Lendlease Global Commercial Reit H1 DPU down 14.5% to S$0.021

LENDLEASE Global Commercial Real Estate Investment Trust’s (Lendlease Reit) distribution per unit (DPU) fell 14.5 per cent to S$0.021 for its first half ended Dec 31, 2023, from S$0.0245 the year before.

The lower DPU was primarily driven by higher borrowing costs amid the higher interest rates as compared to a year ago.

This was even as gross revenue was up 17.9 per cent on the year to S$119.9 million for the half-year period, from S$101.7 million in the year-ago period.

This was mainly due to improved operational performance from the Reit’s retail malls and recognition of supplementary rent from the lease structure with Sky Italia, said the Reit’s manager in a bourse filing on Thursday (Feb 1).

Net property income climbed 22.2 per cent year on year (yoy) to S$93.4 million, from S$76.4 million.

Distributable income declined 12 per cent yoy to S$49.3 million, from S$56 million previously.

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The distribution will be paid out on Mar 27, after books closure on Feb 9.

Property operating expenses rose 4.8 per cent on the year to S$26.5 million, from S$25.3 million previously, while finance costs grew 38.7 per cent yoy to S$32.7 million, from S$23.6 million before.

The higher finance costs were mainly due to higher-than-average interest rates, due to the current higher interest rate environment, said the manager.

Committed occupancy rate at Lendlease Reit’s retail portfolio stood at 99.6 per cent as at Dec 31, 2023, with a positive rental reversion of about 15.7 per cent for the period.

Its office portfolio was underpinned by a long weighted average lease expiry of 12.8 years by net lettable area and 15.3 years by gross rental income.

Kelvin Chow, the manager’s chief executive officer, said the lease restructuring exercise with Sky Italia was a “pertinent move” given the work-from-home trend in Europe.

The manager had restructured the lease with Sky Italia in December to reduce Lendlease Reit’s single-tenant exposure to the broadcasting sector and reposition Building 3 to secure multi-tenancies in market rents.

“This exercise allows us to mitigate the pre-termination risk and enables us to continue maintaining cashflow stability for our unitholders,” he said.

“Moving forward, we remain focused on active capital management to manage cost and gearing,” said Chow. Meanwhile, amid the high interest rate environment, the Reit will “stay flexible and adaptive while monitoring the market for potential additional hedging as appropriate”.

Units of Lendlease Reit closed S$0.01 or 1.6 per cent down at S$0.62 on Thursday.