Starhill Global REIT’s (SGREIT) revenue is likely to increase further, according to a report from DBS Bank.
Upside catalysts include the anticipated rent review for Toshin’s lease at Ngee Ann City mall, as the rent from this tenant makes up 19 percent of SGREIT’s top line for FY2016.
Toshin, which manages the specialty stores of Takashimaya Shopping Centre at basement 2 to level 4 of the mall, renewed the lease for another 12 years starting June 2013.
Under their agreement, the rent review only permits upward changes in rent at a maximum of 25 percent. As such, SGREIT’s profit is forecasted to rise at a stable rate of two to three percent over the next two years.
DBS estimates that rents in June to come in at close to S$16 per sq ft per month from S$15 per sq ft per month.
“With the strong uplift in Singapore REIT (S-REIT) prices in recent times, driven by the large cap S-REITs, we believe second liners like SGREIT should play catch up,” said the report.
Meanwhile, DBS said uncertainties from the group’s exposures in Malaysia and Australia are unfounded and that given the recent renewal of its master lease for Lot 10 and Starhill Gallery in Malaysia mean limited downside risk. Moreover, the planned renovation of Plaza arcade by end-FY2017, would mean that dividends for the medium-term may rise as well.