Is Starhill Global REIT A Good Buy in 2026? [Fundamental Analysis]

Daniel Lee

9 minutes ago

6 min read

In this article, we'll conduct a fundamental analysis and review of Starhill Global REIT and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having high capital preservation ability.

Business Description

Starhill Global REIT is a Retail REIT that was listed in 2005 and owns a total of 9 properties.

What I Like About Starhill Global:

Historically high levels of dividend yield (Average: 6.50%) – largely due to the “unattractiveness” of the REIT.
Master lease tenancy agreements and anchor leases (>50% of Gross rental) provide the REIT with long-term income stability while profit-sharing arrangements provide the REIT with potential upside

What I Do Not Like About Starhill Global:

Top-line performances had deteriorated steadily over the years and have yet to recover to their pre-COVID levels.
Poor track record in foreign property investments – The NAV of the REIT has constantly deteriorated as a result of the devaluation of its foreign properties since 2017 and has only found some levels of stability in 2024.

Updates From Recent Performance (FY 2025/6)

General Comments:

Gross revenue and Net property income rose by 0.2% and 0.1% year-on-year due to the loss of income from the divested Western Atria Office Strata Units. (On a same store basis, NPI grew by 1.2%).
DPU from operation grew by 0.70% largely due to the decrease in finance cost of 4.25% at the back of a slightly lower total borrowing amount and borrowing cost.
Overall portfolio valuation decreased by 0.9% year-on-year due to revaluation of Australian, China and Wisma Atria properties coupled with the divestments of the strata units.

Positive Headwinds:

Limited retail supply in Singapore coupled with a rebound in tourist arrival is expected to support occupancy and rental growth of local properties.

Negative Headwinds:

Slowing global economy coupled with political unstabilities might tighten the consumer spending which in turn results in lower tenant sales and lower Starhill's ability to continue to command positive rental reversion.
Increasing supply risk in Malaysia coupled with lease decay of China property is expected to put some pressure in DPU and NAV in the coming years when the lease renews and as the valuation decays.

Portfolio Movements

Divestments

One divestment programme ran during the year: the progressive sale of 14 office strata units in the Wisma Atria Property. It is shown as a single line item (vertical table), followed by the two year cumulative view.

Item	Detail
Property name	Wisma Atria Property (Office): 14 strata units
Asset type	Strata titled office space in the tower above the Wisma Atria retail podium
Location	435 Orchard Road, Singapore
NLA divested	~16,135 sq ft (20% of the office NLA held at 30 June 2025)
Remaining underlying land lease	99 year leasehold expiring 31 March 2061: ~35 years remaining
Initial purchase date and price	20 September 2005 (IPO), as part of the Wisma Atria Property (74.23% strata interest) bought for S$663.0m. Cost allocated to the individual office units is not disclosed.
Exit price	~S$37m, or ~S$2,293 psf NLA. Ten separate unrelated buyers, mostly medical, aesthetics and private investment companies.
Book value at exit	S$28.1m (CBRE valuation at 30 June 2025, income capitalisation and DCF). Premium to book ~32%.
Gain recognised	Net gain over book S$8.4m (net proceeds S$36.5m less S$28.1m carrying value).
Total gain or loss since purchase	Cannot be computed per unit (cost not allocated). Whole Wisma Atria stake: S$663.0m paid in 2005 vs S$753.3m current value plus ~S$78m strata proceeds to date = ~S$831m, a ~25% nominal gain or ~1.1% a year over ~21 years, before capex spent on the asset since IPO.
Estimated loss of income	~S$1.3m to S$1.5m NPI a year on a full run rate, equal to ~0.06 cents per unit (1.6% to 1.9% of FY2025/26 DPU) before interest savings.
Estimated impact on FY2026/27 DPU	0.00 to (0.06) cents on a run rate basis depending on use of proceeds (see scenario table). Roughly half of this is still to flow through in FY2026/27 because units closed progressively during FY2025/26.

Manager's rationale. Portfolio "rejuvenation" through selective divestment, with proceeds used for debt repayment and working capital. These are not sunset assets in the usual sense; they are small office suites in a building where the REIT wants to keep control (majority stake) and concentrate on retail.

Proposed use of proceeds. Debt repayment and working capital (AR26 p.28). Earlier announcements also listed future acquisitions and distributions as possible uses (MT Newswires, Oct 2024). Net borrowings fell and finance expenses dropped 4.3% to S$40.3m, partly from the proceeds.

Exit yield vs current cap rates. Our ~3.5% to 4.2% exit yield is ~110 to 130 basis points tighter than the yield implied by book value, and roughly equal to the 3.66% cost of debt. The sale converts income into NAV, not into higher DPU.

Timely exit or distress sale? Timely and opportunistic, not distress. Gearing was 35.8%, ICR 3.1x, rating BBB stable. Market conditions favoured sellers.

Strategic verdict. Good price, right timing, limited DPU benefit. The programme protects NAV and gives the REIT a funding source that does not need equity below NAV. The risk is that it becomes a slow liquidation of income supported by one off gains. Investors should judge it by what the proceeds are redeployed into.

Independent Market Review

Performance vs benchmark

Market	IMR vacancy	SGREIT occupancy	SGREIT WALE	Verdict and rationale
Orchard retail	7.2% (rising)	NAC 100%; WA 100% (committed)	NAC: Toshin master lease, next review Jun 2028. WA: ~3 yr leases	Marginally outperforming, future at risk. Full occupancy, but WA tenant sales fell 3.7% and specialty leases reprice every ~3 years into a softening precinct.
Singapore office	Core CBD 4.5%;	100% (NAC, WA)	~3 yr leases; 16.7% of office GRI expires FY26/27	Marginally outperforming, future at risk. ~1.0m sq ft of new Orchard office lands in 2028 to 2029, inside the next lease cycle.
Adelaide retail	CBD 11.7%; strip 4.6%	MCA 91.3%	Myer anchor to 2032 (~6 yrs)	Underperforming its precinct. Better than the CBD average, but vacancy of 8.7% is nearly twice the Rundle Mall strip it sits on.
Adelaide office	16.3% (rising)	86.9% (from 29.6%)	10 yr lease (~42,000 sq ft) from Jul 2026	Outperforming on small base; recovery from depressed base. A backfill after a tenant exit, not a market beat. Incentives n.d.
Perth retail	18.6%	DJB 99.3%; PA 96.2%	David Jones to 2032	Outperforming on small base. One anchor provides 86% of DJB rent.
KL retail	14.4%	100% (master tenancy)	Starhill ~12.5 yrs;Lot 10 ~2 yrs	Outperforming by contract, not by market. Occupancy reflects YTL master leases; tenant level occupancy n.d. Lot 10 is future at risk.
Tokyo	Not covered	100%	n.d.	In line (small base). Strong market [ext], yet NPI fell and JPY valuation rose only 1.0%.
Chengdu	Not covered	100% (new anchor Mar 2026)	Land lease to 2035	Recovery from depressed base. Valuation down 57% in the year; NPI negative.

Supply risk map

Market	IMR supply signal	SGREIT exposure (% AUM / % revenue)	Risk for SGREIT
Singapore retail	Limited: 27.8% below 5 yr average	55.1% / 48.6%	Low (supply)
Singapore office (Orchard)	~1.0m sq ft on Orchard 2028 to 2029; islandwide supply 50% above historical	14.8% / 12.9%	Moderate High
Adelaide retail	Small (~4,930 sqm CBD)	6.7% / 13.6%	Low to Moderate (demand led)
Adelaide office	~62,000 sqm to 2028 into 16.3% vacancy	0.4% / 0.7%	High market, small exposure
Perth retail	Negligible CBD supply	5.3% / 6.6%	Low
KL retail: The Starhill	~1.56m sq ft in KL in 2026	10.9% / 9.8%	Moderate (lease to 2038)
KL retail: Lot 10	Same; JLL: 1.27m sq ft in City Centre by end 2026	5.3% / 6.2%	High (lease ends Jun 2028)
Tokyo / Chengdu	Not covered	1.5% / 1.5%	Tokyo Low; Chengdu Elevated

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