Starhill REIT to raise RM800 mil in new issues

By Lawrence Yong

Starhill Real Estate Investment Trust (REIT) plans to raise RM800 million by increasing the funds’ size, to pay for hotels acquired in Australia last year.

In a filing to Bursa Malaysia, Starhill said that it would seek unitholders approval to issue up to 721 million new units, possibly at RM1.11 per unit based on the recent traded price of Starhill REIT in early June. The new units may be placed out to existing unitholders or new unitholders. The actual issue price and placement would be determined at a later date.

This is to “partially repay the Trust’s borrowings and reduce its gearing level,” Starhill said. This could help the REIT save up to RM35.7 million a year in interest costs, it said.

With the new issues, Starhill’s enlarged unitholder’s capital may rise to 2.045 billion units.

On Nov 29, 2012, the Trust completed the acquisition of Sydney Harbour Marriott Hotel, Melbourne Marriott Hotel and Brisbane Marriott Hotel together with the business assets of the respective hotels. This were financed primarily through borrowings, it said.

Separately, Starhill also asked for higher borrowing leeway, to borrow up to 60% of its total assets value, to give it “flexibility of funding larger acquisition opportunities through borrowings in the future.” This is above the Malaysian Securities Commission guideline of 50% borrowing limits for REITs.

The whole exercise is expected to complete in the fourth quarter of 2013 and new units may dilute the earnings per unit of the REIT, Starhill said. This could however be offset by interest savings gained from its lowered debt.

Starhill’s assets were valued at RM3.124 billion as at Mar 31 and it owes RM1.582 billion. After the proposed exercise, its gearing ratio will be cut to 25.41% from 50.63%, with RM788 million debt to be cleared.

Starhill’s major shareholder is Yeoh Tiong Lay, Malaysia’s 8th richest individual according to Forbes magazine. Yeoh and his flagship company YTL Corp holds 73.71% of total units as at May 23. This may be diluted to 47.73% after the new issues.