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3 Things Investors Should Know From Starhill Global Real Estate Investment Trust’s Latest Earnings Presentation

Starhill Global Real Estate Investment Trust (SGX: P40U) is a REIT that focuses on investing in prime real estate that are used primarily for retail and office purposes. Its portfolio currently comprises 11 properties across Singapore, Australia, Malaysia, China, and Japan.

Last week, the REIT released its earnings for the first quarter of its financial year ending 30 June 2018 (FY17/18). The reporting period was from 1 July 2017 to 30 September 2017. Starhill Global REIT had prepared a presentation for its earnings announcement. Within the deck of slides are three that contain key information about the trust’s business that I think investors should see. Here are the crucial information.

A summary of the results

The table below shows important items from the income statement of the trust’s reporting quarter:


Source: Starhill Global REIT FY17/18 first quarter earnings presentation

As you can see, Starhill Global REIT’s gross revenue and net property income both declined compared to a year ago. This was due to a one-off S$1.9 million pre-termination rental compensation for a retail lease in Wisma Atria that was recorded in the same quarter a year ago.

The lower gross revenue and net property income led to a 9.3% fall to S$26.7 million in Starhill Global REIT’s income available for distribution. Consequently, the REIT’s distribution per unit (DPU) declined by 7.7% to 1.20 cents.

Occupancy rate

The occupancy rate of a REIT’s portfolio is an important indication of the level of demand for its properties. The table below shows Starhill Global REIT’s occupancy rate for its portfolio going back to 31 December 2005:


Source: Starhill Global REIT FY17/18 first quarter earnings presentation

We can see that Starhill Global REIT’s occupancy rate of 93.4% at September 2017 is the lowest seen since December 2005. Low occupancy rates in the REIT’s portfolio were the culprit in the reporting quarter; the retail portfolio of the REIT reported a respectable occupancy rate of 98.1%.

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 weighted average lease expiry (WALE), and its lease expiry profile:


Source: Starhill Global REIT FY17/18 first quarter earnings presentation

We can see that Starhill Global REIT has both short-term as well as long-term leases. The former (leases that expire in less than four years) currently accounts for 59.8% of the REIT’s gross rent.

Having such a REIT expiry profile means that the REIT can take advantage of short-term opportunities while still enjoying some stability from the long-term leases it has.

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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.