Lendlease REIT DPU declines by 14.3%

1HFY25 DPU down 14.3% YoY

Lendlease Global Commercial REIT (LendLease) reported 1HFY25 Distributions Per Unit (DPU) of 1.8 cents, down 14.3% Year-on-Year (YoY) and representing only 47% of consensus FY25E DPU of 3.8 cents. 

The DPU decline was on the back of a 11.8% decline in distributable income, as gross revenues and Net Property Income (NPI) declined 13.6% and 19.8% respectively, as 1HFY24 included the upfront recognition of the supplementary rent received from the lease restructuring of Sky Complex in December 2023.

Retail portfolio saw 10.7% rental reversion

Committed occupancy across Jem and 313 @ Somerset in Singapore continues to remain robust at 99.9%, with the retail portfolio achieving a healthy 10.7% rental reversion rate. 

Tenant retention rate was also high at 86.1%. While visitation to the retail properties continue to be stable YoY, declining a modest 0.6% YoY, tenant sales declined 5.2% YoY in 1HFY25, which management attributed to an increase in outbound travel, on the back of a strong Singapore dollar. 

Construction of the 48,200 square feet multifunctional event space adjacent to 313@somerset has commenced and expected to be completed in the second half of 2026.

Near term focus remains on leasing out Sky Complex Building 3

The overall office portfolio occupancy improved to 86.6% in 2QFY25 from 81.7% in 1QFY25, with new leases committed at building 3 of Sky Complex in Milan, Italy. 

To recap, buildings 1 and 2 are fully leased to Sky Italia until 2033, while building 3 is undergoing a reposition exercise to secure multi-tenancy. 

To recap, Lendlease entered into a new lease agreement with Sky Italia S.r.l. for Sky Complex in December 2023, and as part of this new lease agreement, Sky Italia S.r.l. agreed to return Building 3 in the first quarter of 2024. 

The committed occupancy at Building 3 is now c. 31%. Meanwhile, the rental review for Jem office is in the final stage and will conclude by end February 2025.

Gearing stable at 40.8%

Lendlease’ gearing ratio remains stable, albeit at a relatively elevated level of 40.8% as of 31 December 2024, up by 0.1 percentage point Quarter-On-Quarter (QoQ). 

Weighted average cost of debt declined QoQ to 3.57%, and with a relatively short weighted average debt maturity of 2.0 years, and fixed rate borrowings at 70%, Lendlease could benefit from lower interest rates earlier than its peers, which generally have a debt maturity of around three years.

Trading above historical average yield 

Based on consensus FY25E DPU of 3.8 cents, Lendlease is trading at a 7.0% DPU yield, above its historical average of 6.7%, likely reflecting near term concerns.  

Related links:

• Lendlease REIT share price and share price target
• Lendlease REIT dividend forecast and dividend history

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