Starhill Reit raises rents under Ngee Ann City's Toshin master lease

STARHILL Global Reit on Wednesday announced the new base rents for its Toshin master lease, which is 5.5 per cent higher than the existing rate, and is effective for three years starting June 8, 2016.

The rate is based on the average of three market rental valuations done by independent licensed valuers.

The Toshin master lease accounted for about a fifth of the Reit's portfolio gross rent in March 2016. It covers all the retail strata area of Ngee Ann City owned by the Reit, except level five. Toshin is also the Reit's largest tenant.

The master lease to Toshin provides the Reit with potential rental upside every three years. Together with the agreed extension of its Malaysia properties' master tenancies, whereby the annual rent was revised upwards by about 6.67 per cent, this means that about a third of the Reit's gross rent has secured an increase starting from June 2016.

The latest rent increase was in line with what some analysts had expected, after the rental dispute broke out between Takashimaya and its landlord, Ngee Ann Development in the High Court.

Ngee Ann is proposing to revise the rent to S$19.83 per square foot per month (psf pm), more than double the rent in 2014 of S$8.78 psf pm. This is superior to the approximately S$15 psf pm rental that Starhill currently gets from Toshin. Analysts had believed that this would give Starhill clout to demand more in its own rent from its master lessee, Toshin.

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The Reit owns 27.2 per cent of the share value of the strata lots at Ngee Ann City, with Ngee Ann owning the rest. The dispute does not involve Starhill as the space occupied by Takashimaya is not part of its portfolio.