Starhill Global secures 10% base rent increase for Toshin master lease

Net arrears estimated at S$3.8m.

According to OCBC INvestment Research, Starhill Global REIT (SGREIT) has secured a 10.0% increase in base rent for Toshin master lease at Ngee Ann City, following the completion of the rent review process yesterday. 

Here's more:

The new rate was based on the average of three market rental valuations undertaken by independent licensed valuers, in accordance with the Court of Appeal’s directions, and will be retrospectively applied for the term commencing 8 Jun 2011.

Assuming the accumulated rental arrears owing as a result of the rental increase from 8 Jun 2011 to 31 Dec 2012 were paid in FY12 (after deducting expenses), management estimates an increase of 0.19 S cents (+4.3%) in its FY12 DPU. SGREIT intends to distribute substantially the net arrears received (~S$3.8m) from Toshin in 1Q13. 

This will be on top of the regular distributable income generated for the quarter. We expect the market to react favourably to this news.

Maintain BUY on SGREIT but place our fair value of S$0.95 under review as we incorporate the rental and DPU increase in our forecasts. (Kevin Tan)