Saturday, December 5, 2009

Starhill Global REIT: David Jones Building

Finally, I have gotten in contact with a friend who is now staying in Australia on the recent purchase of David Jones building by Starhill Global Reit. The following is my friend's reply and analysis:
1. I must admit that I am no expert in properties, less so in Australia. but I will give you my personal view. You decide.

2. David Jones (or DJ as it is popularly known here) is a department store behemoth in Australia. They are like the Takashimaya in Japan. DJ stores are all in the heart of the city, or CBD in its major location. So, DJ the business and its associated entities are all quite well regarded in Australia for now.

3. That said, the David Jones building that Starhill Global Reit acquired is in Perth, so it is no where near the big 2, Sydney or Melbourne. Retail property development in Perth, as you would imagine, lags the big 2.

3a. If you have a short term view, it may not be as attractive as I think it will take a while before the commercial/retail property development takes flight in Perth.

3b. It will be attractive if you plan to hold your stock for a while. For instance, I have a longer term view on stocks ( e.g. I bought Apple stocks @ US$20 and sold at $90+ after split 2 years ago, but I held it for more than 8 years. Of course, on hindsight, I should have kept it as Apple is now about $200 ;-). Nevermind, tt's another story). Reason why it may be worth the thought if you have a long term view on stocks:

3b-i) Perth is one of the fastest growing cities in Australia. the property price median in Perth is amongst the highest, if not highest of all of Australia, even tops Sydney. it has taken a beating last year but it has recovered nicely recently). I think this will apply for commercial properties as well.

3b-ii) Western Australia is resource rich. It has all kinds of minerals imaginable, and also lots of gas and oil field not opened. Hearsays are the government will tender some of these out gradually over the next 20 years, so sustained growth is a given according to many in western Australia. This partly explain 3b-i. Also, because of China's insatiable appetite for resources to fuel its own growth, Australia remains a key partner to China, especially western Australia.

3b-iii) There have been lobbies by businesses in western Australia to get the state government to approve longer retail hours and also store openings on Sundays. The law still forbid this on certain trades to do so. This seems an oxymoron elsewhere. Even if it didn't happen this year or next, it will happen sooner than later. I think this is a forgone conclusion. So, the retail scene in Perth can only get better, imo. Here in Melbourne, there are already 24 hrs shopping like Kmart and Macdonalds. My fave roast pork noodle shop open for supper till 3am. http://www.watoday.com.au/wa-news/last-chance-push-for-extended-shopping-hours-20090929

4. At the macro level, property investors in Australia can do no wrong of late. The population explosion & strong economic outlook contributed to the continuous performance growth here. I think it is what prompted Starhill Global to take the plunge in the DJ building in Perth. DJ the department store will not go away. A quick research tells me that DJ has the tenure at the DJ building in Perth signed till 2032. So, it is quite solid in that respect.

5. So, that's all my 2 aussie cents , or 2.6 SGP cents worth. Hope it helps. As I said, if you plan to hold on to Starhill Global for a while, it may be worth the investment. If you are looking for a quick gain, it may not work to your advantage.
This is a friend I can trust.

So now, with my FA on the Malaysian and Australian properties settled, I think I will still go ahead with my purchase. My target entry price will be 51 cents now as it appears that Starhill is unwilling to break the double support to reach the previous low and 200 MA at 50 cents.

However, I might have to weigh my options between this and Cambridge REIT as well as Cambridge is currently offering a higher yield of around 12%.

Let's see how it goes...


  1. Hi Fishmonger,

    thanks for visiting. It's not exactly Warren Buffet's style as I did not really look at the cashflow statements, price to book ratios or price to earning ratios... Rather, for REITs, I was looking at the sustainability or possible growth in DPU with regards to the properties they own.

    Furthermore, I included a little bit of Technical Analysis to determine where I should enter....



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