StarHill Global – BT

Starhill Global’s KL mall to get RM25m makeover

It will create more net lettable area and boost income

STARHILL Gallery – a mall that is part of Starhill Global Reit’s portfolio – will undergo a RM25 million (S$10.4 million) makeover that will create about 8,100 square feet in additional net lettable area.

YTL Starhill Global, the Reit’s manager, said yesterday that the asset redevelopment for the mall in Kuala Lumpur will translate to an additional net property income of about RM1.7 million per annum.

This increase in NPI represents a return-on-investment of about 7 per cent, the Reit manager added.

The works should be completed by the second quarter of this year, with the Reit manager hoping to make store fronts more visible and increase the sale of luxury products.

The renovation cost will be funded from the remaining proceeds of the rights issue by Starhill Global Reit that was completed in 2009, as well as working capital.

Two years ago, the Reit raised $337.3 million through a rights issue – joining the rest of its Reit peers in making a cash call during the financial crisis.

The additional net lettable area will be leased to Katagreen Development, which is the current master tenant of Starhill Gallery and an indirect wholly owned subsidiary of YTL Corporation Bhd, under a new master tenancy agreement.

The initial term of the new agreement will run till June 27, 2013, with an automatic renewal for a second term of three years. The new lease runs concurrently with an existing master lease tenancy agreement, the Reit manager said.

Terms and conditions under both master leases work in an increase of about 7 per cent in the master lease rent at the end of each of the first two terms.

Starhill Global Reit is held by a bankruptcy-remote special purpose vehicle (SPV), Ara Bintang Berhad (ABS SPV).

Such SPVs have operations restricted to the buying and financing of specific assets, and have their assets protected from debt obligations if the parent firm goes bankrupt.

ABS SPV and Katagreen have each a put and a call option respectively to extend the tenancy for a third three-year term when the second term expires.

Shares of Starhill Global Reit gained half a cent, or 0.8 per cent, to finish at 63 cents yesterday.