Starhill Global Real Estate Investment Trust’s Latest Full Year Earnings: 3 Key Slides Investors Should See

Starhill Global Real Estate Investment Trust (SGX: P40U) released its full year results for its fiscal year ended 30 June 2017 (FY16/17) in late July.

As a quick background, the REIT has a focus on investing in prime retail and office properties. Its current portfolio comprises 11 mid to high-end retail properties in five countries (Singapore, Australia, Malaysia, China, and Japan). Singapore makes up 68% of Starhill Global REIT’s total assets, while Australia and Malaysia collectively account for 29%.

Starhill Global REIT had prepared a presentation for its earnings announcement. In the deck of slides, there are three that contain key information about the REIT’s business performance that I think investors should see. Here are the crucial information from the three slides.

The overall result

One of the slides contained a table on how Starhill Global REIT’s gross revenue, net property income, income available for distribution, and distribution per unit (DPU) had changed in FY16/17 compared to a year ago. Here’s the table:

Source: Starhill Global REIT FY16/17 full year earnings presentation

As you can see, the REIT’s gross revenue and net property income (NPI) both fell. That was due to a weaker performance in Australia and China, offset by growth in Malaysia. These resulted in a lower DPU ultimately.

Low occupancy rate

The occupancy rate of a REIT’s portfolio is an important indication of the level of demand for its properties. One of the slides in Starhill Global REIT’s presentation deck showed the occupancy rates of its portfolio going back to end-2005:

Source: Starhill Global REIT FY16/17 full year earnings presentation

We can see that Starhill Global REIT’s occupancy rate of 95.5% in FY16/17 was slightly ahead from FY15/16. But, the 95.5% rate is still one of the lowest seen over the past decade.

A long lease expiry profile

A REIT’s lease expiry profile is useful to study because it gives us insight on the stability of the REIT’s rental income. The chart below shows Starhill Global REIT’s lease expiry profile:

Source: Starhill Global REIT FY16/17 full year earnings presentation

What we can see is that the REIT has both short-term and long-term leases. Short-term leases (those with less than three years) account for about 54% of Starhill Global REIT’s total leases, while the remaining 45% will expire on or after FY20/21.

As such, the REIT can take advantage of short-term opportunities to grow its rent or adjust its tenant mix, while hedging roughly half of its income through long-term leases.

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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.