Recent Stock Market Rally

Recent stock market rally has moved cautious investors into more stable blue chip stocks like ComfortDelgro, SIA Engineering and REITS.

Starhill Global REIT is something that i want to talk about today.

1 Feb 2013, they reported to dispose one of their Japan properties which account for 0.4% of their SGREIT's portfolio by asset value. Mr Ho Sing, Chief Executive Officer of YTL Starhill Global said “This divestment is part of SGREIT’s approach in reviewing and re-balancing our Japan portfolio. The sale price is attractive as it translates to a yield of 3.2%." The sale also improved Japan's portfolio occupancy from 92.7% to 94.3%. The fluctuating Yen has no impact on the deal as then Yen loans were fully hedged. The proceeds will be used substantially to repay the loan.

Source: http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_872CEAD9E351D95E48257B0500381542/$file/PrimoPress130201.pdf?openelement

Previously on the 24 Jan 13, Starhill Global REIT announced the potential acquisition of the Plaza Arcade in Perth which is located next to David Jones Building. 

Source: http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_144B36E45236A4D348257AFD004108EB/$file/PlazaArcadePresentation.pdf?openelement

Assuming the acquisition is completed, there is potential of merging both Plaza Arcade and David Jones building together for more efficient management and reduced operating expenses of both malls. Below is the image of the sitemap:

click for enlargement

Conclusion

These two moves were great moves to strengthen the position of Starhill Global REIT. By reducing its less attractive property in Japan to have a 3.2% profit to reduce its debt in turn to finance the acquisition of the property in Perth which may lead to better management and reduced operating expenses, thus generating more dividends per unit(DPU) for shareholders.