Lendlease Global Commercial REIT reports fiscal 1H net property income fell 2.5 percent

Exterior of 313@Somerset, a retail property located on Singapore's Orchard Road shopping belt. It is part of the Lendlease Global Commercial REIT portfolio. Credit: Lendlease Global Commercial Trust ManagementExterior of 313@Somerset, a retail property located on Singapore's Orchard Road shopping belt. It is part of the Lendlease Global Commercial REIT portfolio. Credit: Lendlease Global Commercial Trust Management

Lendlease Global Commercial REIT reported Friday its fiscal first half net property income fell 2.5 percent on-year to S$29.64 million amid lower rental reversion at the 313@Somerset property and as foreign exchange dampened revenue from the Sky Complex property.

Gross revenue for the six months ended 31 December declined 5.8 percent on-year to S$39.19 million, the REIT said in a filing to SGX. 

However, property expenses declined 14.9 percent on-year to S$9.55 million on the absence of doubtful debt provisions and lower expenses from marketing, insurance, salary and related and operating expenses, the REIT said.

The distribution per unit (DPU) came in at 2.40 Singapore cents, up 2.6 percent from 2.34 Singapore cents in the year-ago period, the REIT said.

The portfolio hit its all-time occupancy high at 99.9 percent as of end-December, with only 2 percent of the portfolio’s net lettable area up for renewal for the rest of the fiscal year, the REIT said. 

313@Somerset

The 313@Somerset property, located in Singapore’s Orchard Road shopping belt, also had a record occupancy rate of 99.7 percent, with a high tenant retention rate of 75.8 percent as of end-December, Lendlease Global Commercial REIT said. 

“The performance was driven by the manager’s proactive leasing strategy which focuses on strengthening the tenancy mix and refreshed new offerings to rejuvenate the mall,” the REIT said, noting new tenants included Oakley, Puma, Chimi’s and Ramburger.

Tenant sales improved 7.8 percent on-year in 2021 to S$166.4 million, although visitation for the year fell 2.7 percent on-year amid tighter restrictions on group size aimed at stemming the spread of the Covid-19 virus, the filing said.

The three office buildings at Sky Complex, located in Milan, Italy, are fully occupied by a single tenant with a long lease term until 2032 and annual rental escalation, the filing said.

The office component at the Jem property in Singapore remained fully leased to Singapore’s Ministry of National Development for a 30-year term, the filing said.

Outlook

In its outlook, the REIT noted Singapore’s retail sales are rising, and that the city-state has one of the world’s highest rates of vaccination against Covid-19 at more than 90 percent of the eligible population. 

“The manager is confident that the higher vaccination rates and an easing in severity of new Covid variants could imply a faster reopening of Singapore’s borders,” the REIT said. “Reopening is inevitable.” 

The REIT said it expected demand for Singapore’s suburban office space would remain resilient amid a decentralization trend. 

Milan outlook

In Milan, the REIT noted the office market take-up is expected to rise. 

“While most companies may likely adopt a hybrid scheme and change the configuration of their offices, the manager does not foresee it will involve reducing the occupied area, but rather the dedication of more space to services and wellness,” the REIT said of its Milan outlook.

Lendlease Global Commercial REIT’s portfolio includes the 313@Somerset retail mall in Singapore and the three office buildings at Sky Complex in Milan, Italy. The REIT also holds a 24.8 percent indirect interest in Lendlease Asian Retail Investment Fund 3 and a 53 percent indirect interest in Lendlease Jem Partners Fund, which respectively hold a 75 percent indirect interest and a 25 percent indirect interest in the Singapore property called Jem.

Jem is an office and retail development located in Jurong Gateway, in Singapore’s Jurong Lake District.

Read more about Lendlease Global Commercial REIT’s results.