its balance sheet and prepare for future growth opportunities. While near-term income dips are expected, robust retail fundamentals, strong ESG credentials, and improved gearing set the stage for long-term value creation. The attractive dividend yield, strong occupancy rates, and sustainability leadership make LREIT a compelling addition to a diversified REIT portfolio.
Contact Analysts
– LOCK Mun Yee: [email protected] – LI Jialin: [email protected]
Investors and market watchers should monitor LREIT for developments in retail leasing, ESG progress, and strategic asset repositioning, as these factors will shape future performance and shareholder returns.
