Starhill Global REIThas entered into a sale and purchase agreement to divest its Daikanyama asset in Japan for JPY1,877.7 million (SGD18.91 million).

This translates to a 39.1% and 2.9% premium over the latest valuation and acquisition price of the asset respectively.

It is a 3-storey building with 8,087 square feet of net lettable area, for retail and office use.

The property was last valued at JPY1,350.0 million, and accounts for approximately 0.5% and 0.4% of Starhill Global REIT’s asset value and net property income respectively.

Pursuant to this transaction, the REIT will be left with one asset in Tokyo, Ebisu Fort, with an asset value of JPY3,620.0 million, representing 1.3% of its asset value.

The net proceeds from the sale of the asset will be used to repay its JPY borrowings or for working capital purposes.

The REIT’s gearing is expected to decrease from 36.5% to 36.1%, assuming that the net sale proceeds are substantially used to repay the JPY borrowings.

The pro forma financial effects of the divestment on the distribution per unit and net asset value per unit are not expected to be material, said the REIT.

“Regardless of the Tokyo divestments in the past few years, Japan remains one of our key markets of interest and we will continue to explore potential investment opportunities”, said Ho Sing, CEO of the REIT’s manager.

“This divestment allows us to unlock value, pare down debt and provide us with greater financial flexibility and capacity to focus on new assets that align with our growth strategy”, he added.

Starhill Global REIT was last done on the Singapore Exchange at SGD0.545, which presently implies a distribution yield of 6.97% according to data on the Singapore REITs table.

Related: Starhill Global REIT addresses concerns over falling rents, valuations

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.