YTL's Starhill windfall after 10% rent hike at Ngee Ann City

The Straits Times, February 15, 2013

YTL's Starhill Global Reit is set to receive about $3.8 million in rental arrears, a substantial portion of which will be paid out to unitholders, the trust management said yesterday.

The windfall comes as Starhill has secured a 10 per cent increase in the base rental rate for the Ngee Ann City mall, which will be applied retrospectively from June 8, 2011.

This means its master tenant, Takashimaya unit Toshin Development Singapore, will have to pay rental arrears for the period between June 8, 2011 and Dec 31, 2012.

After expenses, this will amount to $3.8 million, much of which will be paid out together with the distribution for the first quarter of this year.

The new rate was based on the average of three market rental valuations, undertaken by independent licensed valuers in accordance with the directions made by the Court of Appeal, Starhill said.

Last August, the Court of Appeal had ordered both Starhill and Toshin to jointly request the president of the Singapore Institute of Surveyors and Valuers (SISV) to appoint three valuation firms to carry out a valuation of Ngee Ann City and determine new rental rates.

The two parties had been embroiled in a dispute over a rental review process that they undertake each year to determine whether rent should be increased or left at current rates.

Toshin leases more than 225,000 square feet of space in Ngee Ann City, which it subleases to retailers such as Chanel, Louis Vuitton and Kinokuniya. It is Starhill 's largest tenant.

There will be a separate exercise to determine the renewal rent to be paid upon the start of the further option period of 12 years under the Toshin master lease starting June 8 this year, Starhill said.

Toshin gave notice of its intention to exercise the option to renew the master lease on April 18 last year, it added.

"We are pleased with the result of the rent review for the period up to June 8, 2013, which reflects the premium location and prestigious asset quality of Ngee Ann City," said YTL Starhill Global Reit Management chief executive Ho Sing.

"Our master lease with Toshin provides the reit with long-term income stability as well as the potential for rental upside every three years."