Following my updates on Starhill Global REIT’s recent financial results ( Starhill Global REIT 3Q2017/18 Results Is Disappointing ) , the manager of the REIT has announced the divestment of one of its Japan properties. The divested property is located in the Nakameguro district and is a 4-storey building mainly for retail use. The property by asset value accounts for 8.6% of the Japan portfolio and 0.2% of Starhill Global REIT’s portfolio.
The property is valued at JPY 420 million (estimate S$5.1 million) but was sold for JPY 525 million. I consider it as a decent transaction. If you didn’t know, the property was acquired in 2007 together with 6 other properties in Tokyo for approximate S$182.5 million. The Nakameguro place property was one of the property within the Fund Creation Portfolio which was then owned by Fund Creation Co Pte Ltd.
Reason for the sale?
The sale of Japan’s portfolio is to streamline its portfolio. Having a handful of properties in China and Japan is beneficial but it adds to operating costs and I guess that is why Starhill Global REIT is selling its Japan assets and focus on Singapore, Malaysia and Australia as its core assets.
What will Starhill Global REIT do with the cash from the sale?
According to the manager, they will use the cash to repay debt and save the rest for working capital. If you have followed the REIT’s financial results, the manager has also retained S$1.6 million in 3Q2017/2018 for working capital purposes. As the REIT manager seems very keen in Australia’s assets, are they saving money for another acquisition in Australia?