Prosperity Real Estate Investment Trust, a Hong Kong-listed reit, survived the worst of the financial crisis and a downturn in Hong Kong property rentals last year to announce stable revenues and a net income distributable to unit holders for the year ended on December 31, 2009. Prosperity, which is managed by ARA Asset Management (Prosperity) Limited, announced revenue of HK$263.6 million for the period, marginally higher than 2008's HK$263.1 million. The net income distributable to unit holders for last year was HK$145.4 million, compared with HK$164.52 million in 2008. Stephen Chu, chief executive of ARA Asset Management, says that the reit has been able to sustain occupancy rates of tenants in the aftermath of the Lehman Brothers crisis. Talking figures, Chu points out that Prosperity had an occupancy rate of 93.2 per cent at the end of June 30 last year, as Hong Kong's business climate and economy was affected by the financial crisis. But the occupancy rate rose in the second half to 97.4 per cent as at the end of December, almost at the same level as at the end of 2008, which was 98.5 per cent. 'We are getting a lot of tenants, especially mid-tier enterprises,' Chu says. He says that the reit is flexible in accommodating the demands of tenants, as they take the opportunity to ask for more, such as refurbishment of offices, putting in carpets and other demands. A side effect of the financial crisis, at least in Hong Kong, has been decentralisation, with companies moving out of Central and into Kowloon and North Point. The main reason for this is that the biggest expenses a company has to incur are rentals and payroll. 'One of the easiest ways to cut such a cost is decentralising,' Chu says. He can sense a trend whereby companies will be keeping a front office presence in Central and move back-office operations to cheaper areas where, for a 10th of the rent, they can get bigger A-grade space. To get a clear sense of rental trends in Hong Kong, the reit hired Savills to get an idea of where rents were going. According to Savills, A-grade offices will see an upturn in rentals, driven by recovery in Asia, which is driving the world economies. Also, the 4 trillion yuan (HK$4.55 trillion) stimulus package launched by the central government and its effects is expected to trickle down to other Asian economies, which will help growth in the region. Notwithstanding the market challenges, Prosperity Reit was successful in achieving a positive rental reversion rate of 4.3 per cent. Moreover, the reit was able to attain an encouraging 61.8 per cent tenant retention rate. These are the results of Prosperity Reit's proactive management approach, effective leasing strategies and strong tenant relationships. Talking of the year ahead, Chu says that the reit has earmarked HK$900 million for further acquisitions. He says he will be able to tap banks for refinancing, as interest rates are low, and the property manager is negotiating with banks for refinancing to the tune of HK$1.7 billion of equity financing. Prosperity owns A-grade office buildings in Hung Hom (The Metropolis Tower and a portion of Harbourfront Landmark), North Point (Prosperity Millennia Plaza), industrial and office buildings in Kwun Tong (Prosperity Place and a portion of Prosperity Centre), Cheung Sha Wan (Trendy Centre) and an industrial building in San Po Kong (a portion of New Treasure Centre).