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LREIT retains high occupancy with long WALE in 1Q

Samantha Chiew
Samantha Chiew11/5/2021 06:11 PM GMT+08  • 3 min read
LREIT retains high occupancy with long WALE in 1Q
Lendlease report positive momentum in 1Q business update.
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Lendlease Global Commercial REIT (LREIT) has managed to keep its portfolio occupancy high at 99.8% as at Sept 30, according to its latest 1QFY2022 ended September business update.

Along with its high occupancy rate, the REIT has retained a long weighted average lease expiry (WALE) of 8.5 years by net leasable area (NLA) and 4.4 years by gross rental income (GRI). Within the first three months of FY2022, the REIT’s manager had substantially de-risked leases expiring for the year to 4% and 11% by NLA and GRI respectively.

During the quarter, LREIT had also completed the acquisition of an additional stake in Jem, increasing its exposure in the resilient suburban retail segment and is expected to bring stable income to LREIT’s unitholders.

See: LREIT reports portfolio occupancy of 99.8% for 1QFY22, says increased stake in Jem will bring stable income

LREIT’s occupancy rate for [email protected] remained high at 98.9% with a high tenant retention rate of 90% as at end September, thanks to the manager’s proactive leasing strategy which focuses on tenant retention and refreshed new offerings to rejuvenate the mall. New tenants brought onboard include Marks & Spencer, Miniso, Playmade and Super Coconut.

Notwithstanding the Covi-19 restrictions implemented by the Singapore government, tenant sales continued to improve 14.1% y-o-y to $118.1 million in the first nine months of 2021.

See also: ESR plans to simplify business, "evaluate" Cromwell, monetise sub-scale REITs

Since the onset of the pandemic, the manager has stepped up to help LREIT’s tenants extend their brand communication with the consumers through the Lendlease Plus platform. A suite of in-app offerings such as flash sales, festive games and contactless redemption of promotional mechanics were launched. The manager has also held various promotions to support tenants’ operations during these times, including delivery promotions, to drive sales and footfall, both online and offline. These in-app offerings and campaigns were well-received by shoppers as well as LREIT’s tenants.

Meanwhile, Jem continued to demonstrate its attractiveness as a retail destination in the west of Singapore. In the coming months with new brands joining the mall, such as Huggs Collective, Flash Coffee and Coco.cado.

As part of Lendlease’s proactive asset management strategy to improve asset returns, enhancement works were carried out to create additional leasable space to unlock value at Jem. The space is currently occupied by Clippers Barber, an old-school barbershop with a modern revamp.

See also: Second Chance set to report higher 1HFY2023 net profit

For the REIT’s office portfolio, Sky Complex has continued to maintain its resiliency and generate stable income. Its tenant, Sky Italia, has been making timely rental payments and there are no rental arrears to-date.

Based on the manager’s observations on the ground, more employees have been returning to Sky Complex with safe distancing measures continuing to be in place. There is also an increase in the number of enquires on application of season parking in the buildings, which is a positive signal that more people are returning to the workplace.

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As at end-September, LREIT’s gross borrowings stood at $677.6 million with a gearing ratio of 34.3%. The group and REIT have undrawn debt facilities of $137.2 million-equivalent multicurrency to fund its working capital.

The weighted average debt maturity was 2.3 years with a weighted average running cost of debt of 0.90% per annum. LREIT also has a high interest coverage ratio of 8.8 times, which will provide a buffer from the debt covenant of 2.0 times. All of LREIT’s debt are unsecured for balance sheet flexibility.

Units in LREIT closed at 88 cents on Nov 5.

Photo: Lendlease

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