Starhill Global Real Estate Investment Trust: 3 Things Investors Should Know From Its Latest Earnings

Starhill Global Real Estate Investment Trust (SGX: P40U) is a REIT that focuses on investing in retail and commercial properties in the Asia Pacific region.

Its current portfolio comprises 11 properties in five countries, namely, Australia, China, Japan, Malaysia, and Singapore. Starhill Global REIT counts Singapore as its largest geographical market – our Garden City accounts for nearly 70% of the REIT’s assets.

In late April, Starhill Global REIT reported its third quarter results for its fiscal year ending 30 June 2017 (FY16/17). Let’s look at three useful pieces of information that investors may want to know from the announcement:

1. The overall result

The table below shows some important financial numbers from Starhill Global REIT’s income statement for the third quarters of FY16/17 and FY15/16:

Source: Starhill Global REIT FY16/17 third quarter earnings release

We can see that Starhill Global REIT did not perform well in the reporting quarter given the lower gross revenue, net property income, and distribution per unit.

2. The occupancy rate

The occupancy rate of a REIT’s portfolio is an important indication of the level of demand for its properties. Here’s a table showing Starhill Global REIT’s portfolio occupancy rate going back all the way to 2005:

Source: Starhill Global REIT FY16/17 third quarter earnings presentation

The REIT’s occupancy rate has been falling over the past few years and that’s not a good sign.

3. What lies ahead

As investors, we rely on many tools, including management’s forecasts, to help us gain insight on what to expect for the near to long term performance of our investments’ business.

With regard to Starhill Global REIT, this is what it said about its future in the latest earnings release:

“In Singapore, while emerging Southeast Asia’s rising middle class and household incomes continue to attract international retailers, consumer sentiment and spending remain subdued.

For the Singapore office market, cautious sentiment and oversupply continue to pose challenges in the near-term with upcoming vacant space arising from relocation of tenants from older office stock.

Construction works for the asset redevelopment at Plaza Arcade is expected to commence in 4Q FY16/17. The China mall has been handed over to the new long-term tenant and renovations for the property is underway. The asset redevelopment in Plaza Arcade and the mall repositioning in China will continue to impact the rental revenue until completion.

Almost half of Starhill Global REIT’s portfolio is made up of master and long-term leases with periodic rent reviews, which has provided resilience through previous economic cycles. The Manager will continue to focus on optimising the performance of its portfolio while sourcing for attractive property assets.”

In sum, the latest reporting quarter was a weak one for Starhill Global REIT. But given its diversified property portfolio (over both geography and property types), the REIT should not have a major problems in weathering through this challenging period.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.