Analysts from CGS-CIMB Research and PhillipCapital have kept their “add” and “accumulate” calls on Lendlease Global Commercial REIT (LREIT) with unchanged target prices of 85.8 cents and 82 cents respectively following the REIT’s 3QFY2021 update on May 7.

The continued development of the precinct surrounding LREIT’s Italian property Sky Complex, which is set to transform the area into one of Milan’s key decentralised office and mixed-use destinations, should raise the overall attractiveness of LREIT’s properties, according to CGS-CIMB analysts Eing Kar Mei and Darren Ong.

The REIT also remains well capitalised with gearing at 35.4% and interest coverage at 7.7 times. In addition, the REIT does not face refinancing risks until FY2023.

SEE:Lendlease Global Commercial REIT reports 99.7% portfolio occupancy in 3Q21 business update

The REIT’s current share price [as at May 7], according to Eing and Ong, “is trading at 6.0% yield and 0.9 times price-to-book value (P/BV) vs 1.1 times pre-Covid-19 ([in] January 2020)”.

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“While we expect LREIT to face rental pressures in FY2021 as its tenants continue to face uncertainties from Covid-19 headwinds, we believe annual rental escalations in 60% of the mall’s NLA, the long lease structure of Sky Complex, and the 44,200 sq ft Grange Road redevelopment (expected to be operational in 1HFY2022) will be able to cushion negative rental reversions for renewed leases going forward,” they write

To PhillipCapital analyst Tan Jie Hui, LREIT’s current share price [as at May 10] also translates to a 6.0% FY2021 distribution yield for a total potential upside of 10.8%.

On the back of the tighter restriction measures from May 8 to May 14, Tan says she expects footfall for LREIT’s [email protected] to be “compromised” though sales may hold up with more marketing campaigns and initiatives.

“LREIT may provide food delivery to help tenants tide through this period. We are not expecting any rental rebates, though,” she writes.

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“Sky Complex in Milan is expected to continue anchoring LREIT’s portfolio with its stable recurring income,” she adds.

As at 12.04pm, units in LREIT are trading 0.5 cent higher or 0.7% up at 77 cents, or 0.92 times P/NAV, according to PhillipCapital's estimates.