Lendlease Global Commercial REIT ("LREIT") has dipped below S$0.50 per unit to S$0.485 per unit as at 6 March 2025. This is even lower than the COVID period and also the SREIT price tumble last year- as a matter of fact, this is an all time 5 year crazy low for LREIT. Hence I have taken the opportunity last week to add on 10,000 units @ S$0.485 per unit after going through the below thoughts process as well as risk assessments.
1. LREIT Badly Battered By High Financing Cost and Empty Commercial Office in Milan
The higher interest cost has been severely affecting the results of LREIT. Moreover, the early termination of lease for a major tenant at its Commercial Office building Sky Complex added to its existing woes. So there is a key risk here if LREIT's leasing team is unable to fill up the vacant space fast enough.
2. Good News From LREIT on Singapore Office 13% Negotiated Rental Increase over 5 years.
On the Singapore JEM office front, there are positive upsides for LREIT With Singapore Office rental to Ministry of National Development at 13% Rental Increase.
3. Incredulous Distribution Yield of 7,42% From LREIT Relative to Risk Free Rate 10 Yr Govt Bond of 2.64%.
Based on 6mths ending 31 December 2024, S$0.018 per unit was distributed. Normalising this would be S$0.036 per unit on S$0.485 per unit which translates to 7.42% distribution yield. This is close to a +5% yield relative to a 10 year government risk free bond.
In addition, with inflation being tamed in the US as well as worsening marco-economic conditions, probability of more rate cuts will mean higher distribution income in the future for all unit-holders. This is surely good news.
Parting Thoughts
After consideration of the various market factors, I have thus added additional units into LREIT as I thought that the upside in terms of further reduction in financing costs as well as upsides from Singapore properties will more than outweigh the potential downside risk resulting from the Sky Complex tenancy woes.
(Note: On the CPF Ordinary Account front, I have recently invested S$20K of it into SGX REIT ETF. Will share more details on this in my future post).
congratulations on the new addition! I was contemplating, to add LREIT, CLCT or CLINT, or just increase my allocation in Ascott, lol... still thinking where to put my money
ReplyDeleteBro BFire, just buy all of them! Even if global economies don't go well, just earn as much dividends as possible while waiting for the rising tide to lift all boats. :)
DeleteDoes the 0.36 cents dividend already a include the lost rental from sky complex?
ReplyDeleteKey Highlights
Delete• Retail portfolio occupancy remained high at 99.9% while the office portfolio occupancy
improved to 86.6% from 81.7% in Q1 FY2025.
• Lower gross revenue and net property income (“NPI”) mainly due to the absence of supplementary rent in relation to the lease restructure of Sky Complex (“Supplementary Rent”)
. On a proforma basis after adjusting for the Supplementary
Rent, gross revenue for 1H FY2025 was 0.4% higher whilst NPI was 2.2% lower YoY.
• Higher finance costs in 1H FY2025 mainly due to the replacement of EURIBOR
interest rate hedge at a higher rate in October 2023.
• Lower distributable income and distribution per unit (“DPU”) primarily driven by higher
finance costs, lower NPI and an enlarged unit base.
• Obtained sustainability-linked loan facilities4 to derisk debt refinancing in 2025.
• Construction commenced at the multifunctional event space adjacent to
313@somerset.