Should You Invest In Lendlease Global Commercial Trust [Fundamental Analysis]

In this article, we'll be conducting a fundamental analysis of Lendlease Global Commercial Trust and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having a high degree of capital preservation ability.

Information Is Accurate Up To Dec 2023

Business Description

Lendlease Global Commercial REIT is an office and commercial (retail) REIT that was listed in 2019 and owns 3 properties (2 are in Singapore and 1 in Italy).

What I Like About LREIT Global:

The flagship property (Jem) is a solid sub-urban retail property. Apart from that, generally, the underlying properties had shown to be quite resilient in the short span of their listing
Overall portfolio’s WALE is high (largely due to office exposure)

What I Do Not Like About LREIT Global:

REIT is relatively “new” and the manager is not proven in producing yield accretive acquisition
No clear strategy in terms of the manager’s intention to grow the portfolio. The reported strategy thus far seemed to be to acquire any retail and/or offices globally that are stable and income-producing. At the moment, it is unclear if the management will pursue overseas exposure which may introduce the portfolio to further FX risks
The portfolio is very concentrated in the few properties that they currently hold and as such investors have to take into consideration the impact on their overall portfolio exposure should they decide to start a position.
The quality of their capital management has been deteriorating as the management pursued their acquisition in the past few years (Figure 5)
The bulk of the management fees are paid in the form of units which inflates the reported DPU and clouds the intrinsic value (Figure)

Updates From Recent Performance (1Q 2024)

General Comments:

No refinancing risk until FY2025 should help lower the refinancing risk of Lendlease given that the interest rate would have peaked in 2H 2024 and start to fall back down in 2025. That said, it is likely that interest rates will still be higher as compared to the cost of debt today

Positive Headwinds:

The acquisition of Parkway Parade will start to be reflected in FY2024 financial statements which will improve their performance.
Positive rental reversion should help cushion the impact of a higher interest rate and operating expense environment.

Negative Headwinds:

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Daniel is a Licensed Independent Financial Consultant with MAS and a Certified Financial Planner (CFP®).

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