STARHILL Global Reit : P40U 0% has renewed its current master lease with Takashimaya manager Toshin Development Singapore due to expire in June 2025 for an initial term of 12 years.

The Reit manager announced this in a bourse filing on Thursday (Nov 30).

Beyond its expiry on Jun 7, 2037, the master lease may be further renewed by either party for an additional six years, and for a further three years thereafter, at the option of Toshin.

Under the current master lease, Toshin is the master tenant occupying all the retail areas of the Ngee Ann City property owned by the real estate investment trust (Reit), except Level 5. The current lease contributed about 23.6 per cent of Starhill’s portfolio gross rent as at Sep 30, 2023. 

The renewal will extend Starhill’s portfolio-weighted average lease expiry to 8.1 years from 6.3 years by net lettable area, and to 8.4 years from 4.2 years by gross rent, as at the same date.

For the first three years, the annual fixed rent of the new master lease will be the higher of an agreed sum that is approximately 1 per cent above the existing base rent under the current lease, and the prevailing market annual rental value as at the commencement of the renewed lease.

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The latter value will be agreed to by both parties, or failing which will be based on the average market rental values determined by three licensed valuers, but not exceeding 125 per cent of the agreed sum in the first method. 

Toshin will also need to pay an annual turnover rent to Starhill, which will comprise a portion of Toshin’s annual operating income over and above agreed revenue and profit margin thresholds. 

“This profit-sharing arrangement provides potential upside for Starhill Global Reit while taking into consideration Toshin’s profit margin,” said the manager, noting that the current master lease does not include a profit-sharing component.

The annual fixed rent will be reviewed every three years during the renewed lease’s term and upon the exercise of options to renew.

Starhill has also agreed to contribute up to S$5.2 million for Toshin to carry out renovation and upgrading works “on the demised premises” during the initial 12-year term to maintain the property’s prestige. Units of Starhill Global Reit closed flat at S$0.485 on Thursday, before the announcement.