58 / 152
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 August 2016, the Group issued
five-year Series 3 Japan bond of
JPY0.8 billion (maturing in August 2021).
The proceeds of issuance were used
to redeem the Series 2 Japan bond of
JPY0.8 billion ahead of its maturity in
November 2016.
In October 2016, the Group issued
S$70 million unsecured 10-year 3.14%
Series 004 MTN (maturing in October
2026) under its S$2 billion Multicurrency
MTN Programme. S$50 million of the
net proceeds were used in December
2016 to prepay part of the S$250 million
term loan maturing in September 2018,
while the balance was used to meet
capital expenditure requirements and/
or for working capital purposes.
In November 2016, JPY0.8 billion of the
remaining JPY5.2 billion term loan was
prepaid using sales proceeds from the
divestment of Roppongi Terzo.
In June 2017, the Group entered into
an agreement with the same bank for
an approximately four-year secured
term loan facility of A$145 million to
refinance its existing loan of the same
amount in November 2017, ahead of its
maturity in May 2018.
In July 2017, the Group entered into
an unsecured facility agreement with
a club of seven banks, comprising
(a) four-year term loan facility of
S$200 million; (b) five-year term
loan facility of S$260 million; and (c)
five-year revolving credit facilities of
S$240 million (of which S$50 million
is uncommitted), which will be used
to refinance the existing unsecured
S$250 million and S$200 million term
loans in September 2017, ahead of
their respective maturities in June 2018
and September 2018, with the balance
available for working capital purposes.
Following the above early refinancing
of the S$ and A$ term loans, the
average debt maturity profile will be
lengthened from 2.6 years as at
30 June 2017 to approximately 4.5
years and Starhill Global REIT would
have no significant refinancing
requirement until June 2019.
In July and August 2017, the Group
has prepaid JPY350 million term loan
and JPY55 million Series 3 Japan bond
respectively using the net proceeds
from the divestment of Harajuku
Secondo in May 2017.
As at 30 June 2017, Starhill Global
REIT’s outstanding debt stood
at approximately S$1,137 million
with a gearing ratio of 35.3%, 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 hedges
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 2017, Starhill Global
REIT hedged about 99% of its debt,
of which 88% were hedged by a
combination of fixed rate debt
and interest rate swaps, and the
remaining 11% were hedged using
DEBT GEARING AND HIGHLIGHTS
AS AT 30 JUN 2017
SGD term loans
S$450m
JPY term loan
S$54m
SGD RCF
S$3m
Singapore MTNs
S$295m
Malaysia MTN
S$105m
Australia term loans
S$220m
Japan bond
S$10m
Total Debt
S$1,137m
Gearing ratio
(1)
35.3%
Fixed/hedged debt ratio
(2)
99%
Unencumbered assets ratio
73%
Interest cover for the year ended 30 June 2017
4.2x
Weighted average interest rate per annum
(3)
3.16%
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 2017. Includes interest rate derivatives but excludes upfront costs.
(4)
Standard & Poor’s has affirmed its “BBB+” rating in March 2017, with a stable outlook.
56
STARHILL GLOBAL REIT ANNUAL REPORT FY 2016/17