Frasers Centrepoint Trust VS Lendlease REIT

Daniel Lee

12 minutes ago5 min read

In this article, we’ll be doing a 1-vs-1 comparison between Frasers Centrepoint Trust (FCT) & Lendlease Global Commercial REIT to see which counter is “better” for the provision of retail exposure in a diversified REIT portfolio.

I will be comparing these two REITs based on the following criteria and coming out with a conclusion based on the assumption that I can only invest in either one of the REITs without any consideration of valuation:

Type and Location of Underlying Property Allocation
Occupancy Rate & Weighted Average Lease Expiry (WALE)
Distribution Behaviour and Breakdown
Balance Sheet Health

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The article is best viewed on a desktop. Without further ado let’s get started.

1. Underlying Property Allocation

Frasers Centrepoint Trust

Frasers Centrepoint Trust is a Retail REIT that focuses solely on Singapore’s suburban shopping malls. As of the financial year 2024, FCT owns about 10 sub-urban shopping malls across Singapore.

Apart from Singapore Sub-urban retail properties, the REIT does not hold any other types of property which makes it one of the only pure Singapore Retail Property plays as most of the other retail REITs listed in the SGX are often diversified across other countries or properties.

Lendlease Global Com REIT

Lendlease Global Commercial REIT is a retail & commercial REIT that invests mainly in retail properties in Singapore and offices in Europe (Italy). In 2024, Lendlease also acquired a minority stake (10%) of Parkway Parade – which is another sub-urban retail mall located in Marine Parade, Singapore.

Winner: FCT

For the metrics of underlying properties, Frasers Centrepoint Trust is a clear winner as firstly, they focus solely on Singapore properties which negates the impact of foreign exchange rate risk which is largely undesirable to investors whose purchasing power is based on SGD.

Secondly, while FCT may have a slight exposure to commercial properties, the overall portfolio exposure and management strategy is clearly defined to be focused on sub-urban malls while Lendlease’s strategy is, in my opinion, unclear.

2. Occupancy Rate & WALE

Frasers Centrepoint Trust

Frasers Centrepoint Trust’s occupancy rate has been resilient and is operating near 100% occupancy rate. While the occupancy rate did dip during the COVID-19 pandemic, it has recovered pretty much back to its pre-covid levels since 2021.

Their weighted lease expiry has also experienced an improvement over the years. While the low WALE figure may be a cause of concern for some, I do not think investors need to be too worried about it given the defensiveness of Singapore’s retail properties.

Lendlease Global Com REIT

Lendlease Global Commercial REIT’s occupancy rate has deteriorated significantly in 2024 as a result of the ongoing lease restructuring of Sky Complex. Locally, the malls the Lendlease invest in are operating near 100% occupancy rate based on the latest annual report figures.

The weighted average lease expiry (WALE) for Lendlease is considered to be healthy as far as retail REITs go as it is largely supported by the long lease expiry of the tenants in Sky Complex (Buildings 1 & 2 are leased to Sky Italia until 2033).

Winner: FCT

For the metrics of property resiliency, I would prefer FCT over Lendlease as while the overall WALE is lower, the defensive nature of Singapore sub-urban retail properties and hence the occupancy resiliency of FCT is much preferred over Lendlease. This is especially evident in the recent events of Sky Complex.

3. Distribution Behaviour & Breakdown

Frasers Centrepoint Trust

Despite the resiliency in underlying property performances, the distribution of FCT has experienced a dip in 2023 and 2024 as a result of the impact of higher borrowing costs and loss of income as a result of asset enhancement initiatives.

This is not evident in the reported DPU yet as the management has opted to pay a higher proportion of their management fees in units which has helped them maintain their reported DPU.

Lendlease Global Com REIT

Looking at the distribution breakdown of Lendlease REIT, it is evident that the reported dividend yield is supported heavily by non-operational items – in particular management fees paid in units. In fact as of 2024, up to 27% of the distribution comes from non-operational items.

The DPU from operations have also been experiencing severe headwinds – largely due to the impact of a higher interest rate environment which has pushed the cost of borrowing up severely for Lendlease REIT, thereby causing bottom line performances to deteriorate.

Winner: FCT

For the metrics of distribution behaviour and breakdown, I would prefer FCT over Lendlease as they have a lower percentage of DPU contribution from management fees paid in units.

Furthermore, the nature of the loss of income during 2024 is different for FCT (due to asset enhancement) and Lendlease (due to lease restructuring) and the situation in FCT is simply objectively better from a capital preservation and risk standpoint.

4. Balance Sheet Health

Frasers Centrepoint Trust

The financial health of Fraser Centrepoint Trust has deteriorated since 2022 largely as a result of the higher interest rate environment which has resulted in a higher average cost of debt and lower interest coverage ratio.

Lendlease Global Com REIT

The financial health of Lendlease REIT has deteriorated largely as a result of the higher borrowings associated with their acquisitions. Furthermore, as Lendlease uses a considerable proportion of perpetual bonds, their actual gearing and cost of borrowing would be much higher than what is being disclosed.

If we were to treat the use of perpetual as part of their debt, the current balance sheet health of Lendlease is unsatisfactory as per my standard.

Winner: FCT

For the metrics of financial health, I would say that FCT would be a better option as even though both counter’s balance sheet health has deteriorated over the years, FCT’s balance sheet health is objectively still acceptable as compared to that of Lendlease.

Overall Winner: Frasers Centrepoint Trust

If I could only invest in either FCT or Lendlease, I would choose Frasers Centrepoint Trust as firstly, I’d prefer their overall portfolio structure and management strategy.

Secondly, the health of FCT’s balance sheet is objectively better than that of Lendlease and lastly, FCT has a way longer track record of being able to deliver a resilient performance as compared to Lendlease.

All things considered, when designing a REIT portfolio, things aint as simple as choosing one REIT over another, investors need to understand how each REIT will perform and contribute at a portfolio level to determine whether a REIT is investible and if so what should be the ideal allocation on a portfolio level.

I’ve written more extensively on my REIT investment methodology and how I go about designing, implementing and managing a profitable REIT portfolio for myself which you can grab a copy of for free here:

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