Starhill Global REIT (SGREIT) announced that it has divested its Roppongi Terzo property which is located in Tokyo, Japan. The divestment value is JPY2.5b (~S$29.9m), which is 2.5% higher than its latest valuation of JPY2.44b. The divestment price translates into a yield of 4.4%, which we believe is a good exit level. This is SGREIT’s third divestment in Japan over the past three years and reflects its strategy to streamline its overall portfolio.

The net proceeds would be used to repay its JPY loans and/or for working capital purposes. This would lower SGREIT’s gearing slightly from 35.7% to 35.1%. As Roppongi Terzo contributed only 0.9% of SGREIT’s FY14/15 gross revenue, we see this transaction as immaterial in nature. Hence, we maintain our forecasts, BUY rating and S$0.93 fair value on the stock.

Source: OCBC Research - 8 Jan 2016