Starhill Global REIT's Wisma Atria (Photo: REITsWeek)Starhill Global REIT's Wisma Atria (Photo: REITsWeek)

OCBC Investment Research reiterates a ‘Buy’ rating on Singapore-listed office and retail landlord Starhill Global REIT, while being cautious that a notable percentage of its leases are expiring.

The REIT posted a decline of 0.8% in its DPU for its 1Q FY16/17 on lower contributions from its properties in Australia, China, and Japan during the financial period.

Starhill Global REIT also reported improved performance for its Singapore retail portfolio due largely to a full-quarter of contribution from the 5.5% increase in base rent from its master tenant Toshin at its Ngee Ann City property with effect from June 2016, said OCBC on 31 October.

“However, its Singapore office portfolio had a weaker performance and this was due to lower occupancy rates”, the bank noted.

“Despite the limited new supply in Orchard Road, we are cautious on this space as [Starhill Global REIT] has 20.2%, and 30.4% of its Singapore office leases expiring [by gross rent]at Wisma Atria, and Ngee Ann City, respectively, for the remainder of FY17”, it added.

The bank reiterates a ‘Buy’ rating on the REIT with an unchanged fair value estimate of SGD0.86, noting also that it currently has a distribution yield of about 6.6%, and a P/B ratio of about 0.87 times.

Units of Starhill Global REIT finished the trading day about 0.6% higher from its previous close on the Singapore Exchange to end at SGD0.815.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.