Lendlease REIT Full Year 2025 Results: 3.6 SG cents Dividend, Increase in DPU expected

 Lendlease Global Commercial REIT (LREIT) has released its full year results. Overall, it is an expected results with:

• 3.6 SG cent dividend
• Sale of its JEM Office Space
• Slower uptake of Milan Office Tower 3, improvements need to be done to raise it to 80% from current 31%

Expect Higher DPU Next Year

LREIT has divested JEM office space at 3.5% cap rate. This is good because if LREIT uses the equity portion of the sale to redeem its 4.75% interest perpetuals, there is a 1 million dollar increase in distributable income, this is a 2% increase in DPU. Further, LREIT cost of debt is now declining, factoring all these I expect next year DPU to be 3.7 SG cents with special dividend of 1 SG cent post sale of Singapore office complex.

At 57 SG cents, this translate to a 6.5% dividend yield, which is good. I expect further yield compression to occur until the 5% mark because the risk free SORA rate is declining. Target price is 74 SG cents.

Is it possible for LREIT to reach a target price of 74 SG cents?

The answer is a restounding yes. I feel there are 02 ways- (i) yield compression with the falling Singapore interest rates or (ii) a sale of the Milan office building at current valuation.

If the sale of Milan office goes through, LREIT will become a 100% Singapore mall Trust. And on SGX, we have a 100% SG retail reit which is priced at 1 times P/B with dividend of 5%; it is fraser centrepoint trust.

So all in, I feel it will be easy for LREIT to hit 74 SG cents. 

 

Caveat

The sale of LREIT's office assets is indeed a good way forward, however I will like to caveat to LREIT manager that it should not be buying any more properties from the sponsor. And if it does, it should only be Retail singapore properties like PLQ mall or Parkway at a capitlization rate of 4.75% or more because such a situation means the 4.75% interest perpetuals will not be redeemed. A too low cap rate will be DPU negative to unitholders.

And if it is not a retail property, the chances of fulfilling a one times price book will not be achieved.