- No financials provided in this operational update. Lendlease REIT (SGX:JYEU)'s 3QFY23 (Jan to Mar 2023) portfolio occupancy remained stable at 99.8% q-o-q but experienced a slight drop of 0.1% y-o-y. With higher rental reversion in retail, 3QFY23 reversions of ~3.3% improved from 1HFY23’s ~2%.
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- Maintain BUY on Lendlease REIT with unchanged target price of S$0.91. We expect the organic growth from the additional GFA, higher positive rental reversion from the retail and onboarding of Live Nation to potentially offset the headwinds in borrowing cost. There is also an estimated S$5bn of assets in the pipeline from the sponsor.
The Positive
Retail recovery on track.
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- Portfolio occupancy remained strong at 99.8% (-0.1% y-o-y). As only 1.4% of leases expire in FY23, we expect the occupancy rate to remain stable. The retail side generated a positive rental reversion of 3.3% (+1.3% q-o-q) while office rental escalation remained unchanged at 4%.
- With higher sales driving occupancy cost below average by ~3-5% at the portfolio level, there is still upside for the rental reversion.
The Negative
The cost of debt has increased to 2.51% (+0.16% q-o-q, +1.53% y-o-y).
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