Lendlease REIT reported year-on-year increases in financial metrics like Revenue, NPI and Distributable Income however I think these are quite difficult to analyze as the 1HFY20 figure was annualized and pro-rated since LREIT only listed halfway through that half. Focusing on operational performance would be more valuable. About 60% of its NPI for the half-year was from 313 Somerset and this is its only asset in Singapore. The other asset is an office property in Milan that is master leased so there would not be much variations to explain. 

Occupancy remained high at 98.7% at 313 despite the Covid-19 pandemic. With the phase 3 reopening, 313 reported a 19.5% qoq improvement in tenant sales and a 12.4% improvement in footfall. This represents 75/60% of pre-Covid levels respectively. This trend was similar across other REITs where tenant sales have improved more than footfall. I think this could be due to deliveries for sub-urban malls and also larger ticket sizes from Singaporeans as borders remain closed. 

LREIT highlighted that it is focused on maintaining occupancy levels and help tenants stay viable; my read through for this is that there could be rental abatements or reliefs given and reversions could be less positive than before. Nonetheless, some (albeit lower) income is better than no income. 

A key catalyst for LREIT is definitely more acquisitions; currently, it only has 2 fully-owned properties and a small stake in ARIF3 (which owns JEM). The Sponsor has cleverly structured the REIT to be global and commercial such that the range of potential acquisitions is quite wide. In the near-term I expect there to be acquisitions from the sponsor overseas and a gradual increase in the stake in ARIF3 and perhaps even new stakes in PPP (Parkway Parade) and PLQ. 

SPHREIT was the first to report its results in mid-Jan and is largely underpinned by Paragon (74% of revenue). Paragon suffered a 12.9% decline in revenue while Clementi Mall declined less at 6.6%. This is understandable as prime retail malls (especially luxury ones like Paragon) would suffer more from the dearth of tourists. Clementi Mall, as a suburban mall beside Clementi MRT, would have been less impacted as office workers work from home and patronize their nearby mall. 

Looking at the graphic from SPHREIT's presentation, tenant sales held up very well at Clementi Mall while Paragon still remained resilient. Footfall for Paragon actually held up more than Clementi Mall. A few possible reasons for this. 

i) Clementi Mall was affected by capacity restrictions. For those who have been to Clementi Mall pre-Covid, you would remember how packed the place used to be. There was barely enough space to walk more than 5 steps in a straight line. Safe distancing measures could have limited the number of people allowed inside the various shops. 

ii) The affluent are less impacted by Covid-19. Those buying luxury goods at Paragon's high-end shops like Balenciaga and Prada would probably continue buying during the pandemic due to their high level of financial resources. Luxury items also hold their value well. 

In terms of catalysts, investors can look out for:

a) recovery from Covid-19 and opening of borders 

b) acquisition of assets from the sponsor, in particular Seletar Mall, which has been talked about for the longest time

SGREIT continued to retain income as it only distributed 0.14 Scts out of the 0.35 Scts it retained. This could be an indication of where it sees the recovery of retail. I think the REIT could be worried about its exposure in Malaysia (13.4% of NPI) as the country remains in lockdown and also the lack of tourists in Singapore for its prime retail malls (Ngee Ann City and Wisma Atria). Of note would be the Re-Align Framework where qualifying tenants can renegotiate or terminate their leases without penalties. 

In terms of capital management, apart from issuing $100m of perpetuals at 3.85%, SGREIT managed to refinance $500m of debts and also had a DRP programme in place. This means investors should take their 35.8% gearing with a pinch of salt since it does not include perpetuals and also investors need to account for the small dilution from DRP in future quarters. 

An upcoming acquisition to look out for is the acquisition of Isetan's stake of Wisma Atria. This could have been the reason why SGREIT raised perps. However we understand that the yields for retail malls are still low (4-5%) and hence it may be challenging for SGREIT to acquire the property accretively. Furthermore, the remaining lease on Wisma is only 40yrs.