Natarajan adds that the REIT’s rent reversion outlook remains positive, in the “mid-single digits”, while interest cost expense should inch lower with additional savings from the issuance of new perpetual securities.
With a healthy balance sheet, he also sees that this provides the REIT room for tactical acquisitions.
With Starhill Global REIT trading at an around 20% discount to book value, the REIT’s valuation remains attractive.
Meanwhile, Australian courts have dismissed anchor tenant Myer’s claims against the REIT for an alleged breach of lease terms, issuing a partial final award. The analyst writes: “ The tribunal will separately decide and award on the A$5 million ($4.43 million) costs incurred by the REIT manager on legal and professional fees. This amount has been fully provided for in the financials and should the cost award be favourable, the REIT manager expects part of these costs to be recovered.”
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On the possibility of the sale of Wisma Atria’s office units, Natarajan sees that this is likely. So far, Starhill Global REIT has divested eight strata office units at Wisma Atria at an around 20% to 30% premium over valuation.
“The divestments are net asset value (NAV) accretive but with a slight negative impact on dividend per unit (DPU), assuming debt repayment. The REIT still owns a 66.1% stake and is open to further strata sale but it intends to retain a majority stake above 50%,” he writes.
With regards to leasing updates, the REIT’s market anchor lease at its China asset was terminated in December 2025, with outstanding rental arrears of $2.4 million, although this was mitigated by security deposits and provisions for rental arrear allowance.
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To this the analyst writes: “A new replacement tenant has been signed at a slightly lower rent with income contribution expected from March 2026.”
In Australia, about two-thirds of the Technicolor vacated space in Adelaide has been taken up on a long lease by University Senior College with the remaining being marketed.
Lastly in Singapore, the Toshin master lease new base rent has been determined at 1% higher than the previous base rent until June 2028, while the variable rent based on profit threshold is “less likely” in the near-term, notes Natarajan.
In October, Starhill Global REIT issued $100 million in perpetual securities at a 3.25% per annum (p.a.) coupon, with proceeds used to redeem its $100m at 3.85% p.a. perpetual securities. With this, the analyst expects the overall interest cost to inch lower to about 3.5% with a modest gearing of 35.4%.
In all, Natarjan has revised his FY2027 to FY2028 DPU on the REIT by 2% to 3% through adjusting interest cost assumptions and foreign exchange (forex) as well as lowering cost of equity by 50 basis points, factoring in its low gearing.
Key drivers for the REIT noted by him include an increase in visitor arrivals and pickup in high-end retail sales uplift from variable rents in Toshin master leases and lastly, good sponsor support and master leases which provide base income.
Conversely, key risks include an unexpected slowdown in retail sales from inflationary pressures and weakening economy, a resurgence in interest rates and the structural decline in allure of Orchard Road and shorter land tenure of its Singapore assets.
As at 1.31 pm, units in Starhill Global REIT are trading flat at 59 cents.
