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Starhill Global REIT Keeps Returns Totally Stable In 1H FY25/26 · Investor Exchange

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  Time for another Investor Exchange Podcast. Here are your hosts, Matt and Sally.
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  Welcome back to The Deep Dive. Today, we're looking at a set of financial results
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  that are aggressively, unapologetically boring.
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  And I mean that as a compliment. In the current market, boring is a luxury.
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  I mean, if you can find boring, you hold on to it with both hands.
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  That is exactly the angle we're exploring today. We're breaking down the first
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  half results for Star Hill Global REIT, or S-REIT, for the period ending December 31st, 2025.
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  And we have the full stack on this one. The financial statements,
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  the presentation slides, and the press release from late January.
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  Right. And, you know, if you just glance at the headline numbers,
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  you might think the management team took a six-month nap. You would.
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  But when you actually dig into the footnotes, which, of course,
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  we've done, there was a surprising amount of chaos they had to manage just to
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  keep things looking that calm on the surface. And that's our mission for today.
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  We want to see how this financial machine works when the gears are really grinding.
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  Is that 6% yield actually safe?
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  And what does it mean when a shopping
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  mall landlord starts renting out its office space to a university?
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  That is such a fascinating pivot. We'll definitely get to that.
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  But as always, we have to start with the bottom line, the number that pays the
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  bills. The distribution per unit.
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  The DPU. So what was it? It came in at 1.80 cents for the half year.
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  Which is identical to last year, to the decimal point. Zero percent change.
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  Flat as a pancake. Now, the skeptic in me looks at that and says zero growth.
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  I mean, in an inflationary environment where my coffee costs more than it did
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  last year, flat is basically down. Usually I'd be right there with you.
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  But context is everything here. If you look at the unit price at the end of
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  December 2025, which was around, what, 59 and a half cents? Yeah, about there.
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  That 1.8 cents annualizes to a yield of roughly 6%.
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  OK, so 6%. In a world where risk-free rates are maybe starting to drift down,
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  our volatility is high, a staple 6% from a portfolio that's anchored by these
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  massive properties like NGN City is.
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  Well, it's sturdy. It's almost a bond proxy. So you buy it for the coupon,
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  not for some huge explosion in value. But let's look at how they kept it flat.
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  Because gross revenue was also flat, S96.3 million dollars.
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  But net property income, or NPI, actually slipped a little. It was down 0.8%. Right.
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  And that tiny 0.8% drop is really the result of a massive tug of war that's
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  going on inside the portfolio.
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  You had some pretty significant drags pulling the income down.
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  And the biggest one was self-inflicted, you could say. They sold assets.
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  That's their pruning strategy. They sold off some office strata units. It was Maetria.
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  And obviously, once you sell the floor, you stop collecting the rent on it.
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  So that creates an immediate hole in the income statement compared to last year. A hole.
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  Yep. And then you have the currency drag. The Aussie dollar hasn't been doing them any favors.
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  Right. A weak Australian dollar means the rent they collect in Adelaide and
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  Perth translates back to fewer Singapore dollars. And on top of that,
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  they had to set aside some provisions for unpaid rent in China allowances for arrears.
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  So you've got divestment, currency weakness, and some bad debts all trying to pull that number down.
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  So what pulled it back up? Because a 0.8% drop isn't huge, considering all those
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  headwinds. The lift came from two places, really.
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  First, the Singapore assets, the crown jewels, performed well.
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  But the surprise hero was Malaysia.
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  Lot 10 in Kuala Lumpur. That's the one. Not only did the rental income step
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  up there, but the currency situation completely flipped.
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  The Malaysian ringgit actually appreciated against the Singapore dollar.
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  That's rare. We're so used to hearing about the ringgit sliding.
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  It saved them here. The stronger ringgit basically offset the weaker Aussie dollar.
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  In fact, and this is the key metric for judging the health of the core business. Okay.
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  If you strip out that asset sale, if you just look at the buildings they still
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  own and operate, Net property income would actually be up 0.1%.
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  So the core engine is running just fine.
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  They just made the car a little bit smaller by selling off a part.
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  That's the perfect way to look at it. The operational business is holding steady.
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  Speaking of operations, let's talk about the mini heart attack I had looking
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  at the occupancy numbers. I know the chart you mean.
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  Committed occupancy dropped from 94.6% down to 91.9%.
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  For a stable REIT, a nearly 3% drop in just six months is usually a massive
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  red flag. It looks terrible on the chart.
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  But this is a classic case of why you can't just read the table.
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  You have to read the text below it.
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  That entire drop was almost entirely due to one single tenant in China.
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  Marcor International Home Furnishings. Correct. They were the sole tenant for
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  the China property. They terminated their lease in December 2025.
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  And when your only tenant leaves, your occupancy for that building hits zero overnight. Instantly.
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  But the report mentions a post-period event. This is the crucial part. Yes.
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  By the time they released these results in late January, they had already signed
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  a conditional lease with a replacement tenant.
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  That was fast. I mean, finding a tenant for an entire building usually takes months, if not longer.
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  It suggests they knew this was coming and had a contingency plan ready to go.
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  So once that new lease kicks in, the portfolio occupancy jumps right back up
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  to 96.5%. Higher than where it started.
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  So the crisis was over before investors even really knew it had begun.
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  Which is exactly how you want management to handle things.
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  Honestly, for context, the China asset is less than 1% of the entire portfolio's valuation.
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  It's just noise. Right. The bigger headache was down in Australia.
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  The Meyer Center in Adelaide, there was a lawsuit hanging over that property, correct?
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  Yes. The anchor tenant, Meyer, the big department store, was trying to terminate their lease.
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  Which would be catastrophic. If your anchor tenant leaves a mall,
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  it can trigger a death spiral.
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  It kills footfall for everyone else. A huge risk. But the report says the arbitration is finished.
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  Landlord won. The tribunal dismissed Meyer's claim.
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  Meyer stays, the rent keeps coming in, and that massive cloud of uncertainty
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  is gone. Okay, so they plugged the hole in China, and they won the fight in Australia.
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  But there's another development in Adelaide that I found much more interesting than a lawsuit.
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  They signed a 10-year lease for office space with a college.
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  University Senior College. Yep.
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  They're taking on level 7 to 9 of the office tower starting in July 2026.
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  This feels like a really significant signal. We keep hearing offices dead,
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  especially for older assets sitting on top of shopping malls.
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  Pivoting to education seems, well, it seems really clever. It is incredibly sticky.
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  Think about it. A corporate tenant might move because they want a better lobby or a hybrid work setup.
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  A school. Not so easy. Once they've built out the classrooms,
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  the labs, all that infrastructure, they are moving for a decade.
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  It's just too expensive. And I imagine they bring a different kind of foot traffic
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  to the food courts downstairs compared to office workers.
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  Students eat. Exactly. It diversifies the whole ecosystem.
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  It turns the asset from a pure workshop venue into more of a community hub.
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  It really changes the risk profile.
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  It seems like they're quietly fixing the problem children in the portfolio.
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  But let's be honest, Starhell Global is basically a bet on Orchard Road.
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  It really is. NGN City and Wismat Atria make up about, what,
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  62% of the revenue. So how are the heavy hitters doing?
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  Steady. The big news at NGN City was the Toshin Master lease.
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  Toshin runs the massive retail podium. It's essentially the whole Takashimaya
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  area. A huge lease. Rent review is done.
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  And they locked in a 1% increase. Okay. 1% is barely inflation.
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  In fact, it's below inflation.
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  True, but you have to consider the sheer volume. For a master lease of that
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  size, just getting a positive reversion, an increase rather than a rent cut,
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  is a win. So no news is good news.
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  Landlords often have to give concessions on these mega leases just to keep the tenant.
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  So locking in an increase, even a small one, all the way to June 2028 provides
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  immense cash flow visibility. And Wisma Atria.
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  A bit of a mixed bag, but in a good way. Shopper traffic was down 1.2%,
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  but tenant sales were up 2.9%. Efficiency.
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  Fewer window shoppers, more actual buyers. That fits the luxury profile they're
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  building. You don't need a stampede. You need high net worth individuals.
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  They brought in new flagships, Juicy for Sea Beauty, Sugarfina for Luxury Candy.
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  Luxury candy. That phrase alone tells you everything you need to know about
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  the target demographic here.
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  We're not talking about a dollar bar of chocolate, I assume.
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  High margin, high rent capability.
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  It signals that the mall is positioning itself for the experience economy,
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  not just selling commodities.
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  All right, so operations are tight, but I want to look at the balance sheet.
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  Because in a high interest rate world, or at least a not zero interest rate
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  world REITs, world REITs usually get crushed by debt costs.
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  Star Hill seems to be defying gravity a bit here. Their capital management has
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  been very, very defensive.
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  Their gearing is at 35.4%. Which is low. Very low.
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  Most REITs operate comfortably up to 40 or even 45 percent.
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  Being at 35 percent gives them a massive buffer. If property valuations drop, they're safe.
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  If they want to buy something that's distressed, they have the headroom tomorrow.
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  But what about the cost of that debt?
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  They've hedged 80 percent of it, so they're largely immune to short-term rate
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  spikes. But the real boss move, as you might call it, was the refinancing.
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  In September 2025, they refinanced loans that weren't even due until 2026 and 2027.
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  They're preempting the maturity wall. It's like fixing your mortgage a year
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  before your current deal is even up.
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  But look at the perpetual securities. This is where it gets a little technical, but it's important.
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  They had old perpetual securities costing them 3.85%. Right.
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  They issued new ones in October 2025 at 3.25%. Wait, hold on.
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  How did they issue debt cheaper in late 2025 than they did years ago?
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  Rates are generally higher now than when those old perps were likely issued?
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  It comes down to credit spreads. The market views Star Hill Global as a safer borrower now.
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  So even though the base rates might be higher, the risk premium that investors
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  demand to lend to Star Hill has actually compressed.
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  I see. Investors are so desperate for quality yield that they were willing to
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  accept a lower coupon just to park their money in a safe Singapore-based REIT.
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  So their reputation essentially lowered their mortgage payment. Precisely.
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  And that saving flows directly to the unit holders. It's a very subtle indicator
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  of how the institutional market views them as a safe pair of hands.
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  So we've got a safe balance sheet, stable assets, and they've handled their
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  legal and vacancy issues really well. What's the outlook?
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  The report mentions geopolitical tensions, which is usually corporate speak
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  for who knows what will happen.
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  The macro view is cautious, but resilient.
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  Global growth is forecast at 3.3 percent for 2026.
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  Inflation is moderating down to about 3.8 percent. Which implies that rates
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  might finally start coming down.
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  That is the hope, right? If rates ease, unit prices usually rally.
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  But regionally, the drivers are very specific. In Singapore, it's all about tourism.
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  Visitor arrivals are up. If
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  tourists are on Orchard Road, NGN City just prints money. And Australia.
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  Surprisingly, the office markets in Adelaide and Perth are seeing rental growth up 5 to 10 percent.
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  Which really contradicts the office apocalypse narrative we keep hearing out
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  of the U.S. It's a flight to quality.
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  There's very little new supply being built in those specific cities.
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  So if you want a decent office, you have to pay up for the existing stock.
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  And Star Hill owns the better assets in those towns.
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  So bringing this all back to the investor, this is not a tech stock.
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  It is not going to double in six months. No, not at all. It is a pure yield play.
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  You're buying a 6% coupon that's backed by prime real estate.
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  You're betting that management can keep filling holes like they did in China
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  and that people will keep buying luxury handbags in Singapore. It's defensive.
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  It's sleep well at night money. Which brings me to the final thought I want to leave everyone with.
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  We talked about the university moving into the office tower.
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  We see malls pivoting to experiences like those flagship candy stores.
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  The blurring of the lines. Right.
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  Are we seeing a fundamental shift in how we should value these assets?
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  If a mall is no longer just a place to buy things, but a place to learn and
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  to socialize, does that make the income more resilient?
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  Or does it introduce new risks we don't understand yet?
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  A university is a great tenant until online learning disrupts them.
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  That is the big question, isn't it?
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  You're essentially trading retail risk for institutional education risk.
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  It creates a different kind of city ecosystem. It might make the income steadier,
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  but perhaps less dynamic on the upside.
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  Something to watch as you walk past those campuses inside the shopping centers.
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  We will leave it there for today.
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  Thanks for diving into the numbers. Always a pleasure. And just a reminder,
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  this content is intended to serve strictly and only as an informational,
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  independent, objective summary of recent events and should in no way be interpreted,
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  construed, or relied upon by
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  any party as inside information or financial advice. Thanks for listening.