Starhill Global REIT's Ngee Ann City property. (Photo: REITsWeek)

Standard & Poor’s (S&P) Global Ratings has affirmed its 'BBB+' long-term corporate credit rating on Singapore-listed mixed retail and office REIT, Starhill Global REIT, with a stable outlook.

The REIT’s SGD2 billion medium-term notes (MTN) programme’s ‘BBB+’ rating has also been affirmed, said the agency in a release on 31 March.

"We affirmed the ratings on [Starhill Global REIT] because we believe its ability to maintain steady profitability despite the current market slowdown offsets the moderately weaker interest coverage, and leverage compared to our earlier base case," said S&P Global Ratings credit analyst Annabelle Teo.

In its release, S&P acknowledged that the REIT’s recent financial performance appears to reflect the slowdown in both the retail and office markets.

This was especially apparent in Starhill Global REIT’s negative year-on-year net property income (NPI) growth of 3.5%, which can be attributed to, among other factors, lower retail occupancy at Wisma Atria, and sluggish office occupancies in Singapore and Australia.

The REIT’s divestment of its Japanese Roppongi Terzo property in January 2016, has also contributed to a lower income contribution for the period.

“Despite softer market conditions and operational headwinds, we believe [Starhill Global REIT’s] profitability will remain stable, said S&P, pointing to the REIT’s manager’s strategy of maintaining a well-staggered lease profile, and the large proportion of long-term master-tenanted properties.

This strategy, coupled with the fact that the REIT’s properties are located in prime shopping districts, has therefore bolstered operating stability, making Starhill Global REIT relatively less volatile than its peers.

Units of Starhill Global REIT last changed hands on the Singapore Exchange at SGD0.755.

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.