Tuesday, March 22, 2022

Quick Notes on LendLease Global REIT

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.


Three properties.  By AUM:
  • 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.
I think their malls are quite good.  JEM is at the bustling Jurong East MRT and is usually busy.  Compared to its the neighbouring malls: Westgate is slightly more upmarket, and JCube is too small and far away to have critical mass.  I also like 313@Sommerset: its usually quite busy on weekends, due to MRT traffic, even when neighbouring malls a few blocks away were empty (pre-covid).  Both malls have a good vibe.

I don't like offices, but am comfortable with JEM Office's long lease with 23 years remaining.  Don't know if its indexed to inflation.

I don't like Italy.  Or offices in Italy.  Need to see if Sky Italia takes the option to break the lease in 2026. TV is a dying industry, and Sky Italia should finish its downsizing plan in 2025, meaning less office space.  OTOH, upside in this property may be limited: Under Italian law, upon lease expiry, the landlord must re-offer the lease to the same tenant (under existing terms?), before they offer it to other parties who may be willing to pay more (p143).


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.


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

If they want to grow in Singapore, the sponsor has 2 properties:
  • 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.
Lendlease also has a lot of mixed use properties the world.  I'm sure they will be passed down to the REIT.  Ten years from now, the REIT will look very different...which is why they have the word 'Global' in their name.  I'm cautious on that, as I have no way to know the prospects of these overseas properties, and I don't like offices in general.  We have to trust REIT management to take care of shareholders, and their track record is not long enough now.  I probably would limit myself to  5% position.


I bought a 5% position at 76.5c this morning, as their share price dropped due to news of the preferential offering.  

Just realised that the Preferential Offering takes place 30th March, if I subscribe to it (@ 72c per share), I'll have a 6.5% position.  We'll see....

Update 10th April 2020: They issued less shares than expected, and issued 200m perps.  I calculate their new pro-forma DPU would be 4.8c.

Thursday, March 10, 2022

Bought Oil again

Bought a 5% position in oil producers again with the correction in WTI over the past 2 days: 2% CNQ, 2% Equinor, and 1% Pretobras.

Will write more here on the weekend.

Update: Friday 11th March.

Why I bought oil stocks:

  • They are still not expensive.  CNQ for example is trading at 12X TTM earnings, when WTI averaged $68.
  • They are going up.  Technical Analysis 101: buy stuff thats going up.
  • There may still be a shortage of oil, same inflation story as before the war.  The war has removed Russia's exports of 5m bpd (~ 5%) from the market.  Russia's production will drop without Western technical assistance.
  • Peter Zeihan raised a point: If Russian crude can't be exported through their eastern ports, and the backlog is too big, they need to stop production, which can take years, or even decades, to recover from.
The risks:
  • Biggest risk is a peace deal between Russia and Ukraine.  Israel is trying to broker peace, and while both Putin and Zelensky have gained popularity in the war, they both stand to lose if it drags on.  Zelensky will lose his country, and Putin should be remembering Afghanistan.  I give peace a 1/3rd chance.  If it happens, I'll be happy for the Ukrainians, but would wish I had bought my oil stocks cheaper.
  • Avoid companies operating in the potential warzones of the Persian Gulf, Eastern Europe and Russia (doh!), and the South China Sea.  And Africa may not be that stable if food prices soar,
  • The US president has the power to stop crude exports, which would make WTI trade at a discount to Brent.  This is a risk for US and Canadian producers, and is the reason I'm not buying XLE (to hold together with CNQ).
  • Petrobras is risky and may go to zero if nationalised (or if asked to subsidise the country).  Brazil has a bad track record on this.
  • I am uncomfortable buying when everyone else is.  Energy might be the new FAANG.  Could be, but I'm still uncomfortable.  Need to remind myself that the crowd is correct in the middle of a trend.  And thinking that your'e smarter that everyone else does not make you money.
You pays your money and you takes your chances.

Thursday, March 3, 2022

Sold Kazatomprom & bought Sput

Sold Kazatomprom, at USD 25.25.  Loss of ~ USD 4.7K, or 21%.

Its no longer a dividend play who can benefit from rising Uranium prices.  Most of their Uranium is shipped through Russia.  Once that is cut off, they can only sell to China.  Add to this the risk of holding shares in a Soviet satellite state.

Counting my gold as cash, I'm 6 or 7% in cash.  And I'd probably be comfortable adding another 10 or 15% in margin.  When the time comes....

Update: 7th Mar: Replaced it with Sprott Physical Uranium Trust (U.UN), 1140 shares @ CAD 16.54.  Hard to find Uranium companies worth buying, easier just to bet on Uranium itself directly.  Looks like it tried to correct yesterday but failed.  I'm expecting the stock market correction to continue for a few months, but this may not affect Uranium.

Tuesday, March 1, 2022

Lost in Russia

MOEX has been closed for the past 2 days.  They are considering to not allow foreigners to sell, and not paying dividends to residents of countries that places sanctions on Russia

Nothing I can do about it, so best to just write off my Russian shares.  Its a 6% loss for my portfolio.

I knew the risks when I bought them.

I'm still looking at:

  • Dividend stocks/REITs to replace Netlink Trust in my portfolio
  • Stuff to buy in the correction I expect between now and June.  Copper.  Oil if it corrects.  Maybe some crypto.
For now, I still think we're in a correction.