Wolf Money(Lendlease Global Commercial Trust)

 

Happy 2023. Lone Wolf is back again just barely 2 weeks from my last blog on Starhill Global Reit. I had just taken another small position in another commercial/shopping mall reit. Lendlease Global Commercial Trust had most of its assets tied to two major properties in 313 Somerset and JEM. They are owner of Sky Complex in Milan which they had a long term lease with Sky Italia,a subsidiary of Comcast.

(313 Somerset)

I have positive and negative views on the reit. I personally like the location of their malls. 313 Somerset, Jem and Parkway Parade and PLQ are good quality malls. I rate them as one of the best malls not under the control of Fraser Centrepoint Trust and CapitaLand Malls. 

Below are some of the merits and negatives of Lendlease Global Commercial Trust

1.) I like the location of their malls with 313 Somerset positioning for upcoming revenge shopping by Chinese tourists and Jem with it steady tenants profile and huge catchment of population. There are close to 1.1m people residing in Jurong about 20% of Singapore population.

2.) Current yield is within my 7-8% fair value zone base on current interest rate environment for a reit with high level of Singapore assets.

3.) PLQ is under first right of refusal. The mall has excellent human traffic and transport connectivity. It will add value to the reit if acquisition is done at the right price. Parkway Parade is another good property potentially to be injected into the reit.

4.) 88% of the reit assets are in Singapore.

5.) Reputable sponsor as Lendlease Ltd is one of the largest real estate developer in Australia with global footprint.

6.) Unit price is trading at 0.85x to nav.

Negatives

1.) 40% gearing is consider on the high side at least by my standard as most reits fall within the range of 30-40%. 

2.) Due to the high gearing any future acquisition will involved asking reit holders for more money.

3.) The use of 400m perpetual securities. Recent issued as high as 5.25%.

4.) Normal economic conditions apply.

5.) Debt profile with shorter tenure. Potential refinancing at a higher rate which may affect dpu. 1% move in refinancing rate will affect Lreit dpu by 5%. Fixed rate financing is around 60% vs Starhill of 84% which make Lendlease global commercial trust more sensitive to upward movement in interest rate, likewise downward.

In Summary, I like the assets in the reit but not the debt that is associated with it. One thing which might be going for them is their tenants profile with 59% comprise of essential service that are more resilient to economic weakness. I am taking a cautious approach to Lendlease due to their high gearing after the Jem acquisition thus a small position. The next asset acquired under the reit is likely be equity funded, reit holders must be prepared for cash call. They are reporting result on 7 Feb. God Bless. 

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Disclaimers 

All investments is highly speculative in nature and involves substantial risk of loss. We encourage our reader to invest very carefully. We also encourage reader to get personal advice from your professional investment advisor and to make independent investigations before acting on information that we publish. Much of our information is derived directly from information published by companies or submitted to governmental agencies on which we believe are reliable but are without our independent verification. Therefore, we cannot assure you that the information is accurate or complete. We do not in any way whatsoever warrant or guarantee the success of any action you take in reliance on our statements. All information provided are for education only. Buyer beware,do you own due diligence.