If you like shopping at 313@Somerset (also one my favourite shopping malls), you might know it’s owned by Lendlease REIT (SGX:JYEU).
You see, Lendlease REIT’s shares got crushed last year, because of the Covid-19 pandemic.
It was those rare times when you saw Orchard Road turned into a ghost town.
Shops were shut, people were stuck at home.
And the worst part? Lendlease REIT shares fell a whopping 50%.
Source: Yahoo! Finance
Lendlease REIT is one of the newer Singapore REITs, recently listed in 2019.
It currently spots a market cap of S$906 million.
Check out My Popular Singapore REIT Article: My best 8 Singapore REITs Guide here.
Now, Lendlease REIT is unlike the giant Singapore REITs we commonly know. The fact is, Lendlease REIT owns only two properties — the iconic 313@Somerset and Sky Complex, a grade-A office in Milan, Italy. Sky Complex is fully leased to Sky Italia, owned by Comcast Corporation.
But let’s talk about 313@Somerset today, since this shopping mall dominates 66% of Lendlease REIT’s gross rental income.
What’s so special about Lendlease REIT’s Crown Jewel?
The thing is, Lendlease REIT positions 313@Somerset differently. At its heart, 313@Somerset appeals to a youthful, more hip crowd.
It doesn’t bring in the “high-end” luxury brands like Dior, Louis Vuitton or Chanel.
So, in a way, 313@Somerset is different from the “classier”, more mature Ngee Ann City (owned by Starhill Global) and Paragon Shopping Mall (owned by SPH REIT).
Instead, you get Zara, Food Republic and Cotton On in 313@Somerset. Even the new food tenants it recently brought in — The Coffee Academics, Paris Baguette, Josh’s Grill, in my opinion, appeal to a trendy crowd.
Not only that, 313@Somerset is largely diversified with 150 tenants. The mall is 99.7% occupied. Even during the Covid-19 pandemic.
What assures me is not a single one of these tenants take up more than 4% of the REIT’s total gross income.
If you’d have access to my online Dividend Titan Master Toolkit, you’d know I talk about portfolio diversification in detail. And in a REIT, tenant diversification is crucial.
You see, when a few tenants decide to withdraw, Lendlease REIT can simply replace them without losing a huge income.
And that’s important.
And that’s why I actually find Starhill Global’s Ngee Ann City risky (but that’s a story for another day).
In the markets, as an everyday investor, it’s far too risky to bet all my money on a single horse.
You can check out one of my free guides on How to Safely Build a Long-Lasting Dividend Portfolio.
And readers who have followed me know I’ve never liked concentration.
It’s also one of the few things I disagreed with Warren Buffett’s “Keep all your eggs in one basket, but watch that basket closely” quote.
Lendlease REIT by the Numbers
In its latest 1HFY2021 financial results, Lendlease REIT’s gross revenues and distribution per unit (DPU) both maintained at S$41.6 million (+3.2% y/y) and 2.34 cents per share (+0.8% y/y) respectively.
Tenant sales and foot traffic continued to improve. In fact, under Phase Three of Singapore’s reopening plan, Lendlease REIT’s tenant sales and foot traffic have already returned to 73% and 61% of its pre-Covid-19 levels respectively.
Distribution Per Unit, or DPU simply measures how much dividends you’ll get for every unit you own in the REIT. The higher the better.
What’s more is 40% of its leases were “enhanced” with new, experiential retail and food concepts.
That’s why I’m confident 313@Somerset’s foot traffic is going to return to pre-Covid-19 levels soon.
Now, what I don’t like about Lendlease REIT is the fact it has only two properties, which I’ve mentioned earlier — makes it a small REIT.
Smaller REIT shares fall the hardest when a crisis comes.
But the thing is, I still find Lendlease REIT’s crown jewel, 313@Somerset a top notch shopping mall.
Despite the narrative about e-commerce disruption, 313@Somerset is probably one of the few malls which will stand against the online disruption.
And so far, Lendlease’s shares have soared as Singapore’s community cases drop.
In fact, its shares rebounded strongly (+66% gains) to S$0.77 right after it crashed last year. And Lendlease REIT shares are already sitting close to its pre-Covid-19 levels.
Lendlease REIT Gains Aren’t Over
In my opinion, the gains aren’t done yet.
Lendlease REIT also has other smaller investments, including a recent stake in JEM shopping mall and it was awarded a tender to redevelop the 48,200 sqft car park at Grange Road last year.
The former carpark will set to operate in 2022, which will be a dedicated event space including indoor live performance, cinema and hawker stalls. All complementing 313@Somerset’s youthful audience.
And I’m sure both investments will help diversify Lendlease REIT’s portfolio mix and grow its DPU over the long term.
Right now, its dividend yield is around 5.3%, which is I feel is a good yield range for my portfolios.
And for me, as a long term dividend investor, I’d say Lendlease REIT is one of the few smaller Singapore REITs worth looking at.
You can also check out my best 8 Singapore REITs Guide here.
To good investing,
Willie Keng, CFA
Founder, Dividend Titan
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