Starhill REIT to go for global market

Tan Sri Francis Yeoh

The Star Online

By Angie Ng

YTL Corp Bhd, through Pintar Projek Sdn Bhd, aims to build up a suite of Starhill shopping centres in other major regional cities such as Bangkok, Shanghai and Jakarta to develop a global presence for its Starhill real estate investment trust (Starhill REIT).

Speaking in Kuala Lumpur yesterday, managing director Tan Sri Francis Yeoh said: “We see potential for Malaysia’s first international REIT to increase the Starhill retail property portfolio in Kuala Lumpur and other parts of the world, including Europe. It is our global ambition to do so.”

Pintar Projek, a 70% unit of YTL Corp, manages Starhill REIT and is looking to replicate the success of owning prime properties in premium commercial addresses such as Kuala Lumpur’s Bukit Bintang area.

Starhill REIT property portfolio comprises Lot 10 Shopping Centre, the newly refurbished Starhill Gallery and the adjoining JW Marriott Hotel Kuala Lumpur.

Yeoh, also Pintar Projek chief executive officer, said the good reception for Starhill REIT among retail and institutional investors showed that demand was strong for YTL papers that were backed by quality assets.

The initial public offering (IPO) of Starhill REIT, to-date the country’s biggest at 509.6 million shares, recorded subscription rates of 6.27 times for the retail offer and 8.8 times for the institutional tranche. The proportion of foreign and local investors is 2:1.

The final institutional price of the shares settled at RM1.01 per share, while the retail price is 5% off at 96 sen.

Starhill REIT is committed to pay out 100% of its earnings in the two financial years (FY) ending June 30, 2006 and 2007. The forecast gross yield for the REIT investors is 6.56% for the FY2006, 6.86% for FY2007 and 6.71% for FY2008.

Post-listing, YTL will retain 51% of Starhill REIT. The REIT is scheduled to begin trading on the Bursa Malaysia main board on Dec 16.

Yeoh said the overwhelming demand for the retail portion was particularly heartening, given the large number of IPOs and the prevailing bearish sentiment in the local market.

“We are confident the Starhill REIT will perform well as our top-end retail brand outlets and services available here are recession- proof and will continue to register good business.

“Rental rates at the fully occupied Starhill Gallery, which are about a tenth of top-notch retail properties in Hong Kong and a third of Singapore’s, offer good upside potential,” he added.

With Kuala Lumpur’s duty-free status and the advantage of a competitive ringgit compared with major currencies, Yeoh is confident that Kuala Lumpur had the potential to become the Paris of the East in five years.

The low gearing of Starhill REIT at 15% of the total asset value of RM1.15bil and at annual interest rates of 4.8% over a five-year period also augured well for its performance, he added.

“Going by the tremendous success of Singapore’s Capital Mall Trust and Hong Kong’s Link REIT, which are worth about three times their offer price now, being the first Malaysian REIT to go international will also be a definite advantage for us,” he said.
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