Starhill Global ( former McQ Prime )

[tonylim]

May 13, 2011

APPLICATION TO COURT IN RELATION TO THE MASTER LEASE WITH TOSHIN DEV SPORE PTE LTD (“Toshin”)

YTL Starhill Global REIT Management Limited, as manager (the “Manager”) of Starhill Global Real Estate Investment Trust (“Starhill Global REIT”), wishes to announce that HSBC Institutional Trust Services (Singapore) Limited, as trustee of Starhill Global REIT (the “Trustee”), has applied to the Singapore High Court by way of an originating summons for, among other things, a declaration that the rent review mechanism (the “Rent Review Mechanism”) in its lease agreement with Toshin (the “Toshin Lease”) is not operable and that the Court proceed to determine the prevailing market rent of the Toshin Lease.

Under the Toshin Lease, Toshin is the master tenant occupying the retail areas from basement two to level four of the Ngee Ann City Property.

Under the terms of the Toshin Lease, the Rent Review Mechanism determines whether the rental rate
for the next rental term of two years commencing on 8 June 2011 is to increase (not exceeding a 25%
increase from current rates) or remain at the current rates.

Starhill Global REIT’s position is that the Rent Review Mechanism is no longer operable whereas Toshin takes the opposing view, hence necessitating the application to the Singapore High Court.

So Starhill G R wanted rental upward revision of more than 25% , am I right ?

[winston]

Our thoughts:

Starhill’s master lease with Toshin covers level 1-4 of Ngee Ann City, one of the most successful malls in the prime district of Orchard.

Under the legacy master lease, Starhill leases the prime retail space of these 4 levels to Toshin at below-market rentals of $12-13 psf, with the master lease running till 2013.

Comparatively, the REIT is currently leasing its retail space in Wisma Atria at rentals of $30 psf. It is thus no wonder that Starhill is upset over the current rent review structure and seeks to overhaul the existing structure for it to maximise the value of the mall.

A successful effort on this front could lead to capital values for the mall being re-rated to the $4000-5000 psf range common for Orchard road malls, instead of the current $2500 psf range that the mall is currently being valued at.

Source: DMG

[winston]

Not vested

Starhill Reit: Rent review application dismissed.

The High Court has dismissed the application from Starhill Global Reit to declare the current rent review mechanism in its lease agreement with Toshin Development Singapore as non-operable.

The lease agreement between the two companies was signed in 2008 and will expire in 2013. Rental renewals are due every three years and the next rental term of two years starting on 8 Jun 11 was up for review. (Source: The Business Times)

Comments: We do not see a substantial impact on the distributions for Starhill REIT as this dispute hinges only on the methodology to determine the upward revision of rentals.

This does not impact the current rentals which will still continue to be paid by Toshin.

We also do not anticipate a significant upward revision in the Toshin rent as Orchard rents have not increased substantially since the previous revision in 2008.


Source: UOBKH

[winston]

not vested

SGREIT’s Year-to-Date September 2011
DPU up 8.7% Year-on-Year

HIGHLIGHTS

• Year-to-Date September 2011 DPU up 8.7% over corresponding period last year on the back of
contributions from the acquisition of 2 malls in Kuala Lumpur, Malaysia.

• 3Q 2011 DPU remained the same over 3Q 2010.

• Completion of asset redevelopment works in Starhill Gallery, Kuala Lumpur.

http://info.sgx.com/webcoranncatth.nsf/ ... penelement

[winston]

not vested

Starhill Global REIT: 3Q11 DPU unchanged YoY

Starhill Global REIT (SGREIT) reported its 3Q11 results this morning.

Gross revenue and NPI came in at S$44.0mn and NPI of S$34.4mn respectively,representing a decline of 2.6% YoY and 3.7% YoY.

This was mainly due to lower contributions from Singapore, Japan and Malaysia.

DPU for the quarter, on the other hand, stood at 1.00 S cents, unchanged YoY. This brings the 9M11 DPU to 3.11 S cents, or 72.4% of our full-year estimates.

Our Buy rating and S$0.70 fair value is currently UNDER REVIEW due to a change in analyst coverage.

Source: OCBC

[tonylim]

Starhill Global REIT: BUY; S$0.61 by DBSVickers

Let’s focus on the fundamentals!
Price Target : S$ 0.76 (Prev S$ 0.73)

At a Glance

· Portfolio performance remained healthy, 9M11 DPU makes up 73% of our FY11 estimates

· Improve Supply/Demand outlook for prime retail space to drive prime retail rents

· Slight dilution (c.2%) in DPU in FY11, if Toshin lease renewal takes
place in FY12

· Maintain BUY, TP raised to S$0.76

Comment on Results

3Q11 result is in line with expectations. Revenue and NPI fell by a marginal 3% and 4% to S$44.0m and S$34.5 m respectively, due to lower contributions from its Singapore, Japan and Malaysia portfolios.

However, lower interest expense and dividend to CPPU holders helped to mitigate the decline resulting in a flattish distributable income of S$19.4m or DPU of 1.0 Scts. 9M11 DPU makes up 73% of our FY11 estimates.

Slide in occupancies expected to be transitional. The occupancy for Wisma Atria office rose 2.6 ppt to 94.6%, while Ngee Ann City office occupancy slipped by 4.8 ppt to 91.8% upon the lease expiry of a mid-sized tenant.

However, the group has found a replacement tenant and occupancy should head back to the same level next quarter. Monthly rents signed remained healthy at S$9 -10 psf.

Meanwhile, demand for retail space at Wisma Atria remains strong on the back of expansion from existing tenants with reversions as high as 20% from preceding rents.

Better outlook for prime retail space, Toshin renewals could only take
place next year. Going forward, the improved supply and demand dynamics along Orchard Rd as well as the upcoming year-end festive season should continue to help lift average retail rents at Wisma Atria and Ngee Ann City.

The main concern has centred on Toshin's lease renewal at Ngee Ann
City, which was due in June this year. We estimate that DPU in FY11 will be diluted by a marginal c1.8% if resolution takes place in FY12.

In Australia, David Jones’ lease has been revised up by c. 6% upon the review in August and full contribution will be seen in 4Q.

After refinancing of its loan upon the expiry of the cross currency swaps, interest rate fell marginally from 3.49% to 3.44% while gearing rose 2ppt to 32% due to the higher exchange rate.

Recommendation

Maintain BUY. SGreit continues to offer attractive FY11/12F yields of 7.1- 7.4%. Valuation remains attractive at 0.7x P/BV. Maintain BUY, we raised our DCF backed TP to S$0.76 as we rolled forward our numbers to FY12F.

(Document link: Singapore Research)

[winston]

not vested

3Q11: behind our estimates but met consensus forecast

SGREIT posted 3Q11 revenues of S$44.0m, down 2.6% y-y and 0.4% qq, largely due to decreased contributions
from Wisma Retail.

NPI was down 3.7% y-y and 3.2% q-q to S$34.4m. Operating margin at the property level was lower than expected.

3Q11 DPU of Scts 1.0 met consensus but was slightly behind house forecasts of Scts 1.1.

Wisma Atria retail occupancy of 95.3% was 2.4pts lower against 2Q, due to tenant transition whilst office occupancy performed better, increasing to 94.6%, 4.3pts higher than previous quarter.

Ngee Ann City retail occupancy held firm at 99.7%, whilst office occupancies took a 4.8pts dip to 91.8%, versus 96.6% in the 2Q.

Market’s immediate reaction is likely to be neutral 9M11 DPU of Scts 3.11 met 72% of our FY11F estimates and 74% of consensus. Investor reaction is likely to be neutral, given the broadly in line numbers.

Stock is currently trading at 0.64x FY12F PBV & 7.0% FY12F yield

SGREIT is trading at 0.64x FY12F PBV, versus the average 1.0x FY12F PBV our other covered REITS.

Maintain Neutral with estimates under review.

Source: Nomura

[winston]

not vested

Starhill Global REIT – 3Q11: Asset enhancements on track to deliver growth

(BUY/S$0.61/Target: S$0.70)
FY11F DPU (S$): 4.1
FY12F DPU (S$): 4.2

Results in line with expectations. Starhill Global REIT (SGREIT) reported a 3Q11 distributable income of S$19.4m (+7.6% yoy, -3.8% qoq) or a DPU of 1.00 cents (unchanged yoy, -3.8% qoq).

The 9M11 DPU is in line with our expectations, accounting for 76% of our full year DPU estimate of 4.1 cents.


• 9M11 revenue increased 11.7% yoy to S$134.1m and net property income (NPI) increased 14.2% yoy to S$107.1m, driven by revenue contributions from the acquisitions of Starhill Gallery and Lot 10 properties in Malaysia.

Occupancy in Wisma offices has improved, picking up 2.6 ppt qoq to 94.6% in 3Q11. This was offset by a dip in Ngee Ann City office occupancy by 4.8 ppt to 91.8%.

Office revenue dipped marginally by 1.6% to S$5.4m due to negative reversions and changes in occupancy.

Asset enhancement initiative (AEI) on track to deliver growth at Wisma Atria. Our site visit indicates that the AEI will contribute to a major revamp of Wisma Atria’s façade facing Orchard Road.

Precommitments of 75% have already been secured from Coach, Tag Heur Flagship store and Swatch Concept Store. The target completion of the AEI is by 3Q12.

In addition, AEI works have been completed in Starhill Gallery and Lot 10 in Malaysia, increasing master-rentals from YTL Corp.


We maintain BUY with an unchanged target price of S$0.70. We use the dividend discount model (required rate of return: 7.7%, terminal growth: 2.0%) to value Starhill Global REIT.

Share Price Catalyst includes positive newsflow on rentals, occupancies, yield-accretive acquisitions, and asset enhancement initiatives (AEI).

Source: UOBKH

[winston]

not vested

First Look - Starhill Global REIT (SGREIT SP, Neutral) - 3Q11: behind our estimates but met consensus ( SGD0.60 / PT: SGD0.68 )

3Q11: behind our estimates but met consensus forecast
SGREIT posted 3Q11 revenues of S$44.0m, down 2.6% y-y and 0.4% q-q, largely due to decreased contributions from Wisma Retail.

NPI was down 3.7% y-y and 3.2% q-q to S$34.4m.

Operating margin at the property level was lower than expected. 3Q11 DPU of Scts 1.0 met consensus but was slightly behind house forecasts of Scts 1.1.

Wisma Atria retail occupancy of 95.3% was 2.4pts lower against 2Q due to tenant transition whilst office occupancy performed better, increasing to 94.6%, 4.3pts higher than previous quarter.

Ngee Ann City retail occupancy held firm at 99.7%, whilst office occupancies took a 4.8pts dip to 91.8%, versus 96.6% in the 2Q.

Source: Nomura

[winston]

not vested

Price catalyst

2-month price target: S$0.67 based on a DCF methodology.

Catalyst: Acquisitions and higher-than-expected reversion retail rents


Action and recommendation

SGREIT is largely a prime retail play with 68% of assets in Singapore. Its current yield of 7.6% is attractive relative to its 5-year average trading yield of 6.8%.

We believe the market is pricing in a 38% fall in Orchard Road retail rents at the current share price, which we think is too excessive.

Upgrade to Outperform from Neutral with an unchanged target price of S$0.67.

Source: Macquarie