Office rental chief credits success to playing for keeps
Prosperity Reit, the Hong Kong-listed property manager, announced a satisfactory performance in 2010, despite the lingering effects of the global financial crisis.
The Reit manager benefited from a quick recovery in commercial property rentals last year and a high tenant retention, at 64.5 per cent, according to CEO Stephen Chu.
Chu said he made an effort to meet tenants and hoped to see every single one of them soon.
'The relationship has paid off and shows in the retention rate of our tenants,' he said.
Prosperity said its revenue was HK$270.1 million, which comprised HK$226.9 million worth of rental and car park income, plus HK$43.2 million of rental-related income. Prosperity's net property income rose to HK$212.5 million.
The property manager said revenue and net property income improved by 2.5 per cent and 2.7 per cent respectively year-on-year.
Prosperity Reit's property valuation rose by 12.9 per cent year-on-year and the net asset value per unit grew to HK$2.70.
Prosperity announced that unit holders will receive a total distribution per unit of 11 HK cents for the reporting year. This represents a distribution yield of 6.3 per cent.
Prosperity Reit's overall portfolio occupancy rate continued to improve throughout the past year, climbing to a record high of 99.5 per cent as at December 31, and the average effective unit rent was HK$14.67 per square foot.
Chu said the high occupancy rate was mainly a result of special initiatives in response to suggestions from tenants and environmentally friendly initiatives launched by Prosperity.
One of the tenants' suggestions was to have a mini-golf putting green on the rooftop of The Metropolis Tower in Hung Hom.
Chu said Prosperity decided to turn the idea into reality and the four-hole putting green has become a big hit - especially with the Japanese companies, such as Canon and electronics group NEC, that accounted for half of the building tenants.
Prosperity last year also invested about HK$1 million on a green roof for its 15-storey grade-A Prosperity Place building.
The investment included the installation of three solar panels, a wind turbine and a battery system to capture the energy produced.
Prosperity said last year's figures also showed the cost-to-revenue ratio and gearing ratio maintained healthy rates of 21.3 per cent and 30.1 per cent respectively.
In line with the practice of financial prudence, Prosperity made two financial arrangements during the year.
'We successfully entered into a new term loan and revolving credit facility agreements, totalling HK$2,200 million.
'We also took a prudent approach to managing the risk in fluctuation of interest rates by entering a plain vanilla swap for 80 per cent of Prosperity Reit's term loan,' Chu said.
With these two arrangements in place, Prosperity's finance costs will be reduced in the years to come. These actions will help to mitigate the uncertainties associated with floating interest rates, and the unit holders are likely to benefit from stable distributions.
Looking ahead, Chu said that Prosperity will benefit from the recovering economy.
As the local unemployment rate continues to fall and business improves overall, demand for office space is poised for steady growth.
'Prosperity Reit will continue with its prudent and proactive approach in optimising returns, while endeavouring to provide tenants with the best service to uphold a strong tenant relationship and increase the tenant retention rate,' Chu said.
Prosperity owns a geographically diverse portfolio of seven commercial properties in the decentralised business districts of Hong Kong, comprising all or a portion of, three grade-A office buildings, three industrial/office buildings and one industrial building.
The total gross rental area is about 1.22 million sqft.
Prosperity is managed by ARA Asset Management (Prosperity) Limited.