10 things I learned from the 2017 Starhill Global REIT AGM

Starhill Global REIT (SGX: P40U) is a retail office REIT comprising 11 properties located in Singapore, Malaysia, Australia, China and Japan. As at 30 June 2017, Starhill Global REIT’s total property portfolio is worth S$3.1 billion.

Two Singaporean properties form the bulk of Starhill Global REIT’s portfolio value and gross revenue: Ngee Ann City and Wisma Atria, both located along Orchard Road, Singapore’s prime shopping belt. The REIT has a 27.2% and 74.2% interest in Ngee Ann City and Wisma Atria respectively. Together, both properties comprise 68.5% of Starhill Global REIT’s portfolio value and contribute 62.2% of gross revenue.

Due to competition from suburban malls and the growth of e-commerce, Orchard Road has seen falling shopper numbers and malls with increasingly empty shops. The issue has become pressing enough that the Singapore government has set up a ministerial committee to explore ways to rejuvenate the retail belt. As Starhill Global derives the majority of its gross revenue and income from Ngee Ann City and Wisma Atria, it was with some concern that I attended Starhill Global REIT’s most recent AGM.

Here are 10 things I learned from the 2017 Starhill Global REIT AGM.

1. Gross revenue remained flat, falling 1.5% year-on-year to S$216.4 million, and net property income (NPI) fell by 2.0% to S$166.9 million. CEO Ho Sing highlighted that NPI from the REIT’s Singaporean properties (Ngee Ann City and Wisma Atria) remained resilient, actually growing 0.3% year-on-year. Malaysian NPI also grew 6.0% due to positive rental reversions. However, Starhill Global REIT’s Australian NPI fell 4.9% mainly due to renovation works at Plaza Arcade. NPI from China and Japan fell 65.5% mainly due to repositioning efforts which will convert Starhill Global’s China Property from having a department store mix to a single fixed lease tenant — Markor International Home Furnishings (one of the largest furniture retailers in China). The REIT also saw loss of contributions in Japan from Roppongi Terzo and Harajuku Secondo which were divested in January 2016 and May 2017 respectively.

2. Distributable income fell 5.2% year-on-year to S$107.3 million and distribution per unit fell 5.0% to 4.92 Singapore cents. The CEO explained the higher drop in DPU compared to NPI was mainly due to the introduction of the new withholding tax in Malaysia. Starhill Global’s share price (as of 31 Oct 2017) is 78 cents. If the REIT maintains its current DPU, its expected distribution yield is 6.3%.

3. Overall occupancy rate as at 30 June 2017 is at a healthy 95.5%. Despite Orchard Road’s recent troubles, retail occupancy rates for Ngee Ann City and Wisma Atria remained high at 100.0% and 97.2% respectively. Besides its Australian properties, Starhill Global REIT has a 100.0% occupancy rate for all its properties in Malaysia, China, and Japan. Weighted average lease expiry for the total portfolio is 6.6 years and 4.9 years by net lettable area and gross rent respectively.

4. CEO Ho Sing shared that F&B now comprises 20.3% of Wisma Atria’s retail trade mix (up from around 15% previously). He shared that the management is more defensive as the retail market remains soft but explained that they try not to have too much F&B for a prime Orchard Road property like Wisma Atria as F&B may bring in a lot of traffic but not necessarily income. Wisma Atria recorded positive rent reversions of 0.5% for its retail spaces and annual shopper traffic of 25.2 million.

5. Starhill Global REIT is spending A$10 million to renovate Plaza Arcade in Perth to accommodate a new international anchor tenant. The tenant is expected to take over the space in early 2018. The renovation will also increase the property’s retail space by 33%.

6. The CEO shared that the management will continue to review its Japanese assets to see if there’s a “right time” to sell the properties. He added the REIT may not necessarily sell all its properties and will wait to see if there’s any upside from the 2020 Tokyo Olympics.

7. Gearing ratio as at 30 June 2017 is 35.3%. Weighted average cost of debt per annum increased from 3.09% to 3.16% and weighted average debt maturity extended from 3.1 years to 4.5 years. 99% of Starhill Global REIT’s borrowings is hedged by a combination of fixed rate debt, interest rate swaps, and interest rate caps.

8. The CEO said that malls in prime locations can complement the growth of e-commerce through omni-channel retailing. Omni-channel retailing is a multichannel sales approach that provides the shopper with an integrated shopping experience whether it’s shopping online or in a brick and mortar store. For example, brands can use their store in a prime location as a showroom and collection point for online purchases. To add to the point, Chairman Tan Sri Dato’ (Dr) Francis Yeow shared that YTL Group (Starhill Global REIT’s sponsor) has an arrangement with SECOO, China’s largest luxury e-tailer, to rent space in YTL malls to showcase their products and serve as a distribution centre for online purchases. Unlike Alibaba or Tmall which struggle with counterfeit luxury goods, SECOO holds authorized distribution rights with top luxury brands like Versace, Dior, and Ferragamo. SECOO has over 15 million online users and operates offline “experience centers” in prime locations in Beijing, Shanghai, Chengdu, Hong Kong, Milan, New York and Tokyo. The chairman added that companies like SECOO are now powerful distributors that help international brands enter the Asian market efficiently.

9. A shareholder asked if the REIT receives any rental income from events held at Civic Plaza, the open square outside of Ngee Ann City. CFO Alice Cheong explained that Civic Plaza is common property and any income earned from its use goes to Ngee Ann City’s management, and not to Starhill Global. However, the money is used for maintenance of the property which reduces the REIT’s expenses. For example, Starhill Global didn’t have to pay for the recent upgrades to Ngee Ann City’s lifts and toilets.

10. A couple of shareholders highlighted that Starhill Global’s share price has been trading below its net asset value for many years (the last time it traded higher was in 2012 for a brief period), and one asked if the management could narrow the discount. CEO Ho Sing reminded the room that a REIT is ultimately a yield stock and he’d rather focus on growing income and DPU for unitholders. He added that driving share price is a matter of market sentiment and perception, and he prefers not to “play that game”.

Liked our analysis of this AGM? Click here to view a complete list of AGMs we’ve attended »

Adam Wong

Adam Wong is the editor-in-chief of The Fifth Person and author of the national bestseller Lucky Bastard! which made the Sunday Times Top 10 Bestseller's List in 2009 and Value Investing Made Easy which made the Kinokuniya Business Bestseller's List in 2013. In 2010, he appeared on U.S. national television on the morning show The Balancing Act. An avid investor himself, Adam shares his personal thoughts and opinions as he journals his investing journey online.


  1. Another good summary Adam,

    I’ve noticed recently that a few REITs have started to report very slight drops in DPU. Some of them have made the (fundamentally poor) excuse that if you take into account exceptional items DPU would have actually risen. I’m not an investor in retail REITs but it occurred to me a while ago that there’s an adverse global trend that’s spreading to Singapore, that being e-commerce. There are ever stronger headwinds against retail real estate business models. A visit to middle America or even Australia shows that the world is “over-malled”. There’s only so many retail units that will be re-absorbed for service business like hair and beauty salons, massage parlours and the medical sector (doctors and dentists).

    Two years ago I went to Dallas (Texas) for a weekend. There were virtually no shops open in the downtown area on a Saturday. Whats more, the biggest (and formerly fanciest) shopping mall had actually closed down. While that might not quite happen to Paragon or Ngee Ann City just yet, the REIT unit holders might find that their investments deliver declining yields, and (especially if there’s a jump in interest rates) a nasty negative movement in share price.

    Don’t get me wrong, I like some Singapore REITs, but I’m not keen on office or retail property. I prefer business parks and industrial.

    (I continue to hold Mapletree Industrial Trust, Keppel DC REIT, Ascendas REIT, Parkway Life REIT and Ascot REIT – I’ve recently taken profits on Ascott but still hold some).

    Keep it up you guys. My wife and I enjoy the Fifth Person bulletins a lot.

  2. Hey Adam,

    Thanks for the detailed summary, I enjoyed reading it! I’m currently watching Starhill closely too.

    One area which I was looking at was the lease of the Ngee Ann City property by Toshin. I understand that this lease makes up 86.2% of the gross revenue for the Ngee Ann City property. Do you know if the entire 86.2% is derived from the Takashimaya department store that Toshin operates?

    I read earlier about this court case regarding Takashimaya v Ngee Ann Development (NAD), and it seems like Takashimaya also leases some areas from NAD. I understand that the rental they pay to NAD is well below market rates, at $8.78 psf compared to the market rate of $19.83 psf. Since Toshin also rents from Starhill, do you know if they are paying similarly low rental rates?


    Lastly, what are you thoughts on 20.8% of SGREIT’s gross revenue being derived solely from Toshin (Takashimaya)? With the threat of eCommerce and online retailers, does this seem like a huge concentration risk?

    Would appreciate your insight on these matters! Thanks! 🙂

    1. You’re most welcome!

      Takashimaya is not under the Toshin lease in Starhill’s portfolio 🙂

      According to this article, Toshin pays around S$15 psf to Starhill for its lease at Ngee Ann City: http://www.businesstimes.com.sg/companies-markets/starhill-reit-raises-rents-under-ngee-ann-citys-toshin-master-lease

      It’s a large concentration and the threat from e-commerce is very real. At the same time, Ngee Ann City and Takashimaya still look pretty busy and I go by the mall 1-2 times a week. At times, parking can be hell especially during a sale! The two office blocks also house a good number of tenants and that adds to the shopper traffic there.

  3. Hi Adam, thanks for the write up.

    The current price of starhill is around 69 cents.
    p/b ratio ard 0.7

    You think in the long term starhill will be a good REITs to invest?


    1. Hi Bernard,

      I’m hesitant to to give any sort of recommendation on whether a stock will be a good long-term investment because there are so many factors involved. What looks like a good investment now may turn out bad if demand, industry factors, and the fundamentals of the company change.

      What’s more important instead is to evaluate a stock on the information you have now and monitor the performance of the company in the months and years to come.

      In the case of Starhill REIT, we need to monitor its NPI, DPU, occupancy levels, rental trends, amount of debt, and any threats to its business (e.g. competition, e-commerce, etc.). If these things hold steady and improve, I’d would keep Starhill in my portfolio. If not, I could choose to better deploy my capital elsewhere 🙂

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back to top button