Fortune Reit has agreed to buy two retail properties in Hong Kong for HK$1.9 billion.
The reit will pay HK$1.25 billion for a shop at Belvedere Garden in Tsuen Wan and HK$650 million for a unit in the shopping centre at Provident Centre in North Point.
Both prices were below independent valuations, the reit's manager, ARA Asset Management (Fortune), said. Knight Frank Petty valued the Belvedere Garden property at HK$1.3 billion on September 30, and estimated its net property yield at 5.2 per cent. The Provident Centre property was valued at HK$680 million on September 30, with an estimated net property yield of 4.8 per cent.
The average property yield of the reit's existing portfolio was 4.6 per cent, said Justin Chiu Kwok-hung, chairman of the reit's manager. The acquisitions will increase Fortune Reit's gross rentable area by 23 per cent.
Based on the pro forma financials for the first half of 2012, the distribution per unit of the enlarged portfolio would be 13.66 HK cents, up 6.7 per cent on the existing portfolio.
Chiu said renovation of the two properties had started and would be completed in phases.
The acquisition will be funded by Fortune Reit's available bank facilities and internally generated funds.
Fortune Reit will use a revolving credit facility of HK$970 million for the purchases.
The acquisitions of the two properties will increase Fortune Reit's gross rentable area by this much