Market
Overview
SINGAPORE RETAIL PROPERTY
MARKET
According to Singapore’s Ministry of Trade and
Industry (MTI), Singapore’s GDP expanded by
1.8% yoy in the second quarter of 2015 based
on advanced estimates, a decline from the 2.8%
growth recorded in 1Q 2015
(1)
. The first half of
the year recorded weaker than expected global
economic performance, while growth outlook
for the regional economies remain soft on the
back of further easing in China’s growth. The
country’s economy is expected to grow by 2.0%
to 2.5% in 2015, from the earlier projected 2.0%
to 4.0%
(1)
.
Tourist arrivals to Singapore from January to
June 2015 reached 7.3 million, representing a
10.0% yoy decline
(2)
. However in 2014, tourism
receipts held steady at S$23.6 billion over 2013,
despite a 3% fall in international visitor arrivals
to 15.1 million
(3)
. In recognition of headwinds in
Singapore’s tourism sector this year, Singapore
Tourism Board (“STB”) announced a slew of
marketing campaigns including a S$35 million
joint campaign between Changi Airport Group
(CAG) and STB
(4)
and a S$20 million global
marketing campaign which will be done in
conjunction with Singapore’s Golden Jubilee
celebrations
(5)
. STB projects tourist arrivals
to remain stable between 15.1 to 15.5 million
in 2015, with tourism receipt to range between
S$23.5 billion and S$24.0 billion
(5)
.
According to CBRE, the average prime
Orchard Road retail rents was relatively flat
yoy in 2Q 2015 at S$34.00 per square foot
per month (psfpm) as the industry continued
to be challenged with lower number of
tourist arrivals and manpower restrictions
(6)
.
However, demand for prime Orchard Road
space continues to hold up as there is no
known major supply from 2015 onwards
(6)
and
Singapore’s luxury goods demand continues
to be supported by the increase in per capita
expenditure of tourists
(7)
. According to CBRE,
Singapore remains attractive to international
retailers seeking a presence in the Asia-Pacific
region, with 58 new-to-market entrants in
2014
(8)
. However, the domestic labour market
is expected to remain tight and consequently,
labour-intensive sectors such as retail and food
services may see their growth weighed down
by manpower constraints. The retail landscape
in Singapore remains tepid with the retail sales
index in Singapore (excluding motor vehicle
sales) declining 3.9% yoy in June 2015
(9)
.
SINGAPORE OFFICE PROPERTY
MARKET
For the office sector, average rents for Grade
A and B space increased to S$11.30 psfpm
and S$8.05 psfpm respectively on the back
of tightness of available space and lower
vacancies
(6)
. However, the large influx of new
supply from 2H 2016 onwards will likely exceed
expected absorption levels which might result
in a slowdown in rental demand
(6)
. According
to CBRE, there is no known office supply in the
pipeline within the Orchard Road vicinity till 2018.
AUSTRALIA RETAIL PROPERTY
MARKET
On a seasonally-adjusted chain volume basis,
the Australian economy grew 0.2% in 2Q 2015,
a qoq decline from the 0.9% growth in 1Q 2015,
owing to reduced mining and consumption
activity, coupled with a decline in exports
(10)
.
Retail sentiment remains buoyed by low interest
rates, with the national retail turnover at 4.8%
yoy growth in seasonally-adjusted terms for the
12 months to June 2015
(10)
. Australia’s prime CBD
retail precincts continue to attract international
retailers with more than 40 new foreign retailers
entered the market in 2014
(11)
. The retail market
in Adelaide is showing signs of strength as a
number of international retailers begin their store
roll-outs
(12)
, as Rundle Mall remains the prime
location in the Adelaide CBD
(11)
. International
retailers, Topshop and Zara, opened their new
stores in Perth in October 2014, while Williams
Sonoma opened its Pottery Barn, Pottery Barn
Kids and West Elm stores in Hay Street Mall in
July 2015
(13)
.
MALAYSIA RETAIL PROPERTY
MARKET
In the second quarter of 2015, Malaysia’s
economy expanded at 4.9% supported
by continued expansion in services and a
turnaround in agricultural production
(14)
. The
introduction of the goods and services tax,
weakening ringgit and current political issues
have affected consumer sentiments in Malaysia,
thus having a negative impact on the retail
sector, said the Retail Group Malaysia. It hopes
the current trends are temporary and that they
would recover by year-end. In July 2015, the
Malaysia Retailers Association had also revised
its growth outlook for 2015 from 4.9% to 4%
on the back of higher cost of living resulting
from weaker ringgit and rising cost of doing
business
(15)
. Tourist arrivals declined 8.6% yoy
for the first quarter of 2015
(16)
in view of the
impact of the airline tragedies in 2014. However,
the Malaysian tourism authority believes the
weakened ringgit would be beneficial to the
industry
(17)
. According to Knight Frank, Klang
Valley is expected to see up to 4.5 million sq
ft of retail space expansion up by early 2016
after adding about 1.9 million sq ft in 1H 2015.
However, the core Bukit Bintang shopping
district is likely to see limited new retail supply
till 2017
(18)
.
CHENGDU RETAIL PROPERTY
MARKET
In China, the government’s effort to moderate
economic growth continued to impact market
Sources:
1. Ministry of Trade and Industry Singapore, MTI
Narrows 2015 GDP Forecast to 2.0 to 2.5 Per Cent,
11 August 2015
2. Singapore Tourism Board, International
Visitor Arrivals
3. Singapore Tourism Board, Tourism Sector
Performance for Quarter 4 of 2014, 20 May 2015
4. Singapore Tourism Board, SIA, CAG and STB
strengthen commitment to tourism with largest
partnership to date, 30 June 2015
5. Ministry of Trade and Industry Singapore,
Speech by Mr S Iswaran at the Tourism Industry
Conference 2015, 7 April 2015
6. CBRE Market View Singapore, 2Q 2015
7. Knight Frank Retail Bulletin, 1Q 2015
8. CBRE, How Global is the Business of Retail, 2015
9. Department of Statistics Singapore, Retail
Sales Index, Food & Beverage Services Index,
14 August 2015
10. Australia Bureau of Statistics
11. Colliers International, Research and Forecast
Report, First Half 2015, Australia and New Zealand
12. CBRE Viewpoint, Adelaide Property Market:
What Does the Future Hold?, June 2015
13. Homewares Giant Pottery Barn Moves to Perth,
The West Australian, 16 July 2015
14. Department of Statistics, Malaysia
15. The Star, Weakening Ringgit, Politics Affecting
Retail Sector; Prices May Rise, 11 August 2015
16. Tourism Malaysia
17. The Star, Nazri Stands By Belief That Weak Ringgit
Is Good For Tourism, 7 August 2015
18. Knight Frank Real Estate Highlights, Malaysia,
1st Half 2015
19. National Bureau of Statistics of China
20. Chengdu Bureau of Statistics
21. CBRE, Chengdu Property Market Overview 2Q 2015
22. Japan Cabinet Office
23. Bank of Japan, Monthly Report of Recent Economic
and Financial Developments, July 2015
24. CBRE, Japan Retail Market View, 2Q 2015
sentiment. Based on preliminary readings,
GDP growth eased to 7.0% in 1H 2015 from
7.4% in FY 2014
(19)
owing to macroeconomic
factors and downward pressure of domestic
economic development. Mirroring the slowdown,
nationwide retail sales growth in 1H 2015 eased
to 10.3%, compared to 12.4% in 1H 2014
(19)
. In
Chengdu, retail sales growth have also eased to
10.9% in 1H 2015, compared to 13.6% in 1H 2014
(20)
as the ongoing anti-corruption and austerity
drive continue to impact the high-end luxury
market. Chengdu’s retail landscape continues to
be challenged with high future supply pipeline
with 1.8 million square metres of space expected
by 2016
(21)
.
JAPAN RETAIL PROPERTY MARKET
According to preliminary estimates, Japan’s
GDP declined at an annualised 1.6% for the
second quarter of 2015 after posting growth
for the previous two quarters, due to weaker
consumption and slow exports
(22)
. In July 2015,
the Bank of Japan trimmed its forecast for
growth in the current fiscal year to March 2016
from 2.0% to 1.7% but kept its current monetary
policy unchanged, as it maintained that the
economy would continue to grow moderately
for the current fiscal year
(23)
. Retail sales in
Japan rose 0.9% yoy in June 2015, following
a 3% and 5% gain in May and April 2015
respectively
(22)
. Competition for retail space
along the main streets remains tight as a wide
variety of retailers including luxury, fast fashion
and sportswear brands continue to adopt a
positive attitude towards expansion
(24)
.
Financial
Review
FINANCIAL REVIEW – FY 2014/15 (18 MONTHS) VERSUS FY 2013 (12 MONTHS)
Due to the change in Starhill Global REIT’s financial year end from December to June, which resulted in a longer 18-month
period from January 2014 to June 2015 for FY 2014/15 compared to a 12-month period from January 2013 to December 2013
for FY 2013, the figures presented below are not directly comparable.
Group
FY 2014/15
(S$’000)
FY 2013
(S$’000)
Change
(%)
Gross revenue
294,789
200,616
46.9%
Property expenses
(57,160)
(42,760)
33.7%
Net property income
237,629
157,856
50.5%
Non property expenses
(72,288)
(47,188)
53.2%
Net income before tax
165,341
110,668
49.4%
Change in fair value of derivative instruments
(479)
4,643
NM
Change in fair value of investment properties
9,120
137,528 (93.4%)
Total return for the period before tax and distribution
173,982
252,839 (31.2%)
Income tax
559
(2,861)
NM
Total return for the period after tax, before distribution
174,541
249,978 (30.2%)
Non-tax (chargeable)/deductible items
(2,965)
(139,125)
(97.9%)
Income available for distribution
171,576
110,853
54.8%
Income to be distributed to:
– Unitholders
164,007
104,781
56.5%
– CPU holder(s)
1,287
3,056 (57.9%)
Total income to be distributed
165,294
107,837
53.3%
Distribution per Unit
7.60 cents
5.00 cents
52.0%
Gross revenue of S$294.8 million for FY 2014/15 was 46.9%
higher than S$200.6 million achieved in FY 2013, mainly
due to the additional six months in FY 2014/15, as well as
stronger performance of Singapore Properties and Australia
Properties following the acquisition of Myer Centre Adelaide
in May 2015. The increase was partially offset by one-time
receipt of accumulated rental arrears in 1Q FY 2013 from
the master tenant Toshin at Ngee Ann City Property for
the period June 2011 to December 2012, as well as lower
contribution from Renhe Spring Zongbei Property and weaker
foreign currencies. NPI for the Group increased by 50.5% to
S$237.6 million for FY 2014/15.
Singapore, Malaysia and Australia are our three largest
contributors to NPI, accounting for 94.7% of the Group’s
NPI for FY 2014/15.
Non property expenses were S$72.3 million for FY 2014/15,
53.2% higher than in FY 2013, mainly attributed to the
additional six months in FY 2014/15.
The income tax credit for FY 2014/15 was mainly attributed
to the deferred tax reversal arising from downward property
revaluation of Renhe Spring Zongbei Property.
The loss on derivative instruments for FY 2014/15 represents
mainly the change in the fair value of interest rate swaps
and caps entered into for the Group’s borrowings. The change
in fair value on investment properties of S$9.1 million for
FY 2014/15 represented the net revaluation gain on the
Group’s investment properties.
Income available for distribution and income to be distributed
to the Unitholders and holder of CPU for FY 2014/15 was
S$171.6 million and S$165.3 million respectively. Total DPU for
FY 2014/15 was 7.60 cents.
59
58
STARHILL
GLOBAL
REIT
Annual
Report
FY 2014/15
