Published November 19, 2009

M'sian property major sharpens S'pore thrust

Starhill Global acquiring $571m of assets in big YTL revamp

By UMA SHANKARI

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(SINGAPORE) YTL Corp, Malaysia's biggest property group, is restructuring its RM8 billion (S$3.3 billion) property trust and hotel portfolio, which includes the Singapore-listed trust Starhill Global Reit.

Dr Yeoh: sees huge opportunities for Starhill Reit to acquire high-end assets in key hot spots

Starhill Global Reit, which will focus on retail, will buy two malls in Kuala Lumpur from YTL's Malaysia-listed trust Starhill Reit for $423.3 million.

The Singapore trust will also acquire the David Jones Building in Perth, Australia, for $148 million.

'This exercise will restructure the RM8 billion in retail and hotel assets currently under our control into two distinct Reit portfolios - the hospitality Reit in Malaysia and the retail-centric Reit in Singapore, which will benefit both Reits in terms of pursuing growth and development strategies in a single, focused class of assets,' said YTL managing director Francis Yeoh.

With the proposed acquisition of the three properties, Starhill Global Reit's total portfolio size will grow to $2.5 billion. Its footprint will also be extended to Malaysia and Australia, diluting the geographic concentration risk. The trust's portfolio now comprises 10 properties in Singapore, Japan and China valued at about $2 billion in total.

Starhill Global Reit also said in a separate announcement that it has terminated the master leases and property management agreements for seven properties in Japan to 'mitigate tenant concentration risks'.

Dr Yeoh said that YTL's long-term vision is for Starhill Global Reit to be the main YTL-linked vehicle for the ownership of prime retail and commercial properties.

On its part, Malaysia-listed Starhill Reit will instead focus on the hospitality business after selling the two malls. Hotel assets with the potential to be injected into the Reit include The Ritz-Carlton in Kuala Lumpur and The Majestic Malacca.

'From the global standpoint, we see tremendous opportunities for Starhill Reit to acquire high-end assets in key international hot spots, including Bali, Saint Tropez, Phuket and other world-class destinations,' said Dr Yeoh.

The two malls bought by Starhill Global Reit from Starhill Reit - Starhill Gallery and Lot 10 Shopping Centre - have a total net lettable area of 554,165 sq ft. They will be bought using an asset-backed securitisation structure.

Starhill Global Reit also said that Katagreen Development, a wholly-owned subsidiary of YTL Corp, will be the master lessee in both properties with a tenure. The master lease will incorporate a step-up rental feature every three years.

David Jones Building in Perth will be acquired from Centro, a real estate company based in Australia. David Jones, a department store, has a lease in the building until October 2032. It now occupies about 95 per cent of the total gross lettable area of the building and accounts for 75 per cent of the annual gross rental.

The proposed Australian acquisition is expected to be completed in January 2010 and will be funded by a combination of debt and proceeds raised from Starhill Global Reit's recent rights issue.

Starhill Global Reit was formerly known as Macquarie Prime Reit, and was listed in 2005 with an initial portfolio that included stakes in Singapore malls Ngee Ann City and Wisma Atria.

The property trust's name was then changed after YTL Corp in October 2008 took over the Macquarie Group's 26 per cent stake in an all-cash deal worth $285 million.

YTL Corp has been expanding aggressively in Singapore. In 2008, it landed Singapore's second largest generating company, the 3,100-megawatt PowerSeraya, for $3.8 billion.