KUALA LUMPUR (Sept 25): Singapore-listed Starhill Global REIT is exercising financial prudence amid the headwinds arising from the Covid-19 pandemic by delaying non-essential capital expenditure and implementing cost-savings measures.
Starhill chairman Tan Sri Francis Yeoh Sock Ping said these measures include a 20% cut in directors' fees, as well as cuts of between 5% and 10% for senior management starting April, with the savings passed on to the unitholders as part of a 10% reduction in base management fees for April, May and June.
"Global economic uncertainties and the lack of international tourism have affected the local retail sectors and caused severe business disruptions.
"While our business is not immune to global trends, the years of a disciplined approach with a cautious investment strategy, sound tenant base and prudent capital management have given us a solid foundation to navigate the challenges ahead," Yeoh said in the REIT's annual report.
Starhill reported a modest distribution per unit of 2.96 cents for financial year 2020 (FY20) ended June 30, 2020, a 33.9% decline year-on-year (y-o-y).
The REIT had utilised the tax transparency extension in Singapore to defer S$7.7 million in distribution payouts and retained S$4.9 million in distributable income and utilised S$3.7 million in capital allowances.
"The board recognises the importance of distributions to unitholders, but given the unprecedented levels of uncertainty, we have decided to implement this prudent initiative to manage our cash flow and maintain our flexibility until the global economic outlook is clearer," said Yeoh.
The REIT said its Malaysian properties saw income decline by 36.2% y-o-y for FY20, mainly due to lower contributions from The Starhill, Kuala Lumpur, amid asset enhancement initiatives and rental assistance extended.
Starhill said rental assistance was extended to the master tenant, whose subtenants were impacted by the Movement Control Order.
The REIT said Covid-19 has disrupted the global economy and retail industry and the uncertainty of the scale of the impact could further dampen consumer sentiment and economic growth.
"This will have a spillover effect on retail sales and consequently rents, occupancy rates and valuations of investment properties. Henceforth, we expect the retail operating environment to remain challenging and coupled with rental rebates, adversely impact our financial performance in the new financial year.
"Nevertheless, we remain focused on delivering operational efficiency and enhancing our financial flexibility through prudent capital management," said Yeoh.