Singapore-listed Starhill Global Real Estate Investment Trust is set to make its first foray into Australia with a proposal to buy the David Jones building in Perth for $114.5 million.
The company said it expects to complete the acquisition in January next year, and the purchase will be funded by a combination of debt and funds raised from a recent rights issue.
Chief executive officer of YTL Pacific Star - manager of Starhill - Franklin Heng said the capitalisation rate for the building was one of the attractions for the acquisition.
"The cap rate of 7.9% for the David Jones Building is attractive compared to the long-term average cap rate of 7.7% for prime retail assets in Perth," he said.
"Moreover, the long-term lease with David Jones provides a resilient, stable and recurring income, with the benefit of rental upside from a rent review every three years."
David Jones has a lease on the building until October 2032 and occupies about 22,903 square metres, or 95 per cent, of the total gross lettable area. Six other specialty stories occupy the remaining space while the heritage-listed Savoy Hotel is also part of the building.
Mr Heng said the leases with the other specialty tenants also have an annual rent increase component.
He also added that following completion of the acquisition, Starhill will propose the appointment of a heritage specialist to review enhancement options for "more optimal utilization of space in the property".
