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Lendlease Global Commercial REIT reports portfolio occupancy of 99.0% in 1Q business update

Felicia Tan
Felicia Tan • 4 min read
Lendlease Global Commercial REIT reports portfolio occupancy of 99.0% in 1Q business update
The manager of LREIT intends to distribute 100% of its adjusted cash netflow from operations for the period ending June 30, 2021.
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The manager of Lendlease Global Commercial REIT (LREIT) has reported portfolio occupancy of 99.0% for the 1QFY2020 ended September with a long weighted average lease expiry (WALE) of 9.5 years by net lettable asset (NLA).

It adds that some 78% of its leases by NLA will expire only beyond FY2024.

During the quarter, tenant sales and footfall at 313@Somerset recovered some 70% and 60% of pre-Covid-19 levels respectively.

The mall had maintained an occupancy rate of 96% and tenant retention rate of 80% as at Sept 30. More recently, LREIT has secured a yet-to-be-named tenant that would improve the mall’s occupancy to 98.0%.

The manager says it will focus on capitalising on the mall’s strategic location along the Orchard Road belt to improve visitation and sales performance and to boost 313@Somerset’s image as the heart of the Somerset youth precinct through the redevelopment of the Grange Road car park into a new lifestyle destination.

Sky Italia, which has fully leased Sky Complex, LREIT’s office asset in Milan, Italy, says its business has remained “resilient” amid Covid-19 with safe management measures in place.

Sky Complex is on a long lease term with Sky Complex until 2032.

The manager of LREIT had, on Sept 1, appointed Lendlease Italy SGR S.p.A. as the alternative investment fund manager for Lendlease Global Commercial Italy Fund, which holds Sky Complex, to align its interest closely with LREIT’s unitholders.

The Milano Santa Giulia district, where Sky Complex is located, has been gaining positive traction and is an emerging key office location in the Milan Periphery submarket in recent years.

“We are fortunate to have fully leased our three freehold Grade A office buildings, Sky Complex in Milan, with a long lease term till 2032. Sky Complex is expected to be income resilience and mitigate downside risks during Covid-19,” says Kelvin Chow, CEO of the manager.

On LREIT’s prime retail asset in Singapore, 313@Somerset, Chow adds that “The safety of our shoppers, tenants and employees remains a top priority at Lendlease. The Singapore government’s move towards allowing more people to return to work and increasing the capacity for events and dining, will definitely be positive for malls as travelling overseas is still not readily allowed.”

“We stand ready to work in accordance with local guidelines to drive visitation to 313@somerset. We will also focus on retaining and engaging our tenants as we continue to build on our healthy and long-lease expiry profile to provide unitholders with regular and stable returns.”

See also: 313@somerset to go from 'strength to strength', DPU boost for owner Lendlease Global Commercial REIT: DBS

As at Sept 30, the group and LREIT have an uncommitted undrawn debt facility of $50 million and €30 million ($47.7 million) to fund its working capital.

As at Nov 3, LREIT has committed undrawn multi-currency revolving credit facility of $50 million.

Gross borrowings stood at $555.4 million as at Sept 30, equating to a gearing ratio of 35.6%. The weighted average running cost of debt was 0.86% per annum. LREIT’s weighted average debt maturity was 2.8 years.

The manager of the REIT says it expects leasing activity to remain challenging amid the Covid-19 situation and that retailers are remaining cautious as they adopt a wait-and-see approach.

“In the coming quarters, the Manager expects this cautious stance to put pressure on occupancy and rental reversion for 313@somerset. It remains committed to provide appropriate assistance to ensure business continuity of its retail tenants. On Sky Complex, no rental waiver is granted to Sky Italia and to-date, it has made all its rental payments in a timely manner,” it says.

According to the manager, LREIT intends to distribute 100% of its adjusted cash netflow from operations for the period of the listing date to the end of June 30, 2021.

In a separate announcement on the same day, LREIT’s trustee, RBC Investor Services Trust Singapore, has entered into an agreement with Lendlease Retail to renew a licence to grant access to the portal for the Lendlease Plus App for 313@Somerset.

Lendlease Retail is an indirect wholly-owned subsidiary of LREIT’s sponsor, Lendlease Corporation.

The current portal access licence agreement is for a term of six months that is effective from Jan 1, 2021, with a current contract value of some $0.3 million. The licence agreement provides the trustee with a non-exclusive licence to access the portal for the app and customer relationship management functionality module during the term.

The manager says it believes that the renewal of the agreement allows Lendlease Retail to achieve greater engagement with 313@Somerset’s customers.

The total value of the interested person transactions (IPTs) for the financial year commencing July 1, is approximately $45 million, which represents some 4.6% of the group’s latest audited net tangible assets (NTA) as at June 30.

As at 9.34am, units in LREIT are trading 0.5 cent higher or 0.8% up at 62 cents.

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