Letter to
Unitholders
Tan Sri Dato’ (Dr)
Francis Yeoh Sock Ping
Executive Chairman
1
2
Mr Ho Sing
Chief Executive Officer
& Executive Director
Dear Unitholders
On behalf of the Board of YTL Starhill
Global REIT Management Limited,
the Manager of Starhill Global REIT,
we are pleased to present the report
and audited financial statements of
Starhill Global REIT for the 18 months
ended 30 June 2015 (FY 2014/15).
The financial year end of Starhill
Global REIT has been changed from
31 December to 30 June so as to align
with our sponsor, YTL Corp. Thus
the FY 2014/15 financial year is an
18-month period from 1 January 2014
to 30 June 2015.
ANOTHER YEAR OF
CONSISTENT PERFORMANCE
For the 18 months ended 30 June
2015, Starhill Global REIT recorded
a distribution per unit (DPU) of
7.60 cents. For the 12 months ended
30 June 2015, DPU would have been
5.11 cents (3.7% higher) compared
to 4.93 cents achieved for the
12 months ended 30 June 2014.
Based on Starhill Global REIT’s
closing price of 88 cents on
30 June 2015, the rolling 12-month
DPU translates to an implied yield
of 5.81%, representing the highest
DPU
(1)
achieved since its listing in
September 2005.
The strong performance for the
12 months ended 30 June 2015 was
mainly attributed to the sustained
growth from our core Singapore
portfolio and maiden contribution
of approximately 1.5 months from
the newly acquired Myer Centre
Adelaide. The overall performance
of the REIT could have been
stronger if not for the negative
currency movements, weaker
China contribution and the loss
of income from the divestment
of Holon L in Tokyo.
STRONG PERFORMANCE
FROM SINGAPORE
Singapore continued its strong
performance with a net property
income (NPI) of S$106.0 million for
the 12 months ended 30 June 2015,
representing a growth of 3.9% over
the corresponding period. Ngee Ann
City retail continued to enjoy stable
income from the long term lease to
master tenant, Toshin. Wisma Atria
retail recorded NPI growth of 6.0%
to S$45.4 million for the 12 months
ended 30 June 2015 driven by strong
rental reversion of 7.8% for leases
committed in the same period and
sustained occupancy rate of 98.1%
as at 30 June 2015. Our Singapore
Properties’ prime location on the
most popular retail thoroughfare in
Southeast Asia continues to be well
sought after by international retailers.
Some of the more prominent retail
operators and brands that have
chosen Wisma Atria over the past
18 months include luxury watch
retailers Hong Kong’s Emperor
Watch & Jewellery and Swiss luxury
watch brand deLaCour, UK’s Ben’s
Cookies, Spanish yogurt parlour
llao llao, American luxury luggage
brand Hartmann, Korean cosmetics
Etude House, and gourmet burger
restaurant Omakase Burger.
Level 3 of Ngee Ann City Property
was repositioned following the
relocation of Books Kinokuniya to
Level 4. New fashion and lifestyle
retailers include American Vintage,
British India, Kiton, LaPrendo, La Cure
Gourmande, Lululemon Athletica, and
ABC Cooking Studio from Japan.
Aside from retail, the office portfolio
in the Ngee Ann City Property and
Wisma Atria Property continued to
perform with NPI growth of 5.5% to
S$21.1 million for the 12 months ended
30 June 2015 on the back of 6.0%
positive rental reversion for leases
committed in the same period and
high occupancy rate of 99.3% as at
30 June 2015. The prime location
along Orchard Road and the limited
available new supply of space in
the vicinity have contributed to the
resilience of the office portfolio.
SUCCESSFULLY SECURED
PRIME AUSTRALIAN ASSET
IN ADELAIDE
The purchase price of
A$288 million is lower than
replacement cost, translates
to NPI yield of 6.6% and is
DPU accretive
(2)
.
Australia has grown to become
our second largest market following
the acquisition of Myer Centre
Adelaide in May 2015. Myer Centre
Adelaide is the largest city mall
located in the prime CBD retail
stretch (Rundle Mall) in Adelaide,
the only retail pedestrian stretch in
the city. It benefits from its close
proximity to the main office district,
established universities, as well as
the popular Riverbank Entertainment
Precinct where the city’s Convention
Centre, Festival Theatre and the
sports stadium are located.
The purchase price of A$288 million
is lower than replacement cost,
translates to NPI yield of 6.6% and is
2.8% accretive to DPU on a proforma
basis
(2)
. Occupancy for the retail
mall stands at 96.7% with Myer
being the key anchor tenant while
the occupancy rate for the office
segment was 91.6% as at 30 June
2015. The property also comes with
approximately 113,000 square feet
of vacant space on levels 4 and 5
which present asset enhancement
opportunities. Given the prime
location, Myer Centre Adelaide is
likely to be the preferred location
for international retailers expanding
into Adelaide. After the acquisition,
the proportion of contribution from
Australia increased from 9.3% of the
Group’s revenue for 5Q FY 2014/15
to 16.0% of the Group’s revenue
for 6Q FY 2014/15 based on
the approximately 1.5 months
contribution from Myer Centre
Adelaide (or approximately 23%
(2)
based on full period contribution
from Myer Centre Adelaide).
EXTRACTING VALUE
FOR UNITHOLDERS
The resources unlocked
from the Japan divestment
will be channelled towards
strengthening Starhill Global
REIT’s portfolio.
We continue to streamline our
portfolio and focus on our strengths
so as to extract value for Unitholders.
In March 2014, we divested Holon L in
Tokyo at a 6% premium to valuation.
Proceeds were substantially used to
repay JPY borrowings. The resources
unlocked from the divestment will be
channelled towards strengthening
Starhill Global REIT’s portfolio
as demonstrated by the recent
acquisition of Myer Centre Adelaide.
Asset redevelopment has been one
of the key value creation strategies.
In recent years, the rejuvenation of
Wisma Atria Property and Starhill
Gallery have contributed positively
to income growth and keeping the
assets relevant to shoppers. Looking
ahead, we will be focusing our
efforts on the redevelopment of
Plaza Arcade in Perth, Australia.
The property has received approval
from the local authorities and we
plan to convert approximately
9,000 square feet of space on the
upper floor for more productive
retail use.
PRUDENT CAPITAL
MANAGEMENT
The fully debt-funded acquisition
of Myer Centre Adelaide raised the
gearing of Starhill Global REIT from
29.0% as at 31 December 2013 to
about 35.5% as at 30 June 2015.
Notwithstanding the higher level of
Starhill Global REIT delivers 10 years of
positive growth and solid performance
“The sterling performance was achieved
due to its focus on prime real estate.”
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STARHILL
GLOBAL
REIT
Annual
Report
FY 2014/15
