Date: 27 September 2024
Broker: Lim & Tan Securities
Portfolio Overview
Starhill Global REIT’s portfolio comprises nine mid- to high-end properties across six Asia-Pacific cities. The portfolio’s key strength lies in its master and anchor leases, which make up about 53.1% of gross rent. These leases provide a stable income stream, offering long-term security for the REIT.
Financial Performance
For the financial year 2023/24, Starhill Global REIT saw revenue rise by 1.1% year-on-year to S$189.8 million. Net property income (NPI) also grew by 0.8% to S$149.0 million. This growth was driven primarily by improved performance in Singapore properties and the Myer Centre Adelaide (Retail), both of which enjoyed higher occupancy rates and rental income. This helped offset the loss of income from the REIT’s divestment of its Japan assets in the prior period, as well as the impact of weaker foreign currencies, notably the Malaysian ringgit and Australian dollar.
Asset Enhancements and Upgrades
Starhill Global REIT completed significant asset enhancement works in 2024. In Malaysia, The Starhill underwent a transformation into an integrated development, offering both hospitality and retail experiences. Similarly, Myer Centre Adelaide’s façade was renovated to improve safety and give the property a fresh look. In Singapore, Wisma Atria Property undertook retail interior upgrades, including cosmetic enhancements and lift modernization. These upgrades were extended to the basement, widening the MRT entrance and reconfiguring central spaces to create a more conducive shopping experience. All of these upgrades were completed in 2024, bolstering the appeal of the REIT’s assets.
Occupancy and Leasing Activity
As of 30 June 2024, Starhill Global REIT maintained a strong committed occupancy rate of 97.7% across its portfolio. Singapore properties performed even better, with a 99.2% committed occupancy rate. The improved properties, coupled with a carefully curated tenancy mix, have resulted in higher tenant sales and shopper traffic, with Wisma Atria Property seeing a year-on-year increase of 2.8% in tenant sales and 8.2% in shopper traffic for FY 2023/24.
Lease Renewal with Toshin Development
Starhill Global REIT successfully renewed its master lease with Toshin Development Singapore Pte. Ltd. for Ngee Ann City Property ahead of its expiry. The new lease, starting in June 2025, has an initial term of 12 years, with options to extend up to another nine years. The renewed lease offers long-term income stability through an annual fixed rent with potential upside from periodic rent reviews and a new profit-sharing arrangement. Toshin is Starhill Global REIT’s largest tenant, contributing about 23.8% of the portfolio’s gross rent as of 30 June 2024.
Financial Position and Debt Management
As of 30 June 2024, Starhill Global REIT maintained a stable gearing ratio of 36.8%, with approximately 79% of borrowings fixed and/or hedged, mitigating the impact of interest rate volatility on distributions. The REIT has well-spread debt maturities, with an average term to maturity of 2.5 years. It also has sufficient undrawn long-term committed revolving credit facilities (RCF) to cover all debts maturing until June 2025.
Outlook
Despite macroeconomic uncertainties, Starhill Global REIT remains optimistic about the Singapore market, driven by rising tourist arrivals and limited new supply of office and retail space in the Orchard Road vicinity. The recent renovations and enhancements, particularly at Wisma Atria Property, are expected to help sustain high occupancy rates. The completion of Stage 4 of the Thomson East Coast Line will also improve accessibility to Orchard Road, boosting foot traffic to the REIT’s properties.
However, the REIT remains cautious about its Australian assets due to inflationary pressures and the elevated interest rate environment, which are expected to impact consumer spending and moderate retail trade. Nevertheless, Starhill Global REIT is committed to exploring further asset enhancement opportunities to future-proof its portfolio.
Source: Lim & Tan Securities, Daily Review, 27 September 2024.
