Starhill Global Reit

[dzwm87]

IMO, unlikely for Starhill Global to win the appeal.

Francis Yeoh did mention about it during the last Starhill's AGM but he did express doubts in winning during the post-AGM discussion. In a nutshell, the argument in favour against them is that they had earlier agree upon a lower rental charge and now they are fighting in court for higher rents. The court seem to think that Starhill wants the best of both worlds. The lower rental charge was supposedly agreed upon long time ago - even before Francis Yeoh was taking charge over Starhill.

Even if there is an upside rental reversion, I doubt it will be huge.

[Stocker]

The appeal is for the rental revision from 8 June 2011 to 2013.
Believe Starhill did it was just to remind Toshin that the new lease will have a hefty increase in rental if Toshin is interested to go for the next 12 years lease . Starhill would not be that silly not to understand that the agreement signed in 2011 , it can be null and void before the expiry of the 12year agreement, ending 8 june 2013.
What we are more imtersted is the new rental rate after June8 2013 , be it with Toshin or other new tenants. In the first place do Starhill really need Toshin to be the chief tenant to do the sub- letting ?
Starhill should be able to do what Toshin does in NAC.

[Coattails]

Believe YTL prefers to lie low on this issue until they exercise their CPU in June 2013 to cross the 30% mark , YTL has a white wash clause to excuse them from making a MO, after they cross the 30 % holding, they can buy directly from the open market. Now they cannot do it because if they cross 30%, they would have to make a MO.
It is very clear cut case that the new tenancy agreement will start with new rental at today's market price , not that of 2001.
If Toshin disagree with the new rental rate, Toshin will have to move out from NAC. In today's market condition , tenants are at the mercy of the landlords, but not the other way round.

Sorry, but I see something not right with your logic. The strike price for their CPU is $0.7244 (or thereabouts). Currently the stock price is at about $0.62. If the stock price does not go above this by the time Jun 2013 comes, they would not get to exercise it and would have to wait until 2017 to convert CPU to shares.
What this means is that if they wanna cross 30% via CPU conversion in 2013, they would desperately wanna announce all potential good news asap.

[Nick]

Will the extension of Toshin lease be at similar rental rates as before ? Not sure whether this renewal is an option with all the rental figures or the framework to determine it cast in stone. Thanks.

(Not Vested)

[cfa]

Sorry, but I see something not right with your logic. The strike price for their CPU is $0.7244 (or thereabouts). Currently the stock price is at about $0.62. If the stock price does not go above this by the time Jun 2013 comes, they would not get to exercise it and would have to wait until 2017 to convert CPU to shares.
What this means is that if they wanna cross 30% via CPU conversion in 2013, they would desperately wanna announce all potential good news asap.

Stocker was spot on, it were all stated in the prospectus for acqusition of the two malls in KL and issuing of the CPU.

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Will the extension of Toshin lease be at similar rental rates as before ? Not sure whether this renewal is an option with all the rental figures or the framework to determine it cast in stone. Thanks.

(Not Vested)

Then why didn't they just signed the tenancy agreement for 24 years since day one ?

[cfa]

What we recommend, by Daiwa

We reaffirm our Buy (1) rating for SGREIT as we continue to see deep value, trading at a 29% discount (one of the widest in the S-REIT
sector) to its NAV of S$0.87, as at 31 March 2012.

We also see potential upside catalysts from stronger-thanexpected revenue growth post-AEI at WA and a favourable ruling (and rent increase on the rent review) on its Toshin lawsuit.

We maintain our target price of S$0.75, pegged to parity with our finite-life Gordon Growth Model valuation.

The major risk to our positive call would be any REIT-specific or external factor that undermines the resilience of its DPU.

[Stocker]

Will the extension of Toshin lease be at similar rental rates as before ? Not sure whether this renewal is an option with all the rental figures or the framework to determine it cast in stone. Thanks.

(Not Vested)

Option is for the existing tenants to have the first right of refusal, provided they meet the new terms and conditions ( usually refers to revised rental rate ).

[Stocker]

NOTICE OF INTENTION TO EXERCISE THE OPTION TO RENEW
THE MASTER LEASE WITH TOSHIN DEVELOPMENT SINGAPORE PTE LTD
(“TOSHIN”)

YTL Starhill Global REIT Management Limited (the “Manager”), the manager of Starhill Global Real
Estate Investment Trust (“Starhill Global REIT”) wishes to announce that the Manager has received
a written notice from Toshin of its intention to exercise the option to renew the term of the lease
between HSBC Institutional Trust Services (Singapore) Limited, as trustee of Starhill Global REIT and
Toshin (the “Toshin Lease”) pursuant to Clause 12.2 of the Toshin Lease for a further term of 12
years commencing 8 June 2013 (the “Option Period”).

Under the Toshin Lease, Toshin is the master tenant occupying the retail areas from basement two to
level four of the Ngee Ann City Property (as defined below). Starhill Global REIT’s stake in Ngee Ann
City (the “Ngee Ann City Property”) comprises four strata lots representing 27.23% of the total share
value of strata lots in Ngee Ann City at 391/391B Orchard Road, Singapore. The Toshin Lease
accounted for 18.8% of the gross rent of Starhill Global REIT’s portfolio in December 2011.

In the event that the Toshin Lease term is extended, the extension will increase Starhill Global REIT’s portfolio weighted average lease expiry to 8.4 years from 6.6 years (by net lettable area) and to 6.3 years from 3.8 years (by gross rent) as at 31 March 2012. There is no further option to renew the Toshin Lease upon expiry of the Option Period.

The Toshin Lease provides for the parties to agree on the renewal rent for the Option Period (the “Renewal Rent”), failing which the Renewal Rent shall be the average of three market rental values of
the premises as determined by three separate licensed valuers in accordance with the Toshin Lease.

However, if such average prevailing market rental value is less than the rent payable immediately prior to the commencement of the Option Period, the Renewal Rent shall be the annual rent then payable.

The Toshin Lease also provides for a review of the rental rate every three years during the Option Period, and the existing provisions of the Toshin Lease regarding rent review shall continue to apply.

If the Renewal Rent is not determined prior to the commencement of the Option Period, the annual rent payable immediately prior to the commencement of the Option Period shall continue to apply until the Renewal Rent has been determined. However, there shall be a retrospective adjustment such that the Renewal Rent will apply from the date of commencement of the Option Period.

We wish to highlight that the rent review mechanism for the rental rate in respect of the lease term 8
June 2011 to 7 June 2013 (which precedes the Option Period) is currently the subject of litigation and
pending a decision by the Singapore Court of Appeal.

For more information, please refer to the
Manager’s previous announcements dated 13 May 2011 and 5 September 2011.

The Manager will provide further updates as and when material developments concerning the above
renewal arise.
YTL Starhill Global REIT Management Limited
(Company registration no. 200502123C)
(as manager of Starhill Global Real Estate Investment Trust)
Lam Chee Kin
Joint Company Secretary
19 April 2012

[Coattails]

Stocker was spot on, it were all stated in the prospectus for acqusition of the two malls in KL and issuing of the CPU.

I refer you to the following para on page 101 and 102 of the Starhill Global 2011 annual report, specifically to the part in bold.

It states clearly that the CPU conversion price is $0.7266, so why would YTL not want the stock price to go above this level by Jun 2013? I stand by my comment that his logic is incorrect.

14. Convertible preferred units

On 28 June 2010, the Trust issued 173,062,575 convertible preferred units (“CPU”) (valued at $173.4 million, net of capitalised costs incurred directly attributable to the issue of CPU) at the issue price of $1.00 per CPU, as part of the consideration for the acquisition of Malaysia Properties.
The principal terms of the CPU are as follows:
• subject to the sole discretion of the Manager, the CPU holders are entitled to receive a discretionary, non-cumulative variable S$ coupon distribution of up to RM0.1322 per CPU, which is equivalent to
a distribution rate of 5.65% per annum assuming the CPU distribution is paid in full and based on the Ringgit Malaysia amount of the CPU determined on the date of issuance of the CPU;
.
.
.
.
• the CPU holders have the right to convert the CPU into units after a period of three years commencing from the date of issuance of the CPU at a conversion price of $0.7266 per unit determined at the date of issuance of the CPU. Any CPU remaining in existence after seven years from the date of issuance of the CPU shall be mandatorily converted into units at the conversion price;

[Stocker]

Since the conversion price is fixed , and the DPU for the CPU holders is also fixed, share price will not be the reason for conversion. It is the DPU yield vs the yield of CPU that will influence the CPU holder's decision.