OCBC lowers estimate on Starhill Global REIT after Japan property divestment

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OCBC Investment Research has maintained a ‘Buy’ rating but lowered its fair value estimate on Starhill Global REIT, after the latter announced on 15 May that it has divested a three-storey retail property Tokyo,.

The property, which is located in the Harajuku district, was valued at JPY335.0 million as at 31 March 2017 but disposed off for JPY410.2 million (USD3.6 million), representing a premium of about 22%.

Read: Starhill Global REIT further reduces exposure to Japan with JPY410.2 million divestment

With the disposal, Starhill Global REIT’s portfolio in Japan has now reduced to three properties, with exposure to the country representing just 1.9% of its total asset value.

Proceeds from the divestment will be deployed towards repaying its JPY borrowings, and for working capital purposes, said the REIT.

“Management has been seeking opportunities to streamline its portfolio and pare down its non-core assets”, said OCBC in its report, suggesting that the bank has somewhat anticipated the move.

However OCBC expects operational challenges to persist in the near term for the REIT.

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Ridzwan Rahmat has been analysing Singapore-listed REITs and business trusts, since 2008. For disclosure purposes, Ridzwan is currently vested in Mapletree Greater China Commercial Trust, Mapletree Industrial REIT and Mapletree Logistics Trust.

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