Company Overview
Lendlease Global Commercial REIT (LREIT) is a Singapore-listed real estate investment trust that focuses on commercial properties, with a substantial retail portfolio that has grown to represent 63% of its total portfolio value following recent acquisitions.
Strong Half-Year Performance
LREIT delivered a resilient performance in the first half of FY26, with distribution per unit (DPU) rising 3.1% year-on-year to 1.85 cents, representing 51% of the full-year forecast. The trust achieved an 11.7% year-on-year increase in distributable income to S$48.5 million, driven by strong retail rental reversion of 10.4% and disciplined capital management that reduced gearing by 430 basis points to 38.4%.
Strategic PLQ Mall Acquisition Enhances Portfolio
The acquisition of a 70% stake in PLQ Mall from ADIA for S$885 million at a 2.1% discount to appraised value represents a significant strategic move. The acquisition is 2.5% DPU accretive and strengthens LREIT’s suburban retail portfolio, which now comprises 63% of total portfolio value at S$3.9 billion, up from 55% at S$3.3 billion. PLQ Mall boasts over 200 tenants with 99.7% committed occupancy and a weighted average lease expiry of 2.3 years.
Disciplined Capital Management Delivers Results
LREIT has demonstrated strong financial discipline by reducing gross debt by S$500 million to approximately S$1.2 billion. The trust successfully refinanced S$200 million of perpetual securities with S$120 million of new issuance at a lower coupon rate, reducing from 5.25% to 4.75% per annum. This, combined with cheaper loan funding, compressed the cost of debt by 19 basis points to 2.90%. With 72% of borrowings fixed-rate hedged and S$701.2 million in available facilities covering the S$100 million FY26 debt maturity, refinancing risk remains minimal.
Positive Rental Reversion Outlook
The acquisition of Jem in FY2022 compressed portfolio occupancy cost by over 600 basis points to 23.7%, creating headroom for rental increases. PLQ Mall, having been under-rented since its Covid-period opening when occupancy was prioritised over rent optimisation, presents significant rental uplift potential. Ongoing reconfiguration works are expected to drive rental increases from single digits to the high teens percentage range.
Investment Recommendation
Phillip Securities Research maintains a BUY recommendation with a raised target price of S$0.73, up from S$0.70, based on a dividend discount model incorporating PLQ Mall’s contribution. The trust currently trades at a FY26 estimated yield of 5.9% and at approximately 28% discount to net asset value.
Frequently Asked Questions
Q: What was LREIT’s DPU performance in 1H26?
A: LREIT achieved a DPU of 1.85 cents in 1H26, representing a 3.1% year-on-year increase and forming 51% of the full-year FY26 forecast.
Q: How significant is the PLQ Mall acquisition?
A: The acquisition of 70% of PLQ Mall for S$885 million is 2.5% DPU accretive and increases the suburban retail portfolio to 63% of total portfolio value at S$3.9 billion from the previous 55% at S$3.3 billion.
Q: What is the current gearing ratio and how has it changed?
A: The gearing ratio has improved significantly, falling 430 basis points to 38.4% due to disciplined capital management and debt reduction of S$500 million.
Q: What is the rental reversion performance across the portfolio?
A: The retail portfolio achieved rental reversion of 10.4% year-on-year, with approximately 7% excluding PLQ Mall’s contribution, and this is expected to continue at double digits for the remainder of FY26.
Q: What is Phillip Securities Research’s recommendation and target price?
A: Phillip Securities Research maintains a BUY recommendation with a raised target price of S$0.73, up from the previous S$0.70, based on a dividend discount model.
Q: How well-positioned is LREIT for debt refinancing?
A: LREIT has minimal near-term refinancing risk with S$701.2 million in available facilities covering the S$100 million FY26 debt maturity, and 72% of borrowings are fixed-rate hedged.
Q: What potential upside catalysts exist for the trust?
A: Upside catalysts include a potential accretive divestment of Milan Building 3 and a larger-than-expected distribution from the S$8.9 million Jem office divestment gain yet to be deployed.
Q: At what valuation metrics is LREIT currently trading?
A: LREIT currently trades at a FY26 estimated yield of 5.9% and at approximately 28% discount to net asset value.
This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.
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