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3 Takeaways From Lendlease REIT’s 3Q22 Business Update

·3-min read
Jem Mall
Jem Mall

If you feel that it’s getting more crowded in the malls these days, you’re not wrong.

Malls, especially suburban retail ones, have been reminiscent of crowd levels to that seen pre-pandemic.

Attributable to efforts of the Singapore government opening up further, we will soon see an eventual return to pre-pandemic normalcy.

Lendlease Global Commercial REIT (SGX: JYEU), is a Singapore REIT that invests in real estate assets used primarily for retail and/or office purposes.

In its fiscal 2022’s third quarter (3Q22) business update, Lendlease Global Commercial REIT (Lendlease REIT) highlighted the suburban retail mix boost from Jem’s remaining acquisition.

Below are the three takeaways from Lendlease REIT’s 3Q22 business update:

1 . Full ownership of Jem delivers many benefits

On 22 April 2022, Lendlease REIT completed the acquisition of the remaining 68.2% stake in Jem.

As a result, the exposure of Lendlease REIT’s resilient and defensive suburban retail increased from 16.3% to 46.8%.

Source: Lendlease REIT, acquisition of remaining interests in JEM announcement

Source: Lendlease REIT, acquisition of remaining interests in JEM announcement

Lendlease REIT’s portfolio weighted average lease expiry (WALE) has also increased from 8.4 years to 8.9 years, post acquisition.

Jem has a strong quality tenant mix, such as Fairprice Extra, Cathay Cineplexes, Don Don Donki, Uniqlo, Koufu, and IKEA.

One interesting anchor tenant is the Ministry of National Development (MND).

MND has a 30 year master lease with Jem and  constitutes 12% of Lendlease REIT’s gross rental income.

Gross rental income weightage for essential services trades also increased from 52% to 59% post acquisition.

Source: Lendlease REIT, Gross rental income split between Essential Services Trades and Non Essential Services Trades

2. Increased footfall from tourists and office workers 

The importance of tourists cannot be overstated when it comes to mall footfall within the Orchard Road belt.

Lendlease REIT’s occupancy rate for its retail-heavy mall, 313@somerset, is 99.4%, with a 71.1% tenant retention rate as of 31 March 2022.

Its leasing strategy, focused on bringing a fresh and exciting mix to its shoppers, was an important factor in ensuring high occupancy and retention rates.

This was because 313@Somerset was relying on mostly domestic footfall during the pandemic period.

Singapore’s vaccinated travel framework that commenced in April 2022 will play an important role in bringing tourists’ back to the country.

This scheme will have a direct positive effect for 313@Somerset.

Moreover, with all workers allowed to return to work from 26 April 2022, compared to the 75% limit previously, the mall should enjoy increased footfall and tenant sales.

3. Possible acquisition of Paya Lebar Quarter

With the acquisition of the remaining stake in Jem and the strength of the suburban retail mix, one may wonder about another similar mall under Lendlease Corporation Limited; Paya Lebar Quarter (PLQ).

Lendlease REIT’s sponsor, Lendlease Corporation Limited, currently owns 30% of PLQ; with the remaining 70% held by the Abu Dhabi Investment Authority.

As to whether Lendlease REIT will fully acquire PLQ, like how it did with Jem, is something investors would hope to see.

This will be a catalyst to watch down the road as the injection of PLQ will count as a suitable growth strategy for Lendlease REIT.

At a unit price of S$0.80, Lendlease REIT sports a dividend yield of 5.9% (based on the REIT’s trailing 12-month distributions), and a price-to-book (P/B) ratio of 0.99x.

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Disclaimer: Kent Lee does not own shares of any of the companies mentioned.

The post 3 Takeaways From Lendlease REIT’s 3Q22 Business Update appeared first on The Smart Investor.

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