Singapore assets to drive LREIT’s FY2025 DPU: DBS

DBS expects strong rental reversions from LREIT’s Singapore properties.

DBS forecasts that Singapore assets will continue to be the key driver of distribution per unit (DPU) for LendLease Global Commercial REIT (LREIT) in FY2025.

It expects strong rental reversions in the range of a high single-digit or above for both office and retail lease renewals in FY2025.

The completion of the lease restructuring at Sky Complex Building 3 is expected to boost LREIT as revenue from the asset stabilises at $42m (€30m) per annum (FY2027), up +20%.

DBS anticipates the supplementary rents totaling $14m (€10m) across two years to buffer any impact to DPUs from temporary occupancy losses at Sky Complex Building 3. Breakeven occupancy at the tower is estimated at 60%-70%.

“The JEM office divestment is a key catalyst for a re-rating of the stock, strengthening LREIT’s balance sheet. Buyer prospects for JEM have improved in recent quarters following the sale of Mapletree Anson, combined with easing interest rates,” DBS said.

According to DBS, the divestment of JEM office at a 3.5% cap rate will generate approximately $450m in proceeds which can be used for debt reduction ahead of the April 2025 perpetual redemption, while also being yield accretive to DPUs.

“Our target price (TP) of $0.0075 considers lower net property income (NPI) margins in Singapore due to inflationary pressures, alongside an estimated 20bps increase in average borrowing costs in FY2025, fully reflecting true euro loan rates,” DBS added.