Recently, Lendlease REIT has been sold down by investors. The share price of Lendlease Global Commercial REIT (SGX:JYEU) has fallen as much as 16.42% in the past 6 months. What has happened?
As you can see from the chart above, Lendlease REIT’s share price has dipped significantly since the mid of August 2023. This happen to be after Lendlease REIT released its FY2023 financial results.
Thus, let us take a detail look at its FY2023 financial results to find out what has happened.
Lendlease REIT FY2023 Financial Results
Lendlease REIT’s Gross Revenue and Net Property Income (“NPI”) was up two times over the year to approximately S$205 million and S$154 million, respectively. This was mainly attributed to the full year financial contribution from Jem and positive rental growth.
Despite the increase, Distribution Per Unit (“DPU”) was lower due to higher borrowing costs on the back of rising interest rates. DPU declined 3.2% from 4.85 cents in FY2022 to 4.70 cents in FY2023.
|Net Property Income||153,937||75,508||>100|
|Distribution Per Unit (“DPU”) (cents)||4.70||4.85||(3.2)%|
As of 30th June 2023, gearing stood at 40.6%. Weighted average debt maturity is 2.1 years and approximately 61% of the borrowings are hedged to fixed rates.
There are no refinancing risks in FY2024 as a €300 million unsecured 5-year sustainability-linked loan facility has been obtained due during the year to refinance Lendlease REIT’s Euro loan. After drawing down on the Euro loan in FY2024, there is still S$162.6 million of undrawn debt facilities.
As of 30th June 2023, the overall portfolio occupancy stood at 99.9%. Lease expiry was well spread with weighted average lease expiry at 8.2 years in terms of Net Lettable Area (“NLA”).
Current Dividend Yield
Based on Lendlease REIT’s current share price of S$0.56 and FY2023 full year distribution of 4.70 cents, this translate to a current dividend yield of 8.39%.
Summary of Lendlease REIT Sold Down
Based on Lendlease REIT’s FY2023 financial results, I believe the sell down by investors was because of
- Decline in Distribution Per Unit due to higher borrowing costs on the back of rising interest rates.
- High gearing of 40.6%.
On a positive note,
- Lendlease REIT’s Gross Revenue and Net Property Income grew because of its acquisition of Jem. Recently, Lendlease REIT also acquired a 10.0% interest in Parkway Parade.
- Occupancy was healthy at 99.9%.
- High current dividend yield of 8.39% because of the dip in share price.
If you notice, the DPU of most REITs have in a way or another been impacted by the increase in interest rates.
In my opinion, Lendlease REIT should attempt to decrease its gearing to below 40% to gain back investors confidence like how Frasers Centrepoint Trust did through their divestment of Changi City Point.
Nevertheless if you believe Lendlease REIT is able to manage its debt and Fed probably may not further increase their interest rate, this is an opportunity to buy in Lendlease REIT given its attractive current dividend yield of 8.39%.