StarHill Global – BT
Judge denies Starhill’s request to set new rental
Existing rent review mechanism ‘still operable’, she says
A SINGAPORE High Court judge has denied an application by Starhill Global Reit for the court to set new retail rental rates with its master tenant, Toshin Development Singapore, in Ngee Ann City mall, saying that an existing rent review mechanism is ‘still operable’.
Starhill wanted the court to determine the prevailing market rent of the Toshin lease after a dispute erupted between the parties over the rent review process.
Toshin, a unit of Takashimaya, leases more than 225,000 square feet in Ngee Ann City, which it then sub-leases to luxury brands such as Chanel, Louis Vuitton, Burberry and Tiffany & Co.
But in a grounds of decision issued last Friday and made public yesterday, High Court Justice Lai Siu Chiu declined to order an inquiry into the market rental rate of the premises, saying she ‘had (her) reservations about the legitimacy of this remedy’.
‘In substance, the latter remedy would amount to the court substituting its own terms for those in the lease agreement, which was a contract made between the parties,’ Justice Lai wrote.
Starhill claimed that the review mechanism was no longer workable because Toshin had allegedly breached its lease when it ‘unilaterally’ hired seven valuers from July 2010 to February 2011 prior to a joint conduct of the rent review exercise for a new rental term starting on June 8, 2011.
Starhill alleged that if any of the seven valuers that had been engaged by Toshin were to participate in the rent review process, then their findings would be ‘tainted by conflicts of interest’.
But Justice Lai found ‘that the valuers were not involved in a conflict of interest, and . . . (Toshin) had not obtained any unfair advantage by engaging seven of the eight valuers in 2010’.
‘(Toshin’s) objectives in engaging valuers for the 2010 valuation included the need to plan (its) business operations for the future, including negotiations with its sub-tenants on rental rates; and also the need for the Takashimaya group . . . to prepare reports for its shareholders,’ Justice Lai wrote.
‘I’m hard pressed to discern any apparent bias. I had opined . . . that conflicts of interest in the sense of the valuer being conflicted between (Starhill’s) and (Toshin’s) interests are not an issue in this case. Further, the possibility of financial interest in future remuneration from (Toshin) to the valuers was not alleged in this case,’ she wrote. ‘To my mind, there was no justification for the independence of the valuers to be compromised by an allegation of bias.’
Starhill has appealed against Justice Lai’s decision to the Court of Appeal, which is scheduled to hear the case next month. Toshin is represented by senior counsel Cavinder Bull of Drew & Napier LLC.
Sealed in 2008, the lease agreement between Starhill and Toshin will expire in 2013 and rental renewals are due every three years.
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 current rates.
If no consensus is reached, both parties will jointly nominate three valuers. Should there be no agreement on the nomination, they could jointly request that the three valuers be nominated by the president of the Singapore Institute of Surveyors and Valuers.
A-REIT – BT
Acquisitions lift A-Reit’s Q3 DPU by 5.8%
Revenue rises 15.7% to $127.3m while net income climbs 11.6% to $93.9m
ASCENDAS Real Estate Investment Trust (A-Reit) saw better results for its third quarter ended Dec 31, 2011, on the back of increased rental income arising from the completion of projects and acquisitions since December 2010.
Gross revenue for the quarter climbed 15.7 per cent year-on-year to $127.3 million as rental from acquisitions rolled in. Net property income rose to $93.9 million, up 11.6 per cent from the year before.
Total amount of income available for distribution also jumped 17.4 per cent to $72.5 million. As a result, distribution per unit (DPU) for Q3 came in at 3.48 cents, 5.8 per cent higher than the 3.29 cents a year earlier.
Cumulatively, for the nine months since the start of the financial year, gross revenue rose 10.2 per cent from the previous year to $368.9 million, while net property income rose 7 per cent to $273.2 million over the same period.
This led to an 11.9 per cent increase in the total amount available for distribution to $208.9 million, translating to a DPU of 10.06 cents.
Yesterday, the counter closed three cents, or 1.5 per cent, higher at $2.01.
Commenting on the industrial Reit’s occupancy, chief executive officer and executive director of the Reit’s manager, Tan Ser Ping, said: ‘Occupancy for the multi-tenanted properties and the portfolio declined marginally from the previous quarter to 92.4 per cent and 95.9 per cent from 93.0 per cent and 96.4 per cent respectively due to the acquisition of a property in the third quarter which has a relatively low occupancy. However, positive rental reversions of between 5.7 per cent and 28.4 per cent were achieved across all segments.’
The Reit’s aggregate leverage as at Dec 31 stood at 34.3 per cent.
The group expects a stable performance for its full financial year ending March 31, 2012, barring any unforeseen events.
KGT – BT
K-Green Trust’s H2 distribution up
K-GREEN Trust posted a net profit of $16 million for the year ended Dec 31, 2011, 17.3 per cent higher than its projection of $13.6 million.
Distribution per unit (DPU) for the second half- year of 2011 was 4.69 cents, 8.8 per cent higher than the 4.31 cents paid for the June 29 to Dec 31 period in 2010.
As the business trust was listed on June 29, 2010, full-year comparisons with 2010’s earnings are not meaningful.
Together with the DPU of 3.13 cents for the period from Jan 1 to June 30, 2011, total cash distribution for FY2011 was 7.82 cents, representing a distribution yield of 8.6 per cent based on K-Green’s unit closing price of 90.5 cents on Dec 31, 2011.
Said Thomas Pang, CEO of Keppel Infrastructure Fund Management Pte Ltd, trustee-manager of K- Green Trust: ‘K-Green Trust has achieved good performance in the year 2011. In 2012, we will focus on acquisitions in areas of waste management, water treatment, renewable energy and energy efficiency, including assets which were identified under the Rights of First Refusal, as well as asset enhancement opportunities in our existing portfolio.’
Revenue for the year was $90.6 million, 17.9 per cent higher than the projected figure of $76.8 million. This was mainly due to $10.1 million higher recognition of construction revenue, following a shift in the schedule of flue gas upgrading works for Senoko Plant from FY2010 to FY2011. This is in progress and is scheduled for completion by June this year.
K-Green said the underlying performance of the three assets in its portfolio – Senoko Waste-to-Energy Plant, Keppel Seghers Tuas Waste-to-Energy Plant, and Keppel Seghers Ulu Pandan NEWater Plant – is expected to remain stable.
The company said ‘all three assets have long-term concession agreements with Singapore statutory bodies’, namely the National Environment Agency and Public Utilities Board.
K-Green Trust closed 2 cents higher at 95.5 cents yesterday.
K-REIT – BT
K-Reit post-rights Q4 DPU falls
K-REIT Asia yesterday posted improved results for the fourth quarter ended Dec 31, 2011, on the back of higher contributions from associates and higher interest income. Property income for the office Reit was $22.6 million in Q4, up $1.3 million or 5.9 per cent from a year earlier.
This was mainly due to higher property income from its Australian properties, Bugis Junction Towers and contributions from Ocean Financial Centre (OFC). However, this was slightly offset by a $6 million loss in property income resulting from the sale of Keppel Towers and GE Tower. Net property income rose 1.4 per cent over the same period to $17.8 million.
Distributable income to unitholders for the period jumped 54 per cent year on year to $35.7 million from $23.2 million a year earlier. This translates to a distribution per unit (DPU) of 1.4 cents for Q4, based on an enlarged post-rights share base. DPU in Q4 2010 was 1.71 cents.
For the full year ended Dec 31, K-Reit’s net property income was $61.7 million, down 8.4 per cent from the previous year.
Share of results of associates, however, almost quadrupled to $37.4 million from $9.7 million a year ago. Distributable income also rose 32 per cent to $113 million, representing a DPU of 7.08 cents for the full year ended Dec 31, up 11.1 per cent year on year.
Based on K-Reit’s closing price of $0.83 as at Dec 30, the last trading day of 2011, the distribution yield for the year was 8.5 per cent.
The counter ended trading yesterday at $0.895, up 2.3 per cent or two cents.
K-Reit’s Singapore portfolio occupancy of 93.9 per cent outperformed that of the core central business district of 91.2 per cent.
The Reit has about 2.2 per cent of net lettable area due for rent review and renewal in 2012. However, it has given its assurance that that with a portfolio-weighted, average lease expiry of 6.7 years and healthy capital levels, it is in ‘good stead’ to weather the economic slowdown in 2012.
Commenting on the uptake of one of the Reit’s latest assets, OFC, Ng Hsueh Ling, the CEO of K-Reit Asia Management, said she hoped to achieve 100 per cent occupancy in the building by June next year. Currently, the asset’s committed occupancy is about 85 per cent.
K-Reit’s aggregate leverage at Dec 31 was 41.6 per cent based on borrowings of about $2.5 billion.
Looking ahead, Ms Ng said she would be ‘quite comfortable’ with gearing in the range of 40 to 41 per cent, including debt at the associate level.
HPH Trust – DBSV
Strong Dec11 throughput
Yantian throughput up 13.5% in Dec11. Buoyed by early restocking activity ahead of the Chinese New Year factory closures – CNY falls two weeks earlier than in 2011 -, December throughput at Yantian Port grew 13.5% YoY. This took 2011 volume up 1.3% to 10.26m TEUs, slightly better than our zero growth assumption. This also supports our hypothesis that a weaker-than-usual 3Q11 peak season would be followed by a stronger-than-usual 4Q11, which volume only fell 6% QoQ vs 15% drop in 4Q10. Hence, 2011 container volume was more evenly spread out as shippers moved to just-in-time shipments. At Hong Kong port, Dec11 volume grew 1.4%, while it grew 2.5% at Kwai Tsing terminals. And for full year 2011, Hong Kong port saw 3% throughput growth while Kwai Tsing terminals registered 2% growth. Hence, we estimate volume at HIT Terminals at Kwai Tsing grew 3-4% YoY in 2011, within our expectation.
Stable outlook. The decent volume growth in 4Q11 should help the Trust to meet its DPU guidance for FY11; we expect 3.0 US cts for 2H11. DBS economist forecasts 2.3% GDP growth for the US and zero growth for Eurozone in 2012. Hence, HPH Trust’s volumes in Hong Kong and Yantian should show modest growth this year. Given strong operating margins and cash flows, we assume the Trust would pay c.6.0 UScts DPU next year, similar to 2011 distribution. Our estimate is about 10% lower than initial guidance as we imputed weaker throughput growth and smaller potential tariff hike.
Attractive yields, maintain BUY. Despite the recent share price rally, HPH Trust is still offering attractive 8.5-9.0% prospective yields. Our US$0.85 TP is based on DCF metric (7.8% WACC) and translates into 7% target yield. HPH Trust is among the top yielding stocks in Singapore (excluding special dividends). With US data picking up and retail inventory-to-sales ratios still at historic lows, restocking activity should pick up and lead to stronger growth as early as 1H12, which could drive up the share price. We might see HPH Trust quoted in S$ on the SGX in the near term, which would broaden its investor base.