The manager of Starhill Global REIT P40U has announced the renewal of its current master lease with Toshin Development Singapore due to expire in June 2025.
The renewed master lease is for an initial term of 12 years commencing from June 8, 2025 and will expire on June 7, 2037.
The new master lease agreement may be further renewed at the option of either party for a further 6 years, and thereafter at the option of Toshin for a further 3 years.
Toshin is the master tenant occupying all the retail areas except level five of the REIT’s Ngee Ann City property. Starhill Global REIT’s stake in Ngee Ann City comprises four strata lots representing 27.23% of its total share value of strata lots.
As at Sept 30, the current master lease with Toshin contributed approximately 23.6% of the REIT’s portfolio gross rent.
The renewal will extend Starhill Global REIT’s portfolio weighted average lease expiry (WALE) to 8.1 years from 6.3 years by net lettable area (NLA) and to 8.4 years from 4.2 years by gross rent, as at Sept 30.
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The base rent of the new master lease for the first three years shall be the higher of an agreed sum that is approximately 1% above the existing base rent under the current master lease and the prevailing market annual rental value as at the commencement of the renewed master lease.
Additionally, an annual turnover rent is payable comprising a portion of Toshin’s annual operating income over and above agreed revenue and profit margin thresholds.
According to Starhill Global REIT, this profit-sharing arrangement provides potential upside for the REIT while taking into consideration Toshin’s profit margin. There is no profit-sharing component in the current master lease.
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A rent review of the annual fixed rent will be conducted every three years during the term of the renewed master lease and upon the exercise of options to renew.
As part of the renewed lease, Starhill Global REIT has agreed to contribute up to $5.2 million to Toshin for the renovation and upgrading works to be carried out on the premises. The asset enhancement will ensure the mall is upgraded and maintained as a high class and prestigious shopping complex, it says.
Ho Sing, CEO of the manager, says: “The renewal ahead of expiry provides both certainty and continuity to both Toshin and us. Additionally, the new master lease will allow SGREIT to participate on the upside with a profit-sharing arrangement. Toshin has been a valued tenant at Ngee Ann City since 1993 and we look forward to further developing and expanding this fruitful relationship for the decades ahead.”
Units in Starhill Global REIT closed unchanged at 48.5 cents on Nov 30.
