Starhill Global REIT (SGREIT) recently announced that it has divested its entire beneficial interests in the Harajuku Secondo Property for a cash consideration of JPY410.2m, or approximately S$5.1m. This transaction comes in at an attractive premium of 22.4% to the property’s latest independent valuation of JPY335.0m, and translates into an exit yield of 2.5%, based on its FY16 NPI figure.

The property is a 3-storey building for retail use which is located in the Harajuku district in Tokyo, Japan. It formed only 0.1% of SGREIT’s portfolio by asset value.

SGREIT’s decision to divest does not come as a surprise to us, as management had been seeking opportunities to pare down its noncore assets. As a recap, SGREIT had divested the Roppongi Terzo property, also located in Tokyo, Japan, in Jan last year.

Given the relatively small size of this divestment, we keep our BUY rating and S$0.82 fair value estimate on SGREIT.

Source: OCBC Research - 17 May 2017