More commercial property drama unveils as Starhill Global Real Estate Investment Trust plans to appeal against a High Court ruling, which rejected its demand to review the rent mechanism at its Ngee Ann City mall.
(Mall rental rates are subject to a a complex pricing procedure)
Starhill had wanted the court to set a new rent, after the normal review process with its tenant Toshin broke down. The two parties had been disputing over which valuers should be used in the review.
The review mechanism occurs before the start of each rental term, and determines if the rent should remain at current rates or be increased. Both tenant and landlord have to agree on three valuers, and take the average of the three valuations to be the new rent. However the new rent cannot go below the current rate and if it should go up, the increase must not be more than 25% above the existing rates.
Starhill argued that there was a conflict of interest with Toshin when choosing valuers, and as the two had failed to settle on the three valuers, Starhill asked the High Court in May this year to determine the rent.
The request was recently thrown out but YTL Starhill Global Reit Management, which manages the trust, said it will be appealing and applying for a stay of the court’s orders in the meantime.
Toshin is wholly owned by Takashimaya, the anchor tenant of Ngee Ann City that spans its retail areas from basement two to level four. It then leases the area to shops like Chanel, Louis Vuitton and Kinokuniya.
A DMG Research note informed The Straits Times that under the master lease, which runs until 2013, Starhill rents space to Toshin at below-market rates of $12 to $13 per sq ft (psf) monthly. In comparison, this rate is less than half of the rate at which the Reit leases space in Wisma Atria: $30 psf per month.
“It is no wonder that Starhill is upset over the current rent review structure and seeks to overhaul the existing structure for it to maximise the value of the mall,” said the DMG note. “A successful effort on this front could lead to capital values for the mall being re-rated to the $4,000 psf to $5,000 psf range common for Orchard Road malls, instead of the current $2,500 psf range that the mall is currently being valued at.”
Starhill and Toshin entered a new two-year lease term on June 8, but the current rental rate will remain until a new ruling is made, said the May YTL statement, and the new rent will be applied retroactively from June 8.
Starhill Global Reit has a 27% stake in the total share value of strata lots in Ngee Ann City.
|
|
|
|
|
|
|
Comments:
Please input the captcha text :
|