Hong Kong company reporting season

Fortune REIT’s net property income rises 3pc to US$93m

Distributable income increases 3.7pc to HK$487.3 million, with shareholder dividend growing 3pc to 25.53 HK cents

PUBLISHED : Friday, 28 July, 2017, 8:50pm
UPDATED : Friday, 28 July, 2017, 8:51pm

Fortune Real Estate Investment Trust (Fortune REIT) has reported a stable half year, with a 3 per cent rise in net property income to HK$727 million (US$93 million), and a 2.6 per cent jump in revenue to HK$1.003 billion.

Managed by ARA Asset Management (Fortune), the trust’s management cited positive rental reversion across its portfolio and continual improvement in operational efficiency. It was the trust’s 14th consecutive year of growth.

Fortune REIT holds a portfolio of 17 private Hong Kong housing estate retail properties, comprising approximately 3.2 million square feet of retail space and 2,713 car parking spaces.

Its latest figures showed distributable income increased 3.7 per cent year-on-year to HK$487.3 million, and the shareholder dividend increased 3 per cent to 25.53 HK cents.

Despite Hong Kong’s low retail sales growth with tourists no longer buying big ticket items, the trust’s retail portfolio saw an occupancy rate of 96.6 per cent.

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“Our malls are mostly community focusing on local demand with food and beverage services or supermarkets,” said Justina Chiu, its chief executive, adding they have more stable incomes and are less affected by tourist consumption.

Rental reversions during the reporting period were 10.7 per cent. Passing rent stood at HK$42 per square foot and the retention rate was as high as 78 per cent.

Chiu added that a well-diversified trade mix with a strong focus on daily necessities continues to be its core business model.

Our malls are mostly community focusing on local demand with food and beverage services or supermarkets
Justina Chiu, chief executive, Fortune REIT

To boost growth, meanwhile, the firm is planning to embark on what it called an “asset enhancement” of its Fortune Kingswood in Tin Shui Wai, transforming it into a regional shopping and entertainment venue in the hope of attracting a wider range of shoppers from other districts and areas.

The company said it has no refinancing needs until 2019 with ample liquidity being provided by the Hong Kong banking system. It has arranged a 5-year, HK1.2 billion (US$153 million) unsecured banking facility to refinance all it debt due in 2018 and there are no refinancing needs until 2019.

As at 30 June 2017, Fortune REIT’s gearing ratio and aggregate leverage reduced to 28.4 per cent, down 1.1 per cent from December, as a result of higher property valuations.

Its share price rose 11 per cent during the first half to HK$9.78 per share, its closing price on Friday.