Fitch revises Starhill outlook to stable

Fitch Ratings said it revised its outlook for Starhill Global Real Estate Investment Trust to stable, ending its rating watch negative and affirmed the BBB ratings on the REIT, its financing unit Starhill Global REIT MTN Pte. Ltd. and their senior unsecured notes. The ratings were placed on RWN on March 28.

The agency placed the ratings on RWN after Starhill received an arbitration notice from Myer Pty Ltd. seeking a declaration that Myer can terminate its lease at the Myer store, which occupies 52% of the net lettable area at the trust's Myer Centre property in Adelaide, Australia. Arbitration continues.

“We expect SGREIT's FFO interest coverage to recover to above our negative sensitivities of 3x in the financial year ending June 2025 (FY25) and to 3.3x in FY26, from 2.9x in FY24, assuming Myer terminates its lease in FY25. We believe the trust's interest expenses will peak in FY24 before falling in FY25, in line with our assumption that U.S. policy rates will fall to 475 basis points by end-2024 and 350 bps by end-2025, from 550 bps at end-2023,” Fitch said in a press release.

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