Capital
Management
PRUDENT CAPITAL
MANAGEMENT TO OPTIMISE
UNITHOLDERS’ RETURNS
Starhill Global REIT’s main objective
when managing capital is to optimise
Unitholders’ returns through a mix of
available capital sources. The Group
monitors capital on the basis of
both the gearing ratio and interest
service coverage ratio and maintains
them within the approved limits. The
Group assesses its capital management
approach as a key part of the Group’s
overall strategy and this is continuously
reviewed by the Manager.
In February 2014, the Group issued
S$100 million unsecured seven-year
3.5% Series 002 MTN (maturing in
February 2021) under its S$2 billion
multicurrency MTN programme,
with the net proceeds used to repay
the existing debts and for working
capital purposes.
In May 2014 and June 2014,
approximately JPY0.2 billion
(S$2.5 million) of JPY1.4 billion bond
and JPY0.7 billion (S$8.6 million) of
JPY7 billion term loan were repaid
using sales proceeds from the
divestment of Holon L. In June 2014,
the Group extended the maturity of
its existing secured A$63 million term
loan by two years to June 2019, at
a lower interest margin effective
from June 2014.
In September 2014, the Group
completed the refinancing of
RM330 million MTN ahead of its
expected maturity in June 2015 by
buying back and cancelling the
First Senior MTN and issuing new
five-year secured and fixed-rate
Second Senior MTN of a nominal
value of RM330 million at a
discounted cash consideration of
approximately RM325 million. The
Second Senior MTN bear a fixed
coupon rate of 4.48% per annum
and have a carrying amount of
approximately RM326.2 million
(S$116.2 million) as at 30 June 2015.
In April 2015, the Group entered
into an agreement with the
same banks to secure a five-year
unsecured loan facility to refinance
the JPY6.3 billion term loan ahead of
its maturity in September 2016. The
loan was subsequently drawn in
July 2015 and the maturity extended
to July 2020.
In May 2015, the Group entered into
a three-year unsecured term loan
facility of S$250 million, of which
S$100 million was drawn in June
2015 to refinance the S$100 million
term loan ahead of its maturity in
September 2016. The remaining
S$150 million term loan facility was
drawn in July 2015. The Group also
entered into a three-year secured
term loan facility of A$145 million,
which was drawn in May 2015 to
partially fund the acquisition of Myer
Centre Adelaide in Australia.
In May 2015, the Group issued
S$125 million unsecured eight-year
3.4% Series 003 MTN (maturing in
May 2023), with the net proceeds
used to repay existing debts and for
working capital purposes.
As at 30 June 2015, Starhill Global
REIT’s outstanding debt stood
at approximately S$1,135 million
with a gearing ratio of 35.5%, and
approximately S$2.3 billion (73%) of
the Group’s investment properties
are unencumbered, enhancing its
financial flexibility. The Manager
intends to continue with its prudent
capital management.
Starhill Global REIT’s current financial
risk management policy is described
in greater details below.
INTEREST RATE RISK
MANAGEMENT
In order to protect the Group’s
earnings from interest rate volatility
and provide stability to Unitholders’
returns, Starhill Global REIT may
hedge substantially its interest rate
exposure within the short to medium
term by using fixed rate debt and
interest rate derivatives including
interest rate swaps and caps.
As at 30 June 2015, Starhill Global
REIT hedged 100% of its debt,
of which 81% were hedged by a
combination of fixed rate debt
and interest rate swaps, and
the remaining 19% were hedged
using interest rate caps. The
weighted average interest rate was
approximately 3.19% per annum as
at 30 June 2015. The interest service
coverage ratio was a healthy
5.2 times for the 18 months ended
30 June 2015. The Manager intends
to continue to secure diversified
funding sources from both financial
institutions and capital markets when
opportunities arise, while keeping
Starhill Global REIT’s ongoing cost
of debt competitive.
FOREIGN EXCHANGE RISK
MANAGEMENT
As at 30 June 2015, Starhill Global
REIT is exposed to foreign exchange
risk arising from its investments
in Australia, Malaysia, China and
Japan. The income generated
from these investments and net
assets are denominated in foreign
currencies. In managing its currency
risks associated with its foreign
investments, Starhill Global REIT has
adopted the following income and
capital hedging strategies.
Income hedging
Starhill Global REIT’s core portfolio
is largely based in Singapore, which
contributed approximately 67% of
its revenue for the 18 months ended
30 June 2015. Starhill Global REIT
actively monitors the exchange rates
and assesses hedging on a case-
by-case basis. The impact of the
volatility in the foreign currencies
namely Australian dollar, Malaysian
Ringgit and Japanese Yen on its
distributions has been partially
mitigated by having foreign currency
denominated borrowing as a natural
hedge, and short-term foreign
currency forward contracts to hedge
part of its net foreign income.
Capital hedging
In managing the currency risks
associated with the capital values of
Starhill Global REIT’s overseas assets,
borrowings are denominated in the
same currency as the underlying
assets to the extent feasible, to
provide a natural currency hedge.
As the investments in overseas assets
are generally long term in nature,
the remaining net positions of
the foreign exchange risk on such
investments are not hedged.
DEBT GEARING AND HIGHLIGHTS
As at 30 June 2015
SGD term loans
S$350m
JPY term loan
S$69m
SGD RCF
S$22m
Singapore MTNs
S$349m
Malaysia MTN
S$116m
Australia loans
S$215m
Japan bond
S$14m
Total Debt
S$1,135m
Gearing ratio
(1)
35.5%
Fixed/hedged debt ratio
(2)
100%
Unencumbered assets ratio
73%
Interest cover for the 18 months ended 30 June 2015
5.2x
Weighted average interest rate per annum
(3)
3.19%
Starhill Global REIT corporate rating:
– Standard & Poor’s
(4)
BBB+
Notes:
(1)
Based on consolidated deposited property.
(2)
Including interest rate derivatives such as interest rate swaps and caps.
(3)
As at 30 June 2015. Includes interest rate derivatives but excludes upfront costs.
(4)
Standard & Poor’s has affirmed its “BBB+” rating in April 2015, with a stable outlook.
Notes:
(1)
In July 2015, the Group has fully repaid the S$124 million Series 001 MTN upon maturity and the outstanding short-term RCF of S$22 million.
(2)
In July 2015, the Group has refinanced its unsecured JPY6.3 billion term loan ahead of maturity in September 2016 with the same banks,
with a new maturity in July 2020.
(3)
In July 2015, the Group has utilised the remaining S$150 million from a three-year unsecured S$250 million term loan facility, which was
earmarked to partially fund the acquisition of Myer Centre Adelaide.
(4)
Post July 2015, the Group’s average debt maturity profile is approximately 4.1 years and there is no significant debt refinancing
requirement until year 2018.
A$63m loan
S$100m term loan
JPY6.3b term loan
S$100m MTN
A$145m loan
S$150m term loan (new)
JPY6.3b term loan (new)
S$124m MTN
S$250m term loan
JPY1.2b bond
S$125m MTN
S$22m RCF
RM330m MTN
DEBT MATURITY PROFILE
As at 30 June 2015
FY
2015/16
(4)
FY
2016/17
FY
2017/18
FY
2018/19
FY
2019/20
FY
2020/21
FY
2021/22
FY
2022/23
124
(1)
150
100
250
116
125
100
69
(2)
14
69
(2)
22
(1)
150
(3)
65
400
350
300
250
200
150
100
50
0
Issued in
May 2015 to
refinance the
S$124 million
Series 001 MTN
maturing in
July 2015
S$ million
65
64
STARHILL
GLOBAL
REIT
Annual
Report
FY 2014/15
