TEXT-S&P summary: Starhill Global Real Estate Investment Trust

(The following statement was released by the rating agency)

Nov 27 -

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Summary analysis -- Starhill Global Real Estate Investment Trust -- 27-Nov-2012

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CREDIT RATING: BBB/Stable/-- Country: Singapore

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Credit Rating History:

Local currency Foreign currency

28-Oct-2009 BBB/-- BBB/--

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Rationale

The rating on Starhill Global Real Estate Investment Trust (SGREIT) reflects

the REIT's ownership of good quality properties. The rating also reflects

SGREIT's stable cash flows, high occupancy rates, and improved lease maturity

profile. The REIT's geographic and tenant concentration, as well as its

moderate revenue exposure to the more volatile office rental market partly

offset these strengths. We view YTL Corp. Bhd.'s ownership of SGREIT as a

neutral rating factor. We assess SGREIT's business risk profile as

"satisfactory" and its financial risk profile as "intermediate."

SGREIT's gross revenues of Singapore dollar (S$) 138.6 million for the nine

months ended Sept. 30, 2012, were in line with our expectation. Revenues

represented about 75% of the S$185 million we forecast for 2012. Positive

rental reversions at SGREIT's Wisma Atria property following the completion of

the company's asset enhancement initiative (AEI) offset the lower revenues

from the Chengdu property. We expect gross revenues to increase to S$186

million-S$187 million in 2013. Incremental revenues from the full-year effect

of the Wisma Atria AEI, a positive rental reversion for Toshin Development

Singapore Pte. Ltd.'s master lease at Ngee Ann City, and steady average

occupancy rates of about 96%-98% across the portfolio should more than offset

difficult conditions persisting at the Chengdu property in 2013.

We expect SGREIT to maintain its financial risk profile in 2013, baring

acquisitions. The REIT's ratio of funds from operations (FFO) to total debt

was about 8.4% and its FFO interest coverage was 2.8x for the 12 months ended

Sept. 30, 2012. The ratios are consistent with our expectation of 8%-10% and

2.7x-3.0x, respectively. According to our hybrid criteria, our calculations

include about S$173.5 million of convertible preferred units that SGREIT

issued as debt.

Liquidity

SGREIT's liquidity is "adequate," as defined in our criteria. We expect the

REIT's liquidity sources over the next 12 months to exceed its uses by about

1.3x. Our liquidity assessment is based on the following factors and

assumptions for the next 12 months:

-- SGREIT's liquidity sources include our expectation of FFO of about

S$80 million-S$85 million and surplus cash of about S$75.1 million as of Sept.

30, 2012.

-- Liquidity needs include distribution of at least 90% of taxable income

to unitholders. They also include short-term payables on SGREIT's current

derivatives liabilities of about S$3.28 million.

-- SGREIT also has about S$568 million of debt due in the next 12 months.

This includes a A$63 million term loan due in January 2013 for which SGREIT

has already obtained refinancing commitments. It also includes a S$284 million

term loan and the REIT's JPY13 billion term loan, both of which mature in

September 2013. We do not include such debt in our assessment of liquidity

needs because these are due beyond the next six months.

SGREIT's debt tenor will remain highly concentrated until it refinances S$489

million in debt due in September 2013. We expect the REIT to arrange

refinancing for these maturities in the first quarter of 2013. SGREIT also has

a good banking relationship and a satisfactory standing in the capital

markets, in our view. It has sufficient headroom in its multicurrency

medium-term notes program to issue about S$1.9 billion in debt. A moderate

ratio of encumbered debt to assets of 25.9% as of Sept. 30, 2012, provides the

REIT with additional financial flexibility and partly offsets the refinancing

risk.

Outlook

The stable outlook reflects our expectation that SGREIT will maintain its

current market position, good quality assets, and average occupancy rates of

95%-96% over the next three years. We also expect that SGREIT will prudently

manage its asset acquisitions while maintaining its financial risk profile.

We may raise the rating if SGREIT further diversifies its portfolio and tenant

base, while maintaining the quality of its asset base and its financial risk

profile. We could also raise the rating if the company's cash flows over the

next two to three years increase such that its ratio of FFO to interest

payments exceeds 5x on a sustained basis. This could materialize if occupancy

rates increase above 98% and lease rates across the portfolio are

significantly higher on a sustained basis.

We may lower the rating if: (1) SGREIT makes aggressive debt-funded

acquisitions that weaken its cash flow adequacy and increase its leverage such

that its debt-to-capital ratio exceeds 40% for an extended period; or (2) the

company is unable to replace the loss of a key tenant within a reasonable

timeframe under favorable lease terms, resulting in sustained lower

profitability and cash flows.

Source: http://news.yahoo.com/text-p-summary-starhill-global-real-estate-investment-090714258--sector.html

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