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Lendlease Global Commercial REIT posts 32.8% higher 2H21 DPU of 2.34 cents

Atiqah Mokhtar
Atiqah Mokhtar • 4 min read
Lendlease Global Commercial REIT posts 32.8% higher 2H21 DPU of 2.34 cents
FY2021 DPU stood at 4.68 cents.
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Lendlease Global Commercial REIT (LREIT) has reported distributable income of $27.6 million for the 2HFY2021 ended June, an increase of 33.5% y-o-y.

This brings FY2021 distributable income to $55.1 million, an increase of 15.3% y-o-y.

Distribution per unit (DPU) stood at 2.34 cents for the 2HFY2021, up 32.8% y-o-y, while DPU for the FY2021 stood at 4.68 cents, up 14.6% y-oy.

Gross revenue for the 2HFY2021 rose 8.5% y-o-y to $37 million, driven by lower rental waivers granted to the tenants at 313@somerset and higher revenue from Sky Complex due to foreign exchange.

See also: Lendlease Global Commercial REIT to increase stake in Jem for a total of up to $347 mil

The increase in gross revenue has resulted in a higher net property income (NPI) of $26.5 million for 2HFY2021, up 10% y-o-y.

For FY2021, gross revenue and NPI increased 5.6% and 5.4% y-o-y to $78.7 million and $56.9 million respectively.

Property expenses in FY2021 were $1.3 million, 6.3% higher y-o-y, mainly due to the provision of $2.3 million doubtful debts amid the impact of Covid-19 on some tenants at 313@somerset. However, this was partially offset by lower marketing, insurance, salary & related expenses, operating expenses and utilities expenses.

Gross borrowings were $553.7 million as at June 30 with a gearing ratio of 32%, down from 35.4% as at March 31.

The weighted average debt maturity was 2.2 years with a weighted average running cost of debt of 0.88% per annum.

As at June 30, LREIT’s portfolio occupancy stood at 99.8%, with a weighted average lease expiry (WALE) of 8.8 years by net lettable area (NLA) and 4.5 years by gross rental income (GRI). LREIT’s aggregate portfolio property value stood at S$1.45 billion based on independent appraisals of LREIT’s investment properties.

313@Somerset’s occupancy rate climbed 0.6 percentage points to 99.2% as at June 30 on the back of three new tenants secured, while tenant retention rate stood at 61.5%. Tenant sales and visitation rose 33.7% and 6.2% y-o-y to $81.5 million and 11.4 million in 2HFY2021 respectively. During the same period, fashion & accessories and food & beverage tenants, which accounted for approximately 45% by portfolio GRI, continued to improve its sales by 37% y-o-y.

For its Sky Complex office building in Italy, the manager reports that the asset remains "resilient" with its tenant, Sky Italia making all its rental payments in a timely manner. In the near term, the manager expects the three grade A offices to remain resilient and continue to generate stable income for LREIT’s unitholders.

The manager also highlighted the strong approval by unitholders for the increase in indirect interest held in Jem, with 99.91% votes in favour of the proposal at the extraordinary general meeting held on July 26.

Post-completion of the acquisition, LREIT will have an enlarged portfolio size of up to $1.8 billion. “We are heartened and encouraged by the resounding support and decisive vote from our Unitholders. This is indeed an endorsement of confidence for the REIT, the Board and the Management team. We will continue to focus on optimising LREIT’s portfolio and its performance, and to deliver stable returns to our Unitholders,” says Kelvin Chow, CEO of the Manager.

Looking ahead, the manager anticipates demand for Singapore retail space to remain soft with the continued safe distancing measure and border closures being implemented, which will continue to weigh on rental performance.

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It has a more upbeat outlook for the Milan office industry, noting that business and consumer confidence continued to improve in June, while vacancy rates in Milan remained stable at 9.6% in the 1Q2021.

The manager also discloses that LREIT intends to make distributions to unitholders semi-annually and will distribute at least 90% of its adjusted net cashflow from operations for each financial year after June 30. The actual level of distribution will be determined at the manager’s discretion.

LREIT intends to distribute 100% of its adjusted net cashflow from operations for the period from its listing date of Oct 2, 2019 (being the date LREIT was listed) to the end of June 30.

Units in LREIT closed 0.5 cents or 0.58% lower at 86.5 cents on August 6.

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