I like their current malls, and they have a high yield. Lets look further.
All numbers are from their unaudited pro-forma 2021 results (for the JEM acquisition - starts p235).
This idea was from Dividend Titan.
Properties
- 47%: JEM Retail: Heartland mall in Jurong, it shares Jurong east MRT with 1 or 2 other malls. Leasehold: expiring 2109.
- 29%: 313@Sommerset: Mall above Sommerset MRT in the city. Leasehold: expiring 2105.
- 13%: JEM Office: 12 levels of Grade-A office space. Leased to Singapore Ministry of National Development until 2045, with a rent review every 5 years.
- 12%: Sky Complex: Three A-grade office buildings in Italy, leased to Sky Italia (Italian broadcast & pay TV) until 2032 (option to break in 2026), and indexed (three-quarters) to Italian inflation. Freehold.
Debt
Gearing is 41%. MAS limit is 50%.
They have 200m of perpetual securities (paying 4.2% pa). Adding this to debt brings up the gearing to 44 or 45%. I don't like companies that issue perps, but like bonds, they benefit the issuer in times of high inflation.
A quarter of their debt is denominated in Euros, whereas only 12% of their assets are in Europe. Thats a bit of a currency risk. The Euro denominated debt is until 2024.
Overall: their debt is pretty high. I think the next acquisition must be funded entirely by equity.
Incentives
Base management fees are a flat 0.3% of the asset's value. Incentive fee is 5% of NPI (p326). Pretty standard for Singapore REITS, though I prefer to see incentives based on a per-unit measurement. Incentives based on NPI can make them grow for the sake of growth.
Lendlease, the sponsor, holds 26% of the REIT, reducing the chances of them dumping bad properties into it. I also think that, because they have soooo many properties to dispose of, they would be better off building up this REIT as a reputable longterm investment, rather than just dumping some lousy properties into it in the first few years.
They've only done one acquisition since they listed - the big JEM one. It should be ~10% DPU accretive, increasing DPU to 5c. Lets see how that goes.
Future Growth
- Parkway Parade: a mixed office/retail mall. A very old mall from the 80's. Not near an MRT, though its in a place where residents have cars.
- Paya Lebar Quarter. Large mixed use development, directly accessible from Paya Lebar MRT. I haven't seen it. Sounds busy, but there are competing malls next door.