Lendlease Global Commercial REIT (“LLGCR”) was listed on 2 October as a real estate investment trust with a principal objective to own in-producing real estate across the globe. The initial portfolio will comprise of full ownership stakes in two assets, retail mall 313@somerset (Singapore) and office asset, Sky Complex (Italy).
Merits:
1) Only 2 assets which makes valuation easier.
Merits:
1) Only 2 assets which makes valuation easier.
Lendlease Global Commercial REIT current portfolio of properties in Singapore and Milan, Italy, are high-quality properties. Moreover, the current stable of properties have a committed occupancy rate of 99.9%.
Sky Complex, is a freehold Grade A property comprising three buildings in Milan, Italy. It is 100% leased to Sky Italia, a television platform owned by Comcast Corporation, one of the largest broadcasting and cable television company in the world. It is leased out on a long lease of 12 years + 12 years, starting in 2008.
313@Somerset is a 99-year leasehold prime retail property in the heart of Orchard Road that none of us should be unfamiliar with. It is leased out to a diverse tenant base of 150 tenants across 14 trade sectors, and has a WALE of nearly 1.8 years. 58.9% of 313@Somerset’s leases have an in-built rental escalation of 3.0% to provide stable income growth.
Both properties are also leased out at favourable weighted average lease expiry (WALE) terms at 10.4 years by net lettable area (or 4.9 years by rental income).
I am sure covid-19 situation would have vastly improved by 4.9 years.
2) Dividend
Lendlease Global REIT will be distributing 100% of its adjusted net cashflow from operations till the end of FY2021, and thereafter, it will distribute 90% of its adjusted net cashflow from operations.
Estimated DPU for FY2021 will be 5.29cts, vs share price of $0.51.
That's a good 10.4% yield.
3) Discount to Book
Book value is $0.81, so its trading at P/B of 0.63x ,
rare for a good reit to trade at such valuation.
Risks
1) Pipelines of projects
Growth is definitely hindered. Unless the share price rises back to pre-covid level, i don't think sponsor will inject assets into Lendlease.
So investors got to make do with the current yield and cheap valuation until a day when price recover to above book value of 81cts
Updates:
313@Sommerset
Business operations:
– Tenant sales is expected to be lower for the next few months.
– Majority of the leases by NLA have been renewed for FY2020 with only approximately 5% by NLA is due for renewal in FY2021.
– Rental reversion for the coming quarters might be flat or negative due to weak demand.
-- Rent relief measures provided to tenants during circuit-breaker period will potentially weigh down LREIT’s performance in the coming quarters
Analysis:
1) Occupancy rate as of 31st March 2020 is 99.2%, which is still high. Lendlease will fully support the tenants during this Circuit Breaker period. With the 95% tenants' lease renewed till FY2021, it is sufficient to weather through this period of pandemic.
2) YTD net property income was $32.8 million of which $11.2 million ( 34%) is from Sky Complex, the rest from 313@Sommerset. Worst case for last quarter of FY2020, we are still looking at a base contribution from Sky Complex, Milan. 3rd Quarter distribution is 1.28cts, pending 4rd Quarter results.
Sky Complex, Milan
– Rental is expected to remain flat for FY2021.
Business operations:
– Long lease term till 2032
– Business is under essential services and its operations are continuing with broadcasting (without live audiences) still taking place within the premises.
Analysis:
Tenant is a media company with filming taking place in the building.
It is considered as a specialised building as it is renovated to cater to media industry usage, hence the long lease period.
This form the base income for Lendlease Commercial Reit.
I am sure covid-19 situation would have vastly improved by 4.9 years.
2) Dividend
Lendlease Global REIT will be distributing 100% of its adjusted net cashflow from operations till the end of FY2021, and thereafter, it will distribute 90% of its adjusted net cashflow from operations.
Estimated DPU for FY2021 will be 5.29cts, vs share price of $0.51.
That's a good 10.4% yield.
3) Discount to Book
Book value is $0.81, so its trading at P/B of 0.63x ,
rare for a good reit to trade at such valuation.
Risks
1) Pipelines of projects
Growth is definitely hindered. Unless the share price rises back to pre-covid level, i don't think sponsor will inject assets into Lendlease.
So investors got to make do with the current yield and cheap valuation until a day when price recover to above book value of 81cts
Updates:
313@Sommerset
Business operations:
– Tenant sales is expected to be lower for the next few months.
– Majority of the leases by NLA have been renewed for FY2020 with only approximately 5% by NLA is due for renewal in FY2021.
– Rental reversion for the coming quarters might be flat or negative due to weak demand.
-- Rent relief measures provided to tenants during circuit-breaker period will potentially weigh down LREIT’s performance in the coming quarters
Analysis:
1) Occupancy rate as of 31st March 2020 is 99.2%, which is still high. Lendlease will fully support the tenants during this Circuit Breaker period. With the 95% tenants' lease renewed till FY2021, it is sufficient to weather through this period of pandemic.
2) YTD net property income was $32.8 million of which $11.2 million ( 34%) is from Sky Complex, the rest from 313@Sommerset. Worst case for last quarter of FY2020, we are still looking at a base contribution from Sky Complex, Milan. 3rd Quarter distribution is 1.28cts, pending 4rd Quarter results.
Sky Complex, Milan
– Rental is expected to remain flat for FY2021.
Business operations:
– Long lease term till 2032
– Business is under essential services and its operations are continuing with broadcasting (without live audiences) still taking place within the premises.
Analysis:
Tenant is a media company with filming taking place in the building.
It is considered as a specialised building as it is renovated to cater to media industry usage, hence the long lease period.
This form the base income for Lendlease Commercial Reit.
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