Tibits I learnt from Starhill Global REIT AGM 2018




After my recent post for Silverlake Axis AGM, I managed to go for Starhill Global REIT AGM too! :)

Man, the turnout was crazy, they ran out of handsets and bags, and had to add chairs to the venue. Thankfully, there's a $20 Wisma Atra voucher.

Let's get on to it:

• Retail Market remains challenging due to a change in Gen Y/Millennials spending habits
• Digitalising has moved faster than regulations and infrastructure
• Mitigation strategies:
• Create thematic malls by picking brands to work with
• Most brands except luxury brands such as LVMH are too poor or in financial difficulty to create curated malls
• Starhill aims to work with brands while helping them grow
• Charles and Keith was an example of them buying a stake and helping them grow to where they are now. 
• Create a pipeline of brand partnerships to fill up the malls/offices
• Create global reward points that works globally with all their malls and partners such as online malls and hotels, etc
• Their new mall Lot 10 in Malaysia has shown results and they are working to revamp the portfolio in these directions.
• Aim to be the WeWork of retail space
• Current retail trends seems to favor short term popups
• Dedicate certain percentages of shopping space for it
• Office they have been working with Spring Place with ROFR
• Isetan has been a very difficult neighbour for many years
• Includes Singapore and Malaysia 
• Starhill has been offering to buy them out for years, but they always refuse
• Starhill is looking for alternative Japanese partners, but will try to work with Isetan to allow same voucher usage
• DPU has been falling due to a couple of reasons
• Office market has went down, but is expected to recover
• The new government of Malaysia added a withholding tax for the REIT
• Starhill is now reserving some funds for working capital as well as for future use
• Property value outside Singapore has been falling due to
• weakening of both AUD and RM
• divestment of Japan properties
• Their target IRR for their capex is 8-10% for 5 years
• First year may not show the stellar results, need time to show
• They look to acquire malls or do AEI but would consider if there are tenants or what tenants to fill the spaces first before going forward with the capex
• Rent increases can only go so far
• Cannot just squeeze the tenants
• Have to look for a win win
• Else long term revenue will drop
• Management hopes to grow the REIT until it is included in indexes
• The chairman hopes that the economy will crash hard due to the various political actions globally so he can acquire many bankrupt malls globally
• For now, his focus is strengthening the REIT from inside and get ready for opportunities 
• For example, US is currently leveraged to 95%, but Starhill is only 70%, with the US deleveraging, it will bring back the norm where interest rates are back to normal. This will kill off quite a few malls and companies
• Low valuation makes it difficult for them to make yield accretive acquisitions.
• Hard to find a property yielding 7% 
• Hopes by strengthening the REIT, will see share prices increase
• Borrowings are mostly hedged
•  if interest rates goes up by 1%, DPU will fall by about 1%
• Management prefers developed countries to build malls as they are low hanging fruits

That's it for this post.

I am very impressed with Chairman Tan Sri Dato' Francis Yeoh insights on both political and economical aspects of the Malaysia of the world, very enlightening. Makes me wanna have a look at YTL (but listed in Malaysia).

Thank you for reading.

If you like my tibits from this AGM? Click here to view a complete list of AGMs I have attended.