StarHill – BT

Starhill Reit’s rent review application dismissed

It’ll appeal the High Court ruling, file a stay of execution

THE High Court has dismissed the application from Starhill Global Reit, which had asked the court to declare as non-operable the rent review mechanism in its lease agreement with Toshin Development Singapore.

YTL Starhill Global Reit Management, the Reit manager, said yesterday that it would be filing an appeal against the decision and a stay of the High Court’s orders.

Toshin is the subsidiary of Takashimaya and leases over 225,000 square feet of retail space in Ngee Ann City as master tenant and sub-leases to luxury brands such as Chanel, Louis Vuitton, Burberry and Shanghai Tang.

Inked in 2008, the lease agreement between Starhill Reit and Toshin will expire in 2013 and rental renewals are due every three years. The next rental term of two years starting on June 8, 2011 was up for review.

Under the rent review mechanism, both parties will agree on the new rental rate, which has a cap of not more than 25 per cent from the current rates.

If no consensus is reached, both parties would jointly nominate three valuers. Should there be no agreement on the nomination, they could jointly request for the three valuers to be nominated by the president of Singapore Institute of Surveyors and Valuers.

But Starhill claims, in its application to the court, that this rent review mechanism is no longer operable and requests that the High Court proceed to determine the prevailing market rent of the Toshin lease.

Toshin, on the other hand, takes the view that this rent review mechanism is still operable.

Since the new rental rate has not been determined before the start of the new rental term, the current rate will continue to apply until the new rent has been determined.

The rental rate shall be adjusted retrospectively from the start of the new rental term as soon as the new rent has been determined and any accumulated arrears of rent, if any, shall be paid by Toshin.

Starhill’s stake in Ngee Ann City represents 27.23 per cent of the total share value of strata lots in Ngee Ann City.